A.L.O.H.A. Homes-- Guest Post By State Senator Stanley Chang (D-HI)

Stanley Chang is a progressive Democrat representing the 9th District in the Hawaii State Senate, which-- until he won his election, was the last Republican Senate district in Hawaii. Recently, he was named Chair of the Committee on Housing, which is tasked with finding solutions to Hawaii’s chronic housing shortage.

A recent poll from the University of Hawaii Public Policy Center lists housing as the number one issue for voters in the State of Hawaii. If you are from Hawaii, this wouldn’t surprise you. At least as long as I’ve been alive, the headlines and news coverage have lamented our island community’s lack of housing and the growing need for affordable units.

There are many reasons for the housing shortage. But they are not primarily technological, economic, or even legal. They are political. In the private sector, the mantra goes, “The customer is always right.” In government, the voter is always right. The political stalemate that exists today is because all of the existing proposals have gone against the interest of some important group of voters. I hear three main reasons why voters in Hawaii oppose new housing supply.

• “You’re blocking my view.”
• If the proposed project is near you and will potentially block your view, there is a high likelihood that you’ll never support it. Fortunately, even the most ambitious project would only block the views of a small fraction of the state.

• “No more growth.”
• Many Hawaii residents don’t want large amounts of new housing stock. In fact, they want the housing stock to go down, because they believe that Hawaii is already too crowded with too much traffic, too many tourists, and too many tall buildings. They believe Hawaii has already reached its “carrying capacity.” I wouldn’t be surprised if this were a majority of Hawaii voters, but I still think it’s a minority. When I ask them if they believe their children and grandchildren should be able to live here, they still say yes, and that implies acceptance of some level of population growth.

• “Wealthy investors from overseas.”
• The largest group-- and I believe a majority-- of Hawaii voters fear that any new homes will be snapped up by wealthy investors from overseas before local people are able to buy. Often, these investors will convert these units into vacation rentals, removing from the housing supply a unit that could otherwise house a local family. To address this concern, my housing plan is designed to ensure that newly built homes will be available only to local people.

Often in Hawaii, we look to mainland jurisdictions like California for ideas and precedents. The only problem is, places like Southern California and the Bay Area have even greater housing shortages than we do. Luckily, there are other places that have solved housing crises and today provide an abundance of affordable, high quality housing. By taking inspiration from successful existing models, we can craft a housing solution that will both 1) move the needle and 2) be politically realistic.

Two of the major success stories in affordable housing today are Vienna, Austria and Singapore. In Vienna, 62 percent of the population lives in public housing. In Singapore, 82 percent of the population lives in public housing. Interestingly, these two models are opposite in their approach. In Vienna, as in much of Europe and the United States, the public housing system is a high tax, high subsidy, rentership system. Singapore has a low tax, low-to-no subsidy, ownership model. Both are extremely successful and popular among their respective populations. A key element to the popularity of both systems is that they are available to a large majority of the population. In Hawaii, I believe Singapore’s unsubsidized, ownership for all model would be the most politically viable.

Let’s take a look at how it works in Singapore.

Central Provident Fund

It starts with the Central Provident Fund. Singapore requires all working citizens to save 37 percent of their pay (23 percent for housing, 8 percent for healthcare, 6 percent for retirement) into the Central Provident Fund (CPF). It’s a bit like our Medicare and Social Security, which are mandatory savings programs. The difference is, Medicare and Social Security go into a black hole and come back out of the black hole. In Singapore, the CPF is your money. You keep track of how much is in your own accounts, you have some flexibility in how to invest it, and you have flexibility in how to spend it.

Qualification

You’ve been working and saving into your CPF accounts. Once you pass certain milestones, you become eligible to buy public housing.

• Married and over 21 years old OR Single and over 35 years old
• Own no other real property
• Must be an owner-occupant
• Must be a Singapore Citizen or Permanent Resident

Housing Development Board

In the meantime, the Housing and Development Board (HDB), Singapore’s public housing agency, has been building a ton of new housing. A ton. During the 1980s, at its height, HDB built 322,000 apartment units in 10 years, or over 10,000 units per year. Currently, they build about 20,000 units a year, which is actually more supply than they have demand for. By contrast, Hawaii’s housing demand is about 5,000 units per year, and we only build about 2,000-3,000 units per year, so our shortage grows by 2,000 every year.

A 969 square foot, 3 bedroom, 2 bathroom unit, new construction, in Singapore will run about US$180,000. On top of that, the down payment is only 5 percent, not 20 percent, so you move in with $9,000. Most Singaporeans already have that much saved in their CPF account, and for over 90 percent of Singaporeans, the monthly mortgage payment is less than the mandatory 23 percent CPF housing savings. For most people, there’s nothing “out of pocket” to buy a home. That is how Singapore has been able to achieve 90 percent home ownership. In contrast, the US home ownership rate is 63 percent, and in Hawaii, the lowest state, it is only 57 percent.

A.L.O.H.A. Homes

In the coming legislative session, I will propose a bill to create a new public housing system that adopts many of the best practices from the Singapore and Vienna. The system will be called ALOHA, an acronym standing for Affordable, Locally Owned Homes for All.

