A recent U.S. Supreme Court ruling suggests that Hawaii’s land-use law violates the Fair Housing Act. Due to this law, Hawaii has the least affordable housing in the nation, and since certain minorities such as Native Hawaiians and blacks have lower than average incomes, high housing costs are especially harmful to them.
Median home prices in the Aloha State are close to seven times median family incomes, compared with a national average of well under three times incomes. Such high costs — combined with similarly high costs of business real estate — slow economic growth, contribute to wealth inequality, and have especially severe impacts on low-income families.
Hawaii’s housing prices are so high in urban Honolulu that low-income families have been forced out. Between 2000 and 2010, the population of urban Honolulu grew by 12 percent while the number of blacks living there declined by 4 percent. Since per capita incomes of blacks have consistently been around 60 percent of whites’, this population trend is a bellwether for unfair housing practices.
Last June, a U.S. Supreme Court decision in a case titled Texas Department of Housing v. Inclusive Communities Project found that any policy that makes housing more expensive violates the Fair Housing Act unless it can be “justified by a legitimate rationale.” A rule requiring sewer hookups to protect public health may be legitimate; a rule to protect farmlands is probably not legitimate as both Hawaii and the nation have an abundance of such lands.
The Hawaii Legislature first passed the state’s land-use law, which effectively put more than 90 percent of the state off-limits to development, in 1961. At the time, legislators claimed the reason was to protect the state’s agriculture industry.
Far from protecting agriculture, it destroyed it, as growers and canners of pineapple, sugar cane and other crops cannot afford to pay workers enough for them to afford housing and still compete with farms in Fiji, Costa Rica and other countries. Between 1982 and 2007, the number of acres used for growing crops in Hawaii declined by nearly 60 percent.
Advocates of the land-use law also argue that it is needed to reduce urban service costs, as it is less expensive to serve a compact community than one that is spread out. But what good is a small reduction in urban service costs when housing prices are tripled?
According to regulations from the U.S. Department of Housing and Urban Development, if the goals that the land-use restrictions are meant to achieve could be reached in some other way that doesn’t make housing less affordable, then the restrictions also violate the fair housing law. All of the reasons given for Hawaii’s land-use law are either not legitimate or could be achieved without making housing less affordable.
Oahu, Maui and Hawaii have responded to their housing affordability problems by passing “inclusionary zoning” mandates that require developers to sell a specific share of the homes they build to lower income families at less than market rates. But inclusionary zoning itself violates the Fair Housing Act because it makes housing less affordable for all but the lucky few who get to buy or rent the below-market homes.
Research has shown that developers respond to inclusionary zoning mandates by building fewer homes and selling the market-rate homes they build for higher prices to compensate for their losses on the so-called affordable homes. When the price of new homes goes up, owners of existing homes also raise their prices, so all homebuyers except the lucky few to get an “affordable” home end up paying more.
To make matters worse, MIT economist Matthew Rognlie has shown that rising wealth inequality is due almost solely to rising housing prices (www.brookings.edu/~/media/Projects/BPEA/Spring-2015/2015a_rognlie.pdf ?la=en). Wealth inequality in America reached a low point in 1970, when housing was affordable almost everywhere and median home prices in Hawaii were only a little over three times median family incomes.
Since then, states and urban areas have applied such policies to regions containing nearly half the housing in the nation, leading wealth inequality to grow as people who already owned homes received windfalls while people who didn’t were forced to either go heavily into debt or were shut out of the housing market. Ironically, the main cause of the wealth inequality that progressives decry is the land-use regulation that progressives promote.
In short, urban-containment and many other land-use policies that make housing less affordable, including lengthy permitting processes, excessive impact fees and affordable-housing mandates, all appear to violate the Fair Housing Act. Ending these policies would help revitalize Hawaii’s economy and create new opportunities for low-income people.
