One of the largest debates on Oahu, besides the elevated rail, is the housing crisis. As a Realtor, I’ve often wondered what more can be done to alleviate the issue. Housing costs are high in Hawaii, most of us have accepted that as the “luxury tax”, the price we pay to live in paradise. A few developers have stepped in to create opportunities labeled different title but equating to the same end result: affordable housing. Yet, for every project that is announced and developed with affordable housing (or reserved housing or workforce housing, etc.) there is a list of applicants longer than there are units available.

Developers need to create spaces for affordable occupants, especially when they want to deviate from the zoning laws. Higher and denser building? Add more affordable housing units to your project. That makes sense to me and I honestly applaud developers for creating these opportunities. The cost to build in Hawaii is ridiculously high, not just financially but the time it takes to build. Our labor pool is limited and contractors often take on more than they can chew in the hopes that if they take on 3-4 jobs perhaps 2 of those will actually commence on time. If all four jobs need to start at the same time though, the developer (or homeowner) loses out and time (and money) is wasted.

Trust me, I know because I’m currently building my house right now and we’re currently 4 months behind schedule (14 months into the project).

It shouldn’t come down to the big developers to solve the housing crisis, it should be every homeowner’s responsibility.

How you say? Simple, we require homeowners building new (or renovating extensively) to add an ADU (Accessory Dwelling Unit) to their property. Don’t want to have an ADU on your property, then pay into a State fund that goes towards building affordable housing. I’m sure you’re grabbing your pitchfork now and trying to figure out how to get to me (hint: my office is in Kahala Mall) but let me explain my logic.

Based on a recent study, the state Department of Business, Economic Development and Tourism forecasted demand for additional housing units on Oahu at 25,847 units between 2015-2025. That would require 2,584 new units per year. We are simply not building enough to tackle this, not even close. Like most Americans, we talk loudly but don’t have any real skin in the game. We demand action but often say NIMBY (not in my backyard) when solutions are presented.

The truth is, most of us would prefer to put all the homeless on a boat and move them to Molokini rather than come up with a hard, honest, solution.

ADU’s are amazing opportunities and allow a homeowner (like myself) to generate rental revenue to reduce my mortgage payments and allow me to stay in Hawaii when so many friends my age can’t afford to remain here. My house now becomes two houses and allows a family an opportunity to have a home.

ADU costs are relatively low to build and hopefully if a statute like this passed the costs would further decrease as more demand is had more businesses will offer ADUs. Assume a $200,000 cost to build an ADU was financed at a 30-year fixed rate mortgage at 5%, your monthly payments would be $1,073.84 for this addition. You will most likely be able to recoup that cost renting the unit out. A 2-bedroom, brand new ADU rented for less than $1,100? That’s cheaper than the reserved housing rental prices.

Another factor? Reserved housing units like at Ke Kilohana cost $323,000 for a 1-bedroom unit with 461 sq. ft. and those properties sold out in record time. Essentially you can add a larger “reserved housing” unit to your property for a fraction of the cost increasing your property’s value, increasing your monthly revenue as a landlord and helping to alleviate the housing crisis.

Your ADU can be used for your family, as we all know multi-generational living is a huge part of Hawaii’s culture.

Also, because the cost of living is so high it’s hard for younger generations to move out of the house. ADU’s can allow a cheap alternative for family members given the low cost ($200,000 example). As referenced in a May 2017 Honolulu Magazine article, Before & After: How This Family Remodeled Their Home for Multigenerational Living“11.3 percent of family households in Hawai‘i consist of three or more generations — the highest in the U.S. and almost double the national average of 5.8 percent, according to the U.S. Census Bureau.”

Finally, this is a great way to own an investment property without leaving your backyard (literally). Try to find a decent investment property on Oahu for $200,000 (or less) and you’re never going to make the numbers pencil out if you do. On Oahu as of October 9th, 2018 there are only 49 Fee Simple properties available for sale (Active) priced below $200,000. They are also all condominiums which means a maintenance fee. Think you’ll be able to generate the same revenue on a $200,000 condo as you would on a brand new, $200,000 ADU with no maintenance fees?

How do we pay for this?

The State should offer ways to subsidize loan programs, offering guaranteed loans for ADU projects. Another option would be to offer tax incentives to homeowners that go this route, such as allowing a homeowner to not pay taxes on any ADU rental income up to the monthly mortgage payment. The State offers tax breaks and incentives for the film industry which they say adds “jobs and dollars spent in our local economy” so if we are to believe this then let’s believe that offering a tax break on ADU rentals will help the housing crisis. Which is much more important than the film industry. Again, assume (from above) that your mortgage payment would be $1,073.84 for the ADU you’ve built, and you charge $1,200 per month in rent. The State will only tax you on the difference, or $126.16 of actual income. This is a huge win-win for everyone. These are just two ideas I had while having my morning coffee and brainstorming solutions for our housing crisis.

With the median price of a single-family home on Oahu in September at $812,500 it will be tough for familes my age (or generation) to afford a home without a way to reduce the mortgage burden. ADU’s offer a great opportunity and I almost feel are mandatory for young homeowners getting into the market to allow them an opportunity to purchase. We need to start building more ADU’s on existing renovations and new construction so future generations will be able to enjoy homeownership while alleviating the housing crisis.

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