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Who Owns O‘ahu?

Mystery buyers, high fliers and all those LLCs—we take a look at who’s claiming stakes on O‘ahu.


(page 2 of 6)

The Foreign Buyers

Here Comes Everybody 

Rumors aside, are waves of wealthy overseas investors really snapping up our best real estate? The folks over at Title Guaranty, which tracks foreign real estate transactions, gave us access to a six-year slice of their data for O‘ahu properties selling for more than $1 million. 


The Top Two are in a class of their own, far outpacing the next 25 countries. No. 1 is Japan, with 453 properties from 2009–2014. Total spent: $989 million.


Want to bet on No. 2? The Chinese? Not quite. 


Try Canada, by a mile. The country that gets an “eh?” for effort bought 363 properties for $838 million. It’s worth noting Canadians really swooped in during the bad days of the crash, in 2010, buying 80 properties; as our economy strengthened, they slowed down to 46 in 2014. 


Other numbers to mull over: The number of buyers from China in the past year more than doubled, while from Singapore they tripled. The totals (11, 9) are small, but this is a trend worth watching, says Mike Imanaka, senior vice president at Title Guaranty of Hawai‘i.


“Overall, Japanese investment remains dominant in Hawai‘i, but data suggests The Asian Tigers’ (Hong Kong, Singapore, South Korea and Taiwan) appetite is growing as well,” Imanaka wrote in an email. “Led by Singaporean investment, the Asian Tiger investment of $94 million nearly matched Canadian investment of $98 million. Chances are high, with more high-end quality product being made available on O‘ahu, the Tigers’ appetite may grow in years to come.”  


Where do the foreign buyers choose to buy? For all buyers in 2014, not just $1 million and above, it’s Honolulu—240 Japanese, 38 Canadian, 11 Chinese, 10 from Hong Kong and 10 from Korea. The Windward Side did draw 13 Japanese buyers and the Leeward Side 10 from Canada, but the other numbers were mostly ones and twos.


Supply and Demand 

Why Is There A Perpetual Housing Shortage?

In the Great Mahele of 1848, King Kamehameha III used his trustee powers to distribute 2.5 million acres to 245 konohiki, or chiefs, while reserving the remaining 1.5 million acres for himself as crown and government lands. A provision requiring commoners to file for their land was little understood or advertised and, in the end, the vast majority was dispossessed. The overthrow and annexation shifted most of those crown lands to the government. By the eve of World War II, it is estimated that more than half of Hawai‘i lands were held by about 80 people—and the remainder was held by one branch of government or another. 


“Large landowners maximize their wealth by urbanizing their land holdings in small portions for which they are paid top dollar,” says former state economist Paul Brewbaker, who now runs TZ Economics, a consulting company. “They shave off thin slices of their holdings to maximize their incremental market value. Now, remember that governments are among the biggest landowners per se. So it’s not accidental that their interests often coincide with those of the large estates and landholding corporations.”


Are you saying owners and government actually work together to create a shortage and maintain it? 


“Just because the interests of large landowners and large public entities are incentive-compatible,” says Brewbaker, “does not imply that a conspiracy exists.” However, he adds, “if government wanted to solve Honolulu’s affordable-housing problem, it would simply enable approximately 3,500 housing units to be built every year,” Brewbaker says. “Instead, approximately 1,500 are permitted by the City and County annually these days.”


In other words, “Being the people who give out the right to develop, and being the people who need the right to develop in order to realize the value of their vast landholdings, are naturally compatible, symbiotic situations for the applicants and the gatekeepers. The latter need the former to perpetuate their hold on economic power.”  


Where would you put those 3,500 units a year? Agricultural land like Ho‘opili?


“A dense, urban environment is economically the most efficient human social arrangement from a productivity standpoint. We can live on about 200,000 acres of urban land forever in Hawai‘i, and leave the other 4 million to agriculture and conservation.” As for ag land, keep it ag. “Urbanization of agricultural or conservation land is irreversible. You only get to generate the economic rents once. Require the jurisdictions to credibly, even ruthlessly enforce the existing urban boundary.”


(In case you didn’t get it, that is an economist’s way of saying “Keep the country country.”)


How Huis Help And Hurt Hawai‘i

The seminal book about Island real estate, George Cooper and Gavan Daws’ Land and Power in Hawai‘i, relentlessly examined transactions among the political, bureaucratic and landowning elite to paint a portrait of government “by the hui, for the hui.” But the book’s counterintuitive, ultimately seductive argument is that this is for the best: The only way to empower the previously shut-out members of society, in particular the Asian ethnic majority, was to throw a net of regulations over the giant trusts and landowners.


Published in 1985, Land and Power was about an era when what were called “haole banks” wouldn’t loan to Asian developers and potential homeowners. The long delays, the rope-a-dope permitting process, was an economic equalizer. Only when the landowners and their bankers cut the Democratic Party operatives and their appointees into the action did the building boom take off.


Later, after the flush of ’60s construction had finally alarmed enough people—by filling in the fishponds and lagoons of Hawai‘i Kai and killing the reef in Waikīkī with dredging and raw-sewage outfalls—the environmental movement stepped in and added its voices, and lawsuits, to the obstacle course developers needed to run. 


The regulatory net descended anew and has stayed in place. This is called “bureaucratic capture” by economists—think of giant Gulliver tied down by Lilliputians. 


Many say it’s still needed, and works for the betterment of all. Others beg to differ, including former state economist Paul Brewbaker. “This mythology of exclusion which might have been true in the 1940s and 1950s [has become] gradually irrelevant,” he says. “A single mom can get a mortgage if she has a good enough FICO score.”


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Honolulu Magazine April 2020