I Don’t Recognize This Place Any Longer

Our beloved home, the State of Hawaii, has had an economic problem for decades.  The problem it seems, is that the “haves” keep getting more, and the “have-nots” have even less.  Our children no longer feel they can afford to live in the place of their childhood.  Those that have the opportunity to leave, do so.  And in recent years, that migration has gotten larger each year.

 

The fire that destroyed Lahaina only exacerbated the housing shortage on Maui.  That lack of housing has been an issue for years.  And no different than other times in history when the people are unable to feed and house themselves, the citizenry lashes out for drastic changes.

 

What we failed to realize for years was the dead-end road our state’s economy has been barreling down.  Our political leaders failed to offer solutions for economic diversification, a requirement for a healthy and vibrant state.  They rode the wave of economic infusion from tourism and the military.  A wave that’s been going since the end of World War II.  We’re now almost 80 years riding that wave.  But the nearsightedness of relying on those two industries is that at some point you reach a maximum of economic growth.  We’ve reached a point where Hawaii can no longer handle more tourists, and the military isn’t going to build any new bases and house more soldiers here.

 

While tourism and the military fueled our state’s economic growth for 8 decades, the jobs that were produced were by in large poor paying for unskilled labor.  It is true that being located in the middle of the Pacific precludes Hawaii from many industries that produce high paying jobs, I’ve never heard a politician propose anything that tries to take advantage of our location and ocean access.

 

If Hawaii had different economic drivers that provided good jobs with pay, our children would not be leaving Hawaii.  They would be able to afford a home here.  There’s also been a lot of discussion on why more homes are not being built here.  Developers know the real reason.  Even if they build them, very few of our residents could afford to buy them.  The key to a flourishing Hawaii is not cheap homes and government subsidies.  The long-term and only solution is to find new economic opportunities.

 

Instead of looking inward to how our political leaders have failed us, they have redirected the anger and frustration our residents feel towards people outside of Hawaii that wish to buy real estate here.  I have provided below a few of the bills I found pending at this year’s legislative session.

 

The tone and target of these bills has no Aloha in them.  While all slightly different, they all pretty much say the same thing.  Outside people are bad, and you should stay away.  This was not the mindset of the people of Hawaii when I was growing up here.

 

 

 

 

SB-2617: PURCHASE OF REAL PROPERTY BY FOREIGN PRINCIPALS

Prohibits foreign principals from acquiring real property in the State or any interest in real property in the State, except a percentage interest. Defines foreign principal. Requires a foreign principal that owns real property that was acquired before this measure's effective date to register the ownership with the Attorney General. Requires a buyer of real property to provide a signed affidavit attesting that the buyer is not a foreign principal. Authorizes the forfeiture of real property or an interest in real property that is owned or acquired unlawfully. Establishes penalties. Declares that the appropriation exceeds the state general fund expenditure ceiling for 2024-2025. Appropriates moneys.

 

It's easy to blame foreigners for Hawaii’s housing shortage.  But we should be very careful before excluding certain classes of people from buying property here.  Don’t just think if rich foreigners.  We have lots of residents in Hawaii with middle-class family that are still foreigners and may wish to buy a home here and immigrate.  Are going to include them too, or just the rich ones?

 

This bill has passed its first reading and was sent to various committees for hearings.

 

 

 

 

SB-2624: PROHIBITION OF THE ACQUISITION OF AGRICULTURAL LANDS BY CERTAIN FOREIGN PARTIES

Prohibits certain foreign parties from owning, purchasing, or acquiring an interest in agricultural lands. Establishes an Office of Agricultural Intelligence within the Department of Agriculture to investigate claims that land is unlawfully owned by a prohibited foreign party. Requires the Attorney General to undertake enforcement activities. Appropriates moneys. Declares that the appropriation exceeds the state general fund expenditure ceiling for 2024-2025.

 

One of the ways Hawaii can diversify its economy is through high-value agricultural crops.  And maybe the start-up capital needed comes from foreign sources.  Do we want to exclude foreign investment, or are we pointing the finger at foreigners because they’re an easy target?

 

This bill has passed its first reading and was sent to various committees for hearings.

