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 painfully high in Hawaii; we try to laugh it off by dubbing it a “luxury tax.” The State’s agencies have required developers to build affordable housing (aka reserved housing or workforce housing) with all new development projects, but the result is studio and 1-bed apartments with prices starting at around $625,000. Meanwhile, the U.S. Department of Housing and Urban Development (HUD) crunched the numbers and defined a person making less than $93,000 is LOW-income if trying to live in Honolulu. I’ll let you guess how many families can afford these affordable housing units here. Next, try to guess how many families are looking for studio/1-bed apartments. The answer to both questions is basically … none.

Not so surprisingly, for every project that is announced and developed with affordable housing, there is a list of applicants longer than there are units available. People aspire to and settle for a lot of nonsense here.

Developers haven’t been willing to consider that workforce housing is still family housing, so, it seems the government is going to have to step in again and stipulate that “workforce” housing must be 2- and 3-bedroom condos (or single-family homes) with a price that caps out at $350K, especially when developers want to deviate from the zoning laws. Higher and denser building? Add more affordable housing units to your project. That makes sense to me.

There’s always been a middle- or working-class population on Oahu but with each new development more of them are displaced. And they don’t just go down the road. They leave the islands … forever. Did someone say, “Welcome to Hawaii’s 9th island … Las Vegas?” So, despite the reality that the cost to build in Hawaii is ridiculously high, not just financially but also in the time it takes to build, that burden (cost) cannot trickle down until it comes to rest on our working-class residents. I mean, it can, but eventually luxury home owners will have to hire each other to do the cooking and the cleaning. And while I find that thought hilarious, it’s also never gonna happen. So, when there are no more people to staff our hotels, bars, and restaurants, when the people who used to clean our pools, landscape our gardens, stock our grocery stores, unload our shipping containers, and fix our crumbling roads can’t afford to live here anymore … well … marinate on this: how long will the wealthy consider Hawaii to be a luxury place to own or even visit?

Today, our labor pool is already limited (and shrinking) so contractors often take on more than they can chew in the hopes that, if they take 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 time and money.

Trust me, I know because I built my house a few years ago and, 14 months in, we were 4 months behind schedule (and that was pre-pandemic, pre-supply chain collapse).

In fairness, it can’t come down to the big developers alone to solve the housing crisis. Not just because they won’t (and they won’t), but because they’ll leave, too. It has be every property owner’s shared responsibility.

Here’s an idea: what if we require homeowners that are building new homes (or needing permits to renovate old homes) to build an accessory dwelling unit (ADU) on their property and rent it out? Don’t want to have an ADU on your property? Then pay into a State fund that goes towards building truly affordable housing. I imagine you’re grabbing your pitchfork about now and trying to figure out how to silence me, but please, hear me out.

Based on a 2018 study, the state Department of Business, Economic Development and Tourism determined that, in order to plug the ongoing workforce drain, Oahu needs to build 25,847 more genuinely affordable homes by 2025, and at a rate of at least 2,584 per year. As of 2022, there haven’t been any built. Nope. Nothing. Nada. Zero. Zilch.

[Sidebar: Can we stop minimizing the problem by saying just “affordable housing?” I believe we’re strong enough to say what we’ve been trying to avoid for fear of over-taxing the sensitivities of developers like Howard Hughes. Developers who are barely scraping by (wink, wink.) We need 2- to 4-bedroom, 2- to 3-bath affordable family housing. We don’t have a bunch of impoverished hot, young, trendy single people dying to overpay for a sexy studio/1-bedroom condo here. We have normal American families that cannot afford to grow up in the state in which they were born.]

Apparently, despite our out-n-proud ‘blue state’ voting record, we talk a big game but won’t put any real skin in it. We demand action when we’re in public but privately hold fast to the position of N.I.M.B.Y. (not in my backyard) when provided with an evidence-based solution.

What is this evidence-based solution of which you speak?

Three letters: A.D.U. They are amazing opportunities and allow homeowners (like myself) to generate rental revenue to offset mortgage payments, which, in turn, allows me to stay in Hawaii when so many friends my age have gone. Housing crisis refugees. (*sad face*) My house now becomes two houses, or three, and I can provide homes for other families to rent that are full-size and in a lovely residential neighborhood.

The cost to build an ADU is relatively low if you’re already building/renovating. Let’s assume a realistic, $200,000 price tag to build an ADU is financed by your 30-year fixed rate mortgage at 7.5%. Your monthly payments only go up about $1,100 for this addition. A 2-bedroom, brand-new ADU could easily rent for $1,500-2,000/month and still cost your tenant less than a smaller unit in any crappy, 1970s building you see everywhere around Honolulu.

Another factor? Reserved housing units like those recently released at the new Kaka’ako tower called Ke Kilohana cost $323,000 for a 1-bedroom unit with only 461 total sq. ft! Now imagine, you could add livable (aka, larger) housing to your property for a fraction of the cost and, thereby, increase your property’s value, increase your monthly revenue and ensure some hardworking parents can raise their family in dignity. That has to earn you a free pass into heaven, right?

