Kaua’i’s Wicked Housing Problem

Edit — this post was originally written in 2016, but was updated slightly in October 2020.

Last week The Garden Island Newspaper published an op-ed I wrote in support of most of the policies in the new Kaua’i General Plan update. The gist of the piece is that we are facing an affordable housing crisis (everyone agrees with that) and so to bring the cost of housing down we need to make it easier to build (some people agree with that) while doing more to minimize sprawl (some other people agree with that), and that’s why the direction set by the General Plan is the right one for Kaua’i (almost nobody agrees with that).

But, I provided almost no evidence for any of those claims. In my defense, it was a short column, there was a lot to cover, and printed newspaper pieces don’t allow for linked citations. So — I asked you to trust me, and left it at that.

But, the second most important rule of the internet is to not trust the guy using emotional rhetoric (which I did) to make an argument without any citations (which, gulp, I also did). So, if you’re skeptical of my claims — good, you should be! And you should also read the 4,000 words below.

Claim #1: Kaua’i is in the midst of an affordable housing crisis.

Since we all agree with this, I won’t spend much time on it. But, according to the General Plan, the median home price on Kaua’i is $730,000 which is 300% higher than the national average. And, also according to the plan, 44% of Kaua’i households spend more than 30% of their household income on rent or mortgage. Using the definitions from the US Department of Housing and Urban Development, this means that housing on Kaua’i is unaffordable for almost half of the island’s households. If you’ve lived here for long enough, you know someone who’s lost their home. Maybe they moved off-island, or moved in with their family, or maybe they set up a tent in a county park. Regardless, this is clearly a crisis.

From the Kaua’i General Plan chapter on housing

Claim #2: The price of a house is not fixed into its construction cost, but changes depending on the supply and demand.

This is not intuitive. So I understand if you stopped reading my TGI piece after I said it. But, it’s important, so let me explain.

Increased housing supply puts downward pressure on the value of all other housing units through a process called filtering. There is a large amount of recent research into this effect (Rosenthal, 2014; Zuk and Chapple, 2016; Cortright, 2018; Mast, 2019), but the basic notion is that the availability of new market-rate units allows people to move out of their existing homes and opens those aging homes for someone else to move in. When someone moves into that recently vacated home, they open up another lower priced home for a different family to move into. At some point at the end of the line is a vacant house in need of a tenant — and these are often older, cheaper homes that are available to low-income families or first time home buyers. In a process often compared to musical chairs, filtering ensures that older homes, like all other durable goods, will depreciate over time because there is less intense demand for them if housing construction keeps pace with population growth. According to Rosenthal, “filtering has long been considered the primary mechanism by which markets supply low-income housing.” Todd Litman, Director of the Victoria Transport Institute, writes that the research cited above shows that if the rate of development exceeds population growth, then the process of filtering will lead to a 3 percent annual depreciation in the value of older homes. The research shows that this process has an even larger effect on rental housing. In a separate piece, Litman, summarizes the lesson of filtering:

Communities that want true affordability, including middle- as well as low-income households, future as well as current affordability, and transportation as well as housing affordability, should implement policies to allow housing supply in walkable urban neighborhoods to increase faster than population growth.

Or, if you’d prefer to hear it in the words of an actual economist, let Noah Smith of Bloomberg view explain:

Suppose there are 2000 people in a city, living in 2000 apartments. One quarter of the people are rich, and rent apartments for $4000 apiece. Three quarters are poor, and rent apartments for $1000 apiece. The median rent is therefore $1000. Now build 400 fancy new luxury apartments that rent for $5000 each. And suppose no new people move to the city. All 500 rich people move into the fancy new $5000 places, leaving their old $4000 places vacant. The previously-$4000 apartments fall in price to $2000, and 500 poor people move into them, leaving 500 of their apartments vacant. These are used as second apartments, storage, or whatever. The rent of the 1500 apartments that used to all cost $1000 falls to $900 because of this drop in demand for low-end apartments. The median rent of the city’s 2400 apartments is now $900, down from $1000 before.

