A Boom for the Rich, a Bust for Everyone Else

While the superheated housing market excites comment in the short term, it should be a cause for alarm in any broader and longer-term consideration of what is good for Hawaii.

While sellers take a windfall profit here or there, most of our young people have been priced out of the housing market. Also:

• The cost of rentals has more than doubled in the past five years.
• The number of homeless has increased sharply (and possibly tripled).
• Property taxes have shot up (painfully for many who are on static incomes).

Some see this as a free market at work. Actually it is a government-inspired circumstance that can only be corrected by a change in government policy.

The housing market is either a boom or a bubble, depending on one's definitions. "Homebuyers appear to be irrationally exuberant," in the words of one analyst. The economist Paul Krugman wrote, "The overall market value of housing has lost touch with economic reality." In either case, this overheating of demand over supply has driven up prices in a dizzying fashion.

One of the root causes is a national policy of extraordinarily low mortgage rates. The effect has been exaggerated by the windfall federal tax cuts for the well to do, who have entered the Hawaii market looking for second homes and assorted trophies. Construction resources are also increasingly being diverted into the big expansion planned for military housing.

In this spiral, less and less housing is available for renters and first-time homebuyers.

Have you talked to young people lately? How are they doing with their rent, or with their attempts to become homeowners? If you know of a young couple that bought a home recently, they are indeed fortunate. Who suffers? Possibly your children and mine.

Are there more homeless? Drive slowly down the city streets at night, and look in the doorways. Walk through the grounds of Iolani Palace. Tragically, the homeless are in every nook and cranny.

The beneficiaries of the housing boom tend to be the already well to do, while the victims tend to be the young and the vulnerable. Most people by now are aware that something dramatic has occurred in the Hawaii housing market, but few are asking what government in Hawaii is doing by way of response. The answer seems to be, "Nothing that tempers or alters the situation."

To sit back and watch all of this happen in the name of a "free market" is to avoid the essential facts. It goes to show what happens if goals in the broad public interest are not consistently stated and consistently pursued.

The best solutions have come from the public widely sharing the costs, rather than forcing developers to develop set numbers of lower-priced units, the costs of which are simply passed on to other buyers.

By wide sharing I refer to a matrix of state policies: The conscious nurturing of moderate, but steady growth in supply; intensified use of existing urban lands; carefully planned conversion of appropriate lands to urban use; state mortgage subsidies that complement federal mortgage programs; dedication of land and infrastructure to affordably priced developments; rent subsidies; expanded programs for the homeless and disabled, etc.

We cannot allow a housing boom to drive young people and young families out of Hawaii. Without intervention, we will become a society of newcomers and the elderly.

George R. Ariyoshi, chairman and cofounder of Convergence CT and Cellular Bioengineering, is the former president of Prince Resorts Hawaii Inc. He is active in international business circles, particularly in Asia. An attorney by profession, Ariyoshi served in elective office in Hawaii from 1954 to 1986. He served as governor of Hawaii from 1973 to 1986 and was the first Japanese American to be elected governor in the United States.

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