 

 

 

SB-2626: Prohibits Building Luxury Homes

Provides that a project may not proceed under an emergency proclamation relating to housing or affordable housing if that project includes any construction, development, redevelopment, or adaptive reuse that results in a new luxury housing unit or the conversion of an existing residential unit to a luxury housing unit.

 

This is my favorite proposal from of the bunch of bills, because it capitalizes on the destain for monster homes.  Hawaii has a housing shortage, so why should mega homes be allowed to be built?  But what’s the definition of a luxury home?  The bill tells us: For purposes of this section, "luxury housing unit" means a housing unit, whether offered for sale or rent, that is not affordable to a household earning {a specified} per cent of the applicable area median income as determined by the United States Department of Housing and Urban Development.

 

In this bill, a luxury home is actually a home that’s not an affordable home.  I have news for the legislature.  Almost every home is Hawaii is no longer affordable, based on your definition.

 

This bill has passed its first reading and was sent to various committees for hearings.

 

 

 

SB-2929: RESTRICTION ON PURCHASE OF PROPERTY BY NON-RESIDENTS

Establishes a temporary restriction that only current and former residents of Hawaii may purchase residential property. Prohibits real estate brokers and real estate salespersons from buying, offering to buy, or negotiating the purchase of residential real estate for someone who is not a current or former resident without disclosing the temporary restriction. Repeals the moratorium when the Governor's last proclamation on affordable housing expires.

 

I get it.  Save the homes for the people of Hawaii.  One problem.  Hawaii is part of the United States.  Hawaii cannot legally restrict citizens of the US from buying property here.  Should Nevada prohibit people from Hawaii buying property in Las Vegas?

 

This bill has passed its first reading.

 

 

 

HB-1838: The Phasing Out of Short-Term Vacation Rentals

Allows counties to enact a zoning ordinance to amortize or phase out nonconforming single-family transient vacation rental units over a reasonable period of time.

 

Short-term vacation rental owners are not villains.  The legislature gets lots of lobbying from the hotel industry that has never wanted competition.  What better way to get rid of your competitors then by “phasing out over time” these properties?  We could house more people quicker by converting some hotels into apartment buildings, but I have not heard anyone suggest that.

 

This bill has passed its first reading and was sent to various committees for hearings.

 

 

 

The solution to our problems doesn’t start with blaming others.  We have an economy that produces low paying jobs and things cost more here because everything must come from somewhere else.  The quick answer may be to try and keep Hawaii for the people of Hawaii, but it will send an economic message to the world that Hawaii doesn’t want you.  And if that’s how everyone here now feels, I’ll be sad, because we then truly have lost what makes our home special.

 

 

 

 

 

And now the week’s economic news…….

 

Inflation Eases

The major inflation data released this week was right on target.  While GDP growth exceeded expectations, its impact was minor.  As a result, mortgage rates ended the week with little change.

 

Fed officials keep a close eye on inflation, and the PCE price index is their favored indicator.  In December, core PCE, which excludes food and energy to reduce short-term volatility, was up 2.9% from a year ago.  This was down from an annual rate of 3.2% last month and the lowest level since March 2021.  While still moving in the right direction, it remains above the Fed's target of 2.0%.

 

Gross Domestic Product (GDP) is the broadest measure of economic activity.  During the fourth quarter, U.S. GDP rose at an annualized rate of 3.3%, above the consensus forecast of 2.0% but down from 4.9% during the third quarter of 2023.  Strength was seen in consumer and government spending, business investment, and inventory growth.  Despite higher interest rates, the economy has remained surprisingly resilient and has shown few signs that it will enter a recession.

 

After ten consecutive hikes since early 2022, the European Central Bank (ECB) held benchmark interest rates steady for the third meeting in a row as expected.  The statement released after the meeting again emphasized that future monetary policy decisions will be based on incoming economic data.  During the press conference, ECB President Lagarde said that any discussion of a rate cut is "premature”.  Like the U.S. Fed, the ECB is still planning to hold rates near current levels for now to help bring down inflation.

 

 

 

 

 

 

Next Week

The next Fed meeting will take place on Wednesday.  While no change in rates is expected, investors will look for guidance on the anticipated timing of rate cuts later in the year.  For economic reports, the ISM national manufacturing index will come out on Thursday.  The key Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation will be some of the most highly anticipated economic data of the month.

 

Until next week…….