Like any economic model, this doesn’t happen exactly like this in real life. In the same way that an additional lane to Lihu’e would induce me to drive through Kapa’a more often, thereby exacerbating the same traffic problem that the lane was helped to solve (which I’ve previously written about at Civil Beat and will write about more below), there is an argument (as Noah Smith explains/refutes in his piece) that building new homes on Kaua’i could induce people to move here.

But, researchers write that while the evidence for induced demand in traffic is well documented, it doesn’t work the same for housing. Because while deciding to go for a drive is close to free (“willingness to tolerate delay” and gas being the only cost), homes are expensive and require people to actually move out of their communities to acquire them.

The only published study (Asquith, Mast, Reed, 2018) looking specifically at migration data into popular places with new construction compared to those without showed that while new construction does induce some new people to move into a community from different areas in the city or metropolitan region that wouldn’t have moved otherwise, there are still reductions in rent in nearby housing units from the increased supply. Meaning that the induced demand was not enough to overwhelm the supply.

There is some data available for Kaua’i. The workforce housing study commissioned by the County showed that 50 percent of new units on Kaua’i were sold to off-island buyers between 2013 and 2018. To determine the level of induced demand we would have to know how many of those people would have bought a home on Kaua’i anyway (and so would have bought up existing housing stock if not a new one), which we can’t answer with the available data. Regardless of the exact level of induced demand, the workforce housing study showed that the number of off-island sales are very high within the Visitor Destination Areas (65%+) and very low for some of our town cores. For example, just 8 percent of newly constructed units sold in Lihu’e between $500,00 and $1 million went to off-island buyers between 2013–2018 — and the figure was 0 percent for homes sold both above and below that price range within Lihu’e.

While clearly something (hmm… nice weather, nice beaches, etc) is attracting lots of people to Kaua’i, it’s not the supply of homes that’s drawing them here. And building less homes won’t keep them out — it’ll only end up pricing locals out (as is currently happening).

Graph from Strongtowns.com with datapoint for Kaua’i added based on data retrieved from Zillow and County of Kaua’i, 2019

The point is that it’s not the construction of high end homes that contributes to unaffordable housing. It’s the lack of supply at all levels. In other words, our housing crisis isn’t due to only luxury homes being built, it’s due to the rapid appreciation in value of our island’s existing homes. If home supply is not the cause of high demand, then home restrictions can never be the solution to high prices.

While our conversation about growth often conflates supply and demand, it’s important to keep them separate. The County has lots it can do to control housing supply, and much less it can do to control housing demand (as I’ve written before at Civil Beat).

“The question for a planning document is not how to prevent that demand from changing the city “writes Vox’s Mathew Yglesias,” but how to channel that demand in a constructive way that builds an inclusive city.”

Which brings us to the next point I made in the piece.

Claim #3: Regulations increase the cost of housing by decreasing supply.

While Kauai saw an average of 596 new homes built every year from 1970 to 2010, this decade has averaged around 200 per year, despite seeing an average increase of around 800 people per year (mostly from babies being born here). One contributing factor is that Kaua’i has had an affordable housing mandate (ordinance 860) since 2008 which requires one third of homes in a new development to be “affordable.” Not a single new development has been permitted since that mandate went into effect. That means it’s produced zero affordable units and helped stifle the supply of housing.

Low density zoning patterns have also resulted in a limited amount of small/affordable residential lots, zoning ordinances prohibit multifamily dwellings (including things like ricer cookers in bedrooms) on most residential lots (*2020 edit — multifamily homes are now allowed on all residential lots), neighborhood covenants often prohibit ADUs, and the onerous permitting process weeds out all but the most dedicated (and wealthier) soon-to-be homeowners. All of these end up restricting home construction and increasing costs.

This vast discrepancy in the increase in population versus the increase in new homes has driven the cost of our existing housing units up by 58 percent between 2012 and 2019.

To put that into perspective, a home that sold for $500,000 in 2012 would sell for $780,000 in 2019. That’s an annual increase in value of $40,000 per year — which is equivalent to earning $19 an hour at a full time job. Meaning that the average homeowner on Kaua’i earns nearly twice the minimum wage just in the increasing value of their aging home. And those year over year annual increases have held mostly steady since coming out of the recession.