Under the ALOHA plan, a state agency will redevelop existing state lands near stations of the forthcoming Honolulu rail line with very high density housing. For example, McKinley High School can be redeveloped with 20 towers and 10,000 housing units. These homes will be distributed under the ALOHA system:

• Affordable
• These homes will be affordable with a target cost of $300,000 for a 3 bedroom unit. Existing Fannie Mae and Freddie Mac programs allow a down payment of only 3 percent for those making 100 percent of the area median income (AMI) or less, so residents can move in with just $9,000. Under current HUD guidelines, such a unit would be affordable to those at the 50-60 percent of AMI, or about $64,000 for a family of four. While that’s still a lot of money, we’re now within reach of school teachers, bartenders, or bus drivers--the middle class.

• Locally
• These units will only be available for Hawaii residents who will be owner-occupants and own no other real property at the time they buy them. These three conditions alone should eliminate all of the overseas investors. It’s true that one can become a Hawaii resident the moment you step off the plane. But given the planning and permitting process, even if the bill were to pass tomorrow, and people signed up for the waitlist tomorrow, it would probably take at least 5 years for the first units to open to the first buyers. That’s a de facto durational residency requirement. If someone moves here and lives here at least five years and disposes all their real property, I’d say that person is now a part of our community.

• Owned
• ALOHA homes will be for sale, not for rent. Buyers will receive a 99 year lease on the unit, which means they will not have to worry about having to move before the end of their natural lives. Like any other property interest, the lease can be passed down to one’s heirs. Although the property will revert to the state after 99 years, buyers will still be able to build their net worth. The biggest source of wealth-building in home ownership is not the price appreciation of the property-- which increases in value more slowly than the stock market--but the freedom from paying an ever-increasing amount of rent. And after 30 years, no more rent will be due, which means that one can spend or save a much larger proportion of one’s paycheck.

• Homes
• ALOHA homes will be true homes, not just empty boxes in the sky, or tiny homes, or warehouses for people. They will be large enough to raise a family, with two or more bedrooms. They will have a number of amenities, such as swimming pools, playgrounds, state of the art vertical schools, tennis courts, community gardens, and music practice rooms. A luxury developer might provide one pool for every 200 units. ALOHA homes would have one pool for every 2,000 units, for example, which brings the cost way down per unit. But with so many units using each of these amenities, there will be much more social integration through communal interaction. In addition, by using design competitions instead of awarding the designs to the lowest bidder, there will be a much more direct incentive by the planners and architects to compete on the basis of providing the best amenities for the same cost.

• All
• Last but not least, these homes will be for ALL. Remember the qualifications: Hawaii resident, owner-occupant, owns no other real property. That’s it. There will be no other requirements, such as a first-time home buyer requirement, or an income caps. Now, some people say our current public housing system is too socialist. Actually, that’s exactly the wrong perspective. In the US, public housing comprises only a low single digit percentage of the overall housing stock. Whatever the definition of socialism may be, giving benefits to three percent of the population is not socialism, it’s the opposite of socialism. Socialism is for all. Look at the three biggest pieces of the federal budget: Medicare, Social Security, and defense. What do they have in common? They’re for everybody, no means testing, no income caps. Even Donald Trump is eligible for Medicare and Social Security, and of course everyone is protected by our armed forces. That’s why these programs are wildly popular, and even Donald Trump has pledged never to cut Medicare, Social Security, and defense. If health care, retirement, and defense should be available to all, why not the basic need of housing?

I am hopeful that we’ve devised a plan that helps all the stakeholders in housing issues: environmentalists, neighboring residents, real estate developers, realtors, construction unions, and most importantly, the grassroots voters of Hawaii. It’s a narrow political path to satisfy all these groups while at the same time moving the needle on the housing shortage, but the ALOHA proposal is the only plan currently being discussed to do both those things.

Actually, the problems of growth are good problems to have. Problems of decline are much, much worse. In 1992, Japan had about 2.1 million 18 year olds. Today, Japan has only about 1.1 million. Japan and other countries must deal with the reality that their civilizations could simply cease to exist over time. They are facing a huge shortage of people even to care for their elderly.

In America, we assume population growth, which is fairly unusual in the developed world. What most people don’t know is that Hawaii has lost population for not one, but two straight years now. Every single day, 37 more people move away than move here. I believe the primary reason is the high cost of housing. I refuse to stand by idly as Hawaii dwindles to the very rich and the people who serve them. But without a dramatic change to our housing policy, that’s the legacy we’ll leave to our future generations. I was not elected to do nothing, but to at least address the biggest problems in our society, and the ALOHA homes plan is one way to do just that.

Join me in my fight to solve the housing crisis in Hawaii. Contact me directly at senchang@capitol.hawaii.gov or 808-586-8420. If you’re interested in learning more, you can watch my full presentation on YouTube here:



To access the presentations and materials from our housing conference, “How to Achieve 65,000 Housing Units by 2025,” or to express interest in our upcoming Singapore-Hong Kong delegation May 21-30, 2019, scan the below QR code or visit https://bit.ly/2zS7HAn.