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Housing bill wrong way to help Maui working families, Sugimura says

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How to create more affordable housing on Maui was the topic of Keli’i Akina’s latest “Hawaii Together” program on the ThinkTech Hawaii network.

Yuki Lei Sugimura, a five-year member of the Maui County Council, was the program’s special guest. She spoke with Akina in particular about a proposed Maui ordinance, Bill 10, which would