The nation-wide evidence that high regulations decrease the supply of housing and increase the price of housing is overwhelming. If you’re interested in a deep dive into the weeds, here’s a brief review of the literature:

  • 1987 study by Katz and Rosen compared San Francisco neighborhoods and concluded “that house prices are between 17 percent and 38 percent higher in those communities in which growth moratoria and/or growth control plans are present.”

And then there’s unregulated Houston. Its affordable housing and consistent economic growth have made it the ultimate success story in the argument against zoning regulations.

Houston’s housing costs (in red) compared to Kaua’i’s housing costs (in blue) since 1984.

That is, until Hurricane Harvey. In the words of Paul Krugman:

Having no zoning, no control, can be disastrous — which is what we’re seeing in Houston now. But all too many blue states end up, in practice, letting zoning be a tool, not of good land use, but of NIMBYism, preventing the construction of new housing.

In fact, liberal (in the non-political sense) land use policy is probably the secret behind Texas economic growth: the state doesn’t offer high wages, but it does offer cheap housing even in huge metro areas…

What we need is effective land-use regulation that doesn’t strangle housing construction.

Which, brings us to the next set of claims.

Claim #5: Regulation is necessary.

Houston is affordable because of its lack of regulation, but as this 2009 Zaninetti paper shows, that affordability comes with some major costs. Its sprawling low density developments and lack of separation between uses have contributed to some of the worst traffic and worst air pollution in the country. Its lack of regulation regarding building in flood prone areas contributed to Hurricane Harvey being the most expensive storm in history; and its endless miles of concrete and asphalt without adequate drainage exacerbated the damage. Not to mention that chemical factories are literally exploding in residential neighborhoods.

But, you don’t need to go to Houston to see the need for greater control over build-out patterns.

We can see it every day while sitting in Kapa’a traffic. Most Kaua’i jobs are in Lihu’e, but most of the island’s houses are in Kapa’a. That’s not a road issue, it’s a planning issue.

We can see it in agricultural land that primarily grows houses rather than crops. That’s not a farming issue, it’s a planning issue.

And we can see it in the County of Kaua’i’s increasingly dire budget statements. Spending more every year per person on municipal services isn’t a bureaucratic issue, it’s a planning issue.

Claim #4: Unregulated building patterns increase government expenditures.

Every year during the budget process we hear the same conversation from our elected officials about government waste and doing more with less. Yet, there has been no recognition of one of the fundamental drivers of our budgetary woes: declining density.

According to Kauai’s Land Use Buildout Analysis, over the last 15 years, 39% of new homes were built on agricultural or open zoned land, while only 17% were built in the medium-density zoning district (R-6), and less than 1% in the multi-family zoning districts (R-15 and R-20).

It costs the county significantly more money to provide municipal services (trash pick-up, police/fire protection, road maintenance, administrative expenses, etc), to those 39% of new homes on agricultural land than it does to provide service to anyone in the middle of Kapa’a or Lihu’e. Our sprawling development patterns are why the county of Kaua’i spends 30% more per person than the City and County of Honolulu.

This is a pattern seen around the world.

  • 2003 study by Caruthers concluded that in the United States as density increases, per-capita costs go down — and vice versa.

Claim #5: Roads don’t solve traffic. Planning does.

I’ve written about this many times before for Civil Beat (here, here, and here).

Here’s a quick overview from the first of those pieces:

As early as 1947, studies were proving that new roads and new lanes don’t reduce traffic.

“‘Traffic generation’ was no longer a theory but a proven fact: the more highways were built to alleviate congestion, the more automobiles would pour onto them and congest them and thus force the building of more highways,” writes Robert Caro in his groundbreaking book The Power Broker, “which would generate more traffic and become congested in their turn in an inexorably widening spiral.”

The evidence is so prevalent that it’s called the “fundamental law of highway congestion.”

Economists view traffic as a cost of driving. The more traffic, the higher the cost. As traffic increases, less people are willing to incur the high cost of wasted time — and they either drive at a different hour, take the bus, or avoid driving all together. So traffic always reaches equilibrium. Which is why fears of Carmageddon in Los Angeles never materialized.