Your ADU can be used for your own extended family. After all, multi-generational living was forced on the poor and working-class of Hawaii so long ago that people living today actually believe it’s part of Hawaii’s culture.

Across America, and far more so in Hawaii, the cost of homeownership is so high that it’s basically out of reach for younger generations and the elderly with fixed incomes so they are staying home longer and/or moving in with family. ADU’s can be an affordable stepping stone for your family members. 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 Hawaii consist of three or more generations — the highest in the U.S. and almost double the national average of 5.8 percent.”

Finally, this is a great way to own an investment property without leaving your own backyard. Plus, what you can afford to do for $200K, that will pay for itself and more, isn’t even an option for most working-class families in Hawaii. Imagine trying to find a livable home here for $200,000 (or less). They don’t exist. I mean, there are literally parking spots for sale here for $100K. And while that last scary fact is true, here is some more reality for you – as of Oct 30, 2022, the number of fee simple properties for sale on Oahu for under $200K is … drum roll please45.

Of those 45 available properties:

  • 1 is an 80 sq. ft. wine cellar.
  • 5 are parking stalls.

Of the remaining 39 “homes” for sale:

  • All are in 47- to 61-year-old condo/apt buildings with maintenance fees.
    • 25 have maintenance fees over $1K/month
    • 9 more have maintenance fees over $700/month
  • 35 have no kitchen. (Yes, only 4 have what the housing authority defines as a kitchen. Eek.)
  • 37 are zero-bedroom units (aka, studio apts).
  • 26 have no parking.
  • 0 are ADA accessible.
  • 6 are already occupied by a tenant.
  • 21 are hotel rooms.
  • 12 have no access to public transportation.
  • 29 have less than 300 sq ft of living space. (For reference, a room that is 17½ ft by 17½ ft is just over 306 sq ft.)
  • 24 are in high-risk flood zones.

Would you buy a $200K studio apt/hotel room that isn’t even 18 ft wide by 18 ft deep, has no parking and no kitchen, and for which your monthly bills will be:

  1. $1,100/mo. mortgage (@7.539% fixed for 30 years)
  2. plus $1,000/mo. maintenance
  3. plus $117/mo. mortgage insurance
  4. plus $60/mo. flood insurance
  5. plus $1,000/mo. homeowners insurance

… even if you could get a $0-down home loan (which you can’t), could you afford $3,277/mo. before any utility bills, food expenses, student loan payments, car payments, car insurance payments, fuel costs, or any other expenses … even if you earn the 2022 average income in Hawaii, which is $53K/year, or $4,416/month?

Would you raise a family in this old, 1-room, kitchenless box? Take on a roommate or two to make it affordable?

And what if you earn less? What if you’re a first-year nurse working three 12-hour days per week and you earn (after taxes) $25.28/hr, or $3,640/mo? Where will you spend your remaining $363 every month? Or worse, what if you’re a first-year architect where Hawaii jobs (after taxes) pay only $38K/year, or $3,160/mo? You’d default on your home loan in the first month. These are legit jobs and the people who do them, people who save our lives and build our houses, cannot afford to live where they work, let alone have families of their own. God forbid you end up widowed/widowered trying to raise even 1 child on your income. You and your partner couldn’t even break the “low income” divide with your combined 2-parent income and latchkey kid. What now?

Bottomline: NO, you won’t be buying a livable home on Oahu for $200,000. You wouldn’t do it even if you could. You need a rental. And this is where smart homeowners save the day and improve their own finances at the same time by building ADUs.

Can we sweeten the pot?

In a word, yes. The State can offer ways to subsidize loan programs, offering guaranteed loans for ADU projects. Perhaps a better (or another) option is to offer tax incentives to homeowners that go this route, such as charging homeowners no taxes on ADU rental income up to the amount of the monthly mortgage payment increase. The State offers tax breaks and incentives for the film industry which they say adds “jobs and dollars spent in our local economy” so let’s offering tax breaks to those whose ADU rentals house these industry workers and all working people of Hawaii.

Again, assume (from above) that your mortgage payment would increase by $1,100/mo. for the ADU you’ve built, and you charge just $1,200 per month in rent. The State will only tax you on the difference, or $100 of adjusted income. This is a huge win-win for everyone.

And it doesn’t stop there. We could add incentives for generating your own electricity, harvesting rainwater and greywater, etc.

These are the things I think about while having my morning coffee. I believe this has to be doable. I’m doing it, even without my suggested incentives. And it’s a win for me.

In Sept 2022, Oahu’s median single-family home price hit $1.1 million. It will be tough, if not impossible, for familes my age (or any age) to afford a home without a way to reduce their mortgage burden. ADU’s offer a great opportunity and I feel should be mandatory for all homeowners getting into Hawaii’s housing market. We need to start building more ADU’s on existing renovations and new construction to alleviate our crisis-level housing shortage while we figure out long-term solutions to the challenges of homeownership.

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