The recent commentary, “The $1 million home: a monument to destructive capitalism” (Island Voices, Star-Advertiser, Jan. 4), made some excellent points, but the conclusion in the headline is wide of the mark.
First, which observations were on the money?
>> “This is a horrendous wrong against our people.” Far too many people are priced out of the housing market, whether it’s for sale or for rent.
>> “We need our young people to stay home.” The future of Hawaii depends on it. Just announced: the fourth consecutive decline in the state’s population, due to out-migration.
>> “Enough is enough.” Enough was enough long ago.
>> “Where our leaders of government?” Fair question!
However …
The assertion that buyers, sellers and real estate agents are responsible for high housing prices is like blaming car owners and service stations for the high price of gasoline.
There are many causes of high housing prices. Here are three:
>> The first is low interest rates. It’s not the price that determines how much house you can afford, it’s the monthly payment. When the interest rate on 30-year mortgages was 6%, a $3,000 per month mortgage loan payment could get you a loan for 80% of the price of a house costing $625,000. But with 30-year mortgages available at 3%, a $3,000 per month payment will get you a loan for 80% of the price of a house costing $890,000.
And where, you might ask, do you get the 20% downpayment of $178,000 for this house? Answer: From selling the condo you purchased five years ago and which has appreciated in value.
>> The second is that not enough housing is being built. When something is in short supply, its price goes up. This is not caused by buyers, sellers and real estate agents.
Why isn’t enough housing being built? It’s because we don’t have the collective will to allow it to be built. The density of housing needs to increase.
California is trying something interesting. This past September, the governor of California signed two bills to stimulate the construction of more housing. One allows the construction of four dwelling units on urban lots zoned for single-family dwellings. The law includes protections for the preservation of existing rental housing. The other law streamlines the process for changing zoning to allow developments of up to 10 units.
Will this change the character of single-family neighborhoods? A housing policy center and the University of California at Berkeley estimated that because of the economics of demolishing and constructing new units on single-family lots, redevelopment would pencil out on only 5.4% of the state’s single-family lots.
But, the policy center pointed out, 5.4% is still several hundred thousand units. If we assume Oahu is about 1/40th of California, several hundred thousand units in California would equate to a number approaching 10,000 units on Oahu. It would make a dent if we enacted such a law here.
>> A third cause of our high housing prices is that the city burdens developers with the cost of municipal infrastructure improvements to accommodate the additional housing — road widening, sewer capacity increases, water infrastructure, etc. Instead, the city could and should pay for such improvements and recover the costs through user fees charged to everyone.
Can the high housing cost problem be eliminated?
No, Hawaii is a desirable place to live (except for the cost of living!), and housing costs more to build here than it does in Kansas. But, with community and political will, the problem can be reduced.
Randolph G. Moore is a retired business executive and Department of Education administrator, and board chairman of the Hawaii Housing Finance & Development Corp., a nonprofit developer of low-income rental housing.