When new roads are built, they simply fill back up to their equilibrium point.

(If you already get the gist, feel free to scroll down to claim #6. If not, read on.)

Phrased differently by Jane Jacobs in Death and Life of Great American Cities:

Traffic congestion is caused by vehicles, not by people in themselves. Wherever people are thinly settled, rather than densely concentrated, or wherever diverse uses occur infrequently, any specific attraction does cause traffic congestion… The spaces required for roads and for parking spread everything out still farther, and lead to still greater use of vehicles.

Or, even better, Lewis Mumford’s famous 1955 essay on transportation:

Your one-eyed specialists continue to conduct grandiose plans for highway development, as if motor transportation existed in a social vacuum and as if (our town) were a mere passageway or terminal for vehicles, with no good reasons of its own for existence.

To these experts, a successful solution of the traffic problem consists of building more roads, bridges and tunnels so that more motorcars may travel more quickly to more remote destinations in more chaotic communities, from which more roads will be built so that more motorists may escape from these newly soiled and clotted environments.

Instead of curing congestions, they widen chaos.

Because we have apparently decided that the private motorcar has a sacred right to go anywhere, halt anywhere, and remain anywhere as long as its owner chooses, we have neglected other means of transportation … The major corrective for this crippling overspecialization is to redevelop now despised modes of circulation — public vehicles and private feet.

Or, best of all, Kauai’s first General Plan update in 1970:

[Oahu has been] led into a blind alley of unsolvable traffic problems and a hopeless dispersal of people and services which cannot possibly be served adequately by any economically feasible alternative to the automobile. The resultant destruction to the limited land and natural resources has not yet reached its inevitable limits, but the grotesque evidence of an environment spawned and predominately controlled by a helpless, psychological addiction to a pathetically inefficient method of transportation is there for all to see.

The question should be asked. Should Kauai and the state continue to fund the development of roads and highways knowing full well that they eventually generate more traffic, more dispersal, more congestion than they are designed to alleviate?

Or, should Kauai now, while there is time, move towards a better, more convenient, more efficient, safer and less destructive system of transport; and in so doing maintain and improve the quality of the environment, hence the quality of life?

To those accustomed to the relative leisure and comfort of driving on Kauai, such foresight and imagination is as difficult as the foresight required on Oahu twenty years ago.

The people of Oahu failed. Will the people of Kauai?”

I know I said I’d avoid emotional rhetoric and stick to the facts, but I had to share those three prescient pieces.

Despite overwhelming evidence that roads induce traffic, there is actually mixed evidence on the role of sprawl and commute times. While the research is clear that increasing density reduces traffic fatalities, much of the literature suggests that sprawl decreases commute times because it also often decentralizes employment. However, on Kaua’i, decentralized employment is not an outcome of sprawl. When someone builds on agricultural land, they are not generally also creating a job nearby. And, as I’ve written before, there is strong resistance to commercial activities in residential areas.

According to the Kaua’i Socio-Economic Analysis developed for the General Plan, Lihu’e has nearly half of the jobs on Kaua’i. While the East side had nearly 21,000 residents in 2010, there were only 4,570 jobs in the area. That, more than anything, is the reason for the Kapa’a traffic mess. And it’s why the Kaua’i General Plan cites that the average household on Kaua’i spends more on transportation (car ownership, fuel, maintenance, etc) than they do on housing.

Claim #6: We need regulation to preserve agriculture and open space.

As I’ve written before in Civil Beat:

As our agricultural land competes in the high-end market of homesteads instead of cropland, we have experienced a 28 percent decrease in small farms on Kauai since 2007. This decline in farms (along with the fall of sugar) has led to an average annual loss of 3,500 acres of cultivated land over the last two decades.

“And so, each day,” wrote Jacobs, in explaining this pattern across America, “several thousand more acres of our countryside are eaten by the bulldozers, covered by pavement, dotted with suburbanites who have killed the thing they thought they came to find.”

The bottom line here is that if we want farmers to be profitable, we can not have them competing in the same land market as housing.

Claim #7: Land use regulation causes inequality. It can also reverse it.

