ANALYSIS
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LIHUE >> On any given day, roughly 200 families trudge from Realtor to Realtor looking for homes to buy or rent on Kauai and end each search with no sales agreements or leases in their hands, according to county housing officials. Kauai’s housing crisis worsens
By Anthony Sommer
tsommer@starbulletin.comThere simply are not enough houses, condos or apartments for them to buy or rent. Those that become available are quickly snapped up, often by families taking what they can get rather than what they want.
These homeless are not on welfare or unemployment insurance. Housing for the poor on Kauai is pretty well covered by federal programs.
These are working people who earn between 80 percent and 120 percent of the median income on Kauai -- $55,900 for a family of four in 2001.
They used to be called "middle class." Now, in the government lexicon of euphemisms, they are known as the "gap group" -- those in the "gap" between the rich and the poor.
Kauai has been in a housing crisis since late 1999 when the current real estate boom began. And it keeps getting worse.
Experts say that mainly because of high land and construction costs, developers are not able to build housing affordable to many middle-income people.
Speculators who had watched housing on Kauai mired at rock-bottom prices since 1992's Hurricane Iniki suddenly in the fall of 1999 detected a slight twitch upward in prices -- probably sparked by people suddenly rich from playing the bullish stock market seeking second homes on the Garden Island.
Buyers stampeded to Kauai. Tract homes that for years had been vacant with "For Sale" signs on front lawns were quickly purchased. Condominium complexes that had long resembled ghost towns suddenly were bustling with moving vans. Everyone wanted to buy before the prices went even higher.
The demand continues but there is no supply left. Neither the government nor the private sector has been able to provide sufficient numbers of homes at prices low enough for middle-income residents.
"Kauai needs to produce 200 to 300 new dwelling units per year to maintain a healthy housing inventory," said Ken Rainforth, county housing administrator. "We're producing maybe 50."
Elected county officials, even in an election year, respond unanimously with shoulder shrugs and the identical comment: It's cyclical. It's the way it's always been on Kauai.
The Kauai Council has shown no interest in a program adopted two years ago by Honolulu called the "Development Agreement Ordinance." It requires developers, the mayor's office and the Council to agree on how much of a new project should be set aside as "affordable housing."
It is instructive to roll back the videotape a dozen years.
In the late 1980s, at the end of the state's last economic boom period, Kauai -- and all of Hawaii -- faced exactly the same problem: What was available to buy or rent was expensive, and not much was available.
To the rescue came Hawaii state government with a requirement that every real estate developer set aside 60 percent of any subdivision as affordable housing.
Affordable housing means the homes must be offered first to people who are certified by the government as qualified by virtue of their family income. And the homes must be sold at a price determined by the government.
The government does not subsidize the homes. It fixes the prices.
For example, the 2001 limits require that a builder be able to offer a family of four with the county median household income of $55,900 a single-family house at no more than $197,400 and a multifamily home at no more than $173,600.
The new program affected dozens of developers statewide but only one on Kauai: Grove Farm. The former sugar plantation-turned-home-builder was then owned by descendants of the founder, George Wilcox. It recently was acquired by America Online founder Steve Case.
In 1989, Grove Farm contracted with Schuler Homes to build its "affordable housing" so it could move ahead with more upscale home-building. The total project -- both "affordable" and otherwise -- was to total 1,690 homes, according to Grove Farm Vice President Mike Furukawa.
The history of the Grove Farm "affordable housing" program is the history of housing all over Kauai in the past decade.
In 1990 the state's skyrocketing economy began to fizzle. For a short time -- about two years -- Kauai's housing market was in a state of equilibrium, the only time Housing Administrator Rainforth can remember it being so.
Then came Hurricane Iniki, which damaged, to some extent, every home on the island. By the time the insurance companies and the contractors patched all the leaks in the mid-1990s, thousands of residents had fled Kauai seeking work elsewhere, the economy was dead, and there was so much vacant housing available that no one knew what to do with it all.
It was a buyer's market, and rents and purchase prices were about a third of what they had been in the late 1980s. State government found itself stuck with a white-elephant housing program of its own creation and punted it where it often does: to the counties.
Kauai County already had a pale pachyderm of its own in its public housing projects the public didn't want. The Kauai County Council regularly flogged the Kauai Housing Administration for huge vacancy rates at the two apartment complexes built to ease the housing crisis of the previous decade.
In a backfire of what the original public policy intended, the Schuler "affordable housing" project, which now was regulated by the county, found itself stuck with houses and condos that, by government formula, were too expensive to sell.
"The mandated top sales price for affordable homes also was the mandated minimum," said Maria Burns of Proesser Realty, Schuler's agent on Kauai. "People could go anywhere on the island and find housing much cheaper than we were allowed to sell it."
Fast-forward to late 1999 and the beginning of the current housing crisis.
The big difference between then and now was that the housing shortage of the late 1980s came when Hawaii's economy was glowing with health. This shortage arrived when the state already was swirling around the drain. The government was in no position to strong-arm the few home-builders that remained.
The housing shortage is compounded by a new phenomenon. A large portion of the Kauai housing stock available a decade ago is now being used as "vacation rentals," an industry that goes and grows virtually without county regulation.
"There is something very wrong when the local Sunday newspaper has three columns of ads for vacation rentals and only a half a column for long-term rentals," said a county housing official.
And it is made worse by the higher cost of everything.
Schuler's latest "affordable" offering -- Grove Farm still owes the county 102 "affordable" units -- is a neighborhood of duplexes ranging in price from $169,000 to $221,000.
A three-month period during which the first 24 such duplexes were offered only to people who qualified for "affordable homes" just ended. Fifty prospective customers were qualified by the county, but only one family received a mortgage from a bank.
"The bankers look at their heavy credit card debt, the payments they're already making on that big Chevy four-by-four pickup, and say there's no way they can afford the mortgage payments," said Burns.
The duplexes now will go sale to the public at whatever price Schuler can sell them.
"If it weren't for the fact Schuler was able to buy the land at a very favorable price from Grove Farm in the 1980s, they wouldn't be able to build homes that middle-income people can afford at all. I'm not sure anyone else on Kauai can," Burns added.
And that's probably true.
In 2000, Princeville Corp. wanted to add 10 acres to its existing shopping center. Kauai County said Princeville Corp. would have to build 100 affordable housing units promised in 1988 (but never constructed because of the housing glut in the 1990s) before it would OK the larger shopping center.
Princeville Corp. said the housing project would cost the company too much money (It never said how much). Princeville offered to give the county a $1.2 million vacant lot adjoining Black Pot County Beach Park in Hanalei in exchange for being let out of the housing promise.
Kauai County dug in its heels: no housing, no shopping center expansion.
Princeville Corp. just walked away from the table. The shopping center will not be expanded, and the houses will not be built. The developer refused to take a big a loss providing "affordable housing."