2019 Hawaii Housing Planning Study

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fees or exactions, fiscal policy, and administrative count of the number of times we were reminded processes. that"time is money." Some observers feel there are deficiencies and Impact of Housing Regulation system-wide weaknesses in the way land use is managed. In 2014, the State Office of Planning It is widely accepted in 2018 that stringent (OP), initiated a review of the State Land Use regulation of housing production will result in high District Boundary Amendment process. OP's housing prices, decreasing elasticity of supply, effort was summed up in the State Land Use and low supply, especially in high-priced, volatile System Review Draft Report, which explored markets26. However, the adverse effects of ways to increase the effectiveness of the land use stringent regulations and onerous review system without compromising the original intent of processes on affordable housing development the Land Use Law."23 The process involved wide- extend beyond supply shortages and high prices. ranging debate and ended with an agreement to Some have said that regulations lead to an consider the issue further. inefficient housing market. Markets are expected to sort supply and demand such that specific Many stakeholders interviewed for this project household needs are matched with appropriate commented on review processes rather than on unit characteristics. In highly regulated situations regulations themselves. Reviews are required at like Hawai`i's, the market seems unable to cope several steps along the way to project approval. with that task. Some lower-income households In 2018, it took eight pages to describe the placed in units beyond their means and some process for using 201 H-38 for workforce housing higher-income families are placed in units that projects in Maui County.24 Across the State and would better serve poorer households. Counties, respondents told us that reviews were duplicative, requiring the same basic reporting to Another effect of regulation comes to us from more than one agency. Some felt certain review Somerville and Mayer (2001, 2003). They found procedures were carried out with less attention that stringent regulation causes the filtering27 and diligence than expected. This sentiment was process to be reversed. In markets with heavy particularly true for SHPDA and DCAB reviews.25 regulation and low supply elasticity, affordable Some procedures require refiling if the initial units tend to filter up and become unaffordable28. submission is not approved. In the worst cases, a Thus, regulation reduces the affordable housing developer can go through the entire set of review stock, making regulation counterproductive. processes, pass all requirements, and then be summarily disapproved at a County Council Some researchers find that highly regulated meeting attended by the public. All review housing markets hinder the movement of labor procedures were said to be lengthy, and we lost from one market to another, a process that decreases local GDP29. 23 Office of Planning, State land use system review, rents encourage landlords to invest less in property. The http://planning.Hawai'i.gov/state-land-use-system- key in either case is that old housing costs more to review, paragraph 1. maintain than new housing." We have several more 24 See the process schematic in Appendix, Figure C-1. citations on this. Filtering is a simple idea that ends up 25 being very complicated. One of the issues that adds to Housing Action Plan, p. 60. that complexity is that regulations change the 26 The literature search conducted for the HHPS 2016 relationship. See Also, Rosenthal 2018, Hertz 2015. captured the first 15 years of the research. Glaeser and 28 Specifically, "regulation increases the probability that a Gyourko (2018, pp. 14-16) summarizes the technical rental unit currently deemed affordable will become research since 2015. Gyourko and Molloy (2017) is the unaffordable, owner-occupied, or demolished, relative to most recent and most comprehensive review of the work staying affordable", p. 53. on regulation. 29 Hsieh and Moretti, 2017)calculated that GDP would be 9 27 Bradford, Chris. 2008. "When property values rise, low- percent higher if there were higher production of new quality housing "filters up" to the high-quality housing housing units in Type 2 housing markets. sub-market. The reason is that rising rents encourage landlords to invest more in the property. When property values fall, high-quality housing "filters down"to the low- quality housing sub-market. The reason is that falling Hawai'i Housing Planning Study,2019 Page 12 ©SMS December,2019