I’ve written about this in depth before for Civil Beat, but it’s important to reiterate. Zoning policies can either exacerbate inequality and racial segregation, or they can work to reverse them. The first residential zoning codes were meant specifically to protect the property values of high-income areas by keeping poor people out. They quickly devolved into race based codes meant to keep black people in isolated neighborhoods. While race-based zoning was ruled unconstitutional in 1917, the exclusionary ideas simply morphed into residential zoning ordinances like the low-density lots we’re used to on Kaua’i. Today, nearly every suburban neighborhood around the country is built behind regulations that create an invisible barrier to entry.

If you prohibit families from installing an extra kitchen, then you are also effectively prohibiting multi-generational families from a neighborhood. And if you only allow large lots, then you are barring entry to low-income families.

As a Brookings Institute Paper highlighted:

There is strong support from case law, popular accounts, and the academic literature that local governments often adopt exclusive large-lot zoning, minimum house size requirements, and bans on secondary units precisely to make their housing more expensive and thereby indirectly exclude lower-income racial and ethnic minorities.

Which is why studies continue to show a “strong and significant … relationship between low-density zoning and racial segregation.”

And while government policies have helped create this problem, they can also begin to solve it. There is strong research showing the lifelong benefits of safe streets and well connected neighbors — and the harms of the opposite. Just growing up in a better neighborhood has been shown to increase annual income by 16%.

That same Brookings Institute Paper mentioned above explored the policies which have been shown to “break the chain of exclusion” such as: increasing densities, mandating a mix of housing types, delineating clear growth boundaries (which leads to more multi-family housing inside the town cores), increasing access to public transportation, reducing regulatory delays in the permitting process, and by creating walkable neighborhoods and access to transit (which reduce the high cost burden of transportation).

But, as the paper warns, there is a fine balance point between a growth management program which brings about higher housing costs because it doesn’t allow for enough growth, and one which allows for too much growth and creates sprawl.

And none of these policies can be enacted in a vacuum. You can’t delineate growth boundaries without increasing density and you can’t increase density without planning for a mix of housing types and uses. You can’t expect a mix of housing types if there are long regulatory delays and you can’t increase the density of town cores without simultaneously building adequate multimodal transportation options.

All of this can be boiled down to one question:

How do we enable more construction (to bring down house prices) while reducing government expenditures, traffic, and inequality?

This is the fundamental problem at the heart of land use planning and it’s what the General Plan attempts to solve. We need a vibrant community dialogue around these issues. But, we also need to make sure that all solutions address both sides of the equation.

If you’ve made it this far, thanks for your dedication. But, I have to add one more thing. The main driver of my support for the General Plan is climate change. It changes everything. How we live. How we drive. How our economy functions. It is, hands down, the biggest issue we face as an island, as a country, and as a planet. And, we only have one chance to get this right. We need to get to zero carbon emissions within my lifetime. Which means that by 2035 (the timeframe for the General Plan), we need to be well on our way.

And there are two approaches that Kaua’i can take.

We can pursue growth restriction policies (as I’ve explored before) and energy policies (as I’ve explored before) that force poor people out.

Or, we can forge a more inclusive path. Where reducing the cost of housing comes from the same systems approach that reduces our emissions which comes from the same systems approach that grows our economy. (More on the idea of a three tiered sustainability model in this must read journal article by Fiorino).

As David Roberts writes:

climate change is just a numbers game. Personal virtue doesn’t count for much. The imperative is to build low-carbon systems, not individual low-carbon houses, and to get as many people as possible into those systems.

A building is a system. A neighborhood is a system. A community is a system. Part of making those nested and overlapping systems low-carbon is maximizing the number of people within them, minimizing the distances they have to travel, and providing them services with the minimum amount of energy and infrastructure.

While the General Plan has the goal of 40% emissions reduction by 2030 and 80% emissions reduction by 2050, that’s not what makes the document so powerful from a climate change perspective — it’s that it spells out an entirely new system of development. One where we can walk to work, where people can afford to live here, and where we can thrive without fossil fuels.

Most importantly, it’s a future that we can build together.

If you made it all the way to the end and are looking for more pieces on Kaua’i’s housing problem, please read:

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