Will the Kaka‘ako Condo Boom Ease Honolulu’s Housing Crisis?
With plans for new towers on hold (and a splashy luxury condo scratched), experts are arguing if we’re in a lull or a bust. Either puts an end to the idea that Kaka‘ako would lead to a housing solution. A closer look at O‘ahu’s most intractable issue.
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Photo: Aaron Yoshino
If not the Chinese, then who? Who’s the real driver of the boom?
Maybe you guessed it.
Every developer we spoke to references the unique psychology of Islanders: Thrifty, real-estate-loving O‘ahuans take their house equity—paid off over 30 years—to buy condos. Not only are apartments assets that offer a return if rented, they can provide family housing (for the children) that then becomes retirement housing for the parents (giving the kids the big house when they have keiki). And, if you do have to sell, the asset appreciates nicely. This is Hawai‘i, after all.
Of course, nobody here wants to pay for all those amenities and, thus, all that maintenance. (I got my own tool workshop, yeah? It’s called the carport.) We buy the low-frills condos. And if we can get our name or a keiki’s name on a workforce or even a low-income unit, we’re on it. On. It.
In other words: Those of us who are smartest at doing better are making it harder on the rest of us. And the impact feels bigger because there are so few ways to make money here, with low wages and salaries that have fallen in comparison to the rise in home prices and the cost of living. The national income inequality squeeze is pronounced in Honolulu, and the pain is real.
So the solution is on us, too. “We need the political will to create more housing,” says Stanford Carr, Ryan Harada, Ricky Cassiday and everyone else in the game.
What next? Not much.
Vida may have tapped out first, but, over at the Hawai‘i Community Development Authority, Lindsey Doi knew change was in the air: “Honestly, we have no pending permit applications. None are complete, none scheduled for public hearings.”
Thirteen sites, most condo towers, received permits in 2013 and 2014, says Doi, HCDA Asset Manager and former compliance assurance and community outreach director. “That was the height. Now you see about seven under construction. Potentially, six more could be coming up in the next year—it takes two years from approval to start construction.”
Potentially. The word hangs heavy. “Any high-rise development is risky,” Downtown Capital’s Harada says. “You have a two-year window: If you start a project, you have to finish it. Once you start going vertical, you can’t stop and wait for the market to improve. Not like a residential subdivision.”
Will we see more condo towers? “When the announcement came that nearly 18 towers were in the planning, one had to wonder if the market existed,” says James Wright, owner of Century 21 All Islands. “Nearly 3,500 new units, that’s approaching 40 percent of the total market. We’re oversaturated and not competitive.”
But if the units are affordable, the demand is there. Howard Hughes drew 5,000 applicants to its mortgage workshops for 375 units at its Ke Kilohana reserved housing tower at 988 Halekauwila St. Yet a source who has his fingers on the pulse of real property tax-assessment data says, “Anything not built by the end of this year or the beginning of next year won’t get built.”
Which sounds bad, given those 25,000 homes we need to meet demand on O‘ahu. It sounds even worse when you hear we’re short 19,000 units for low-income households; that we’ve only built 4,500 affordable rentals from 2004 to 2013; or that, according to Cassiday, the compound annual appreciation of homes over the past 35 years is 5 percent, 4.7 for condos. During the same period, he says, the appreciation of wages was 4.2 percent. A 2014 study puts the number of Honolulu households that qualify for affordable rental housing at 46 percent.
“One in five of us qualifies for affordable rentals,” Cassiday says. “One in 20 of us rents affordable housing.” That’s 5 percent of the 90,000 households that could use help.
Put them all together and you have our current conundrum: Just as demand is reaching new highs, wages are stalled and development of new housing is grinding to a halt. Plus, demand for luxury condos is flat.
All that construction, it seemed, had been aimed at investors, second-home owners and those Islanders who could afford to drop a million down on a cool condo with a tool workshop and the amenities of a resort. They didn’t show up. Now, with economies slowing worldwide, especially in China, Kaka‘ako is looking like a glossy attraction that distracts us from the reality of more homelessness, more generations doubling and tripling up in single-family homes and, always, higher prices for less space. A 14-year building boom that didn’t help residents? And won’t help our children?
What does political will look like, in a housing market dominated by luxury construction and undermined by all of us who are so akamai?
Maybe we’re about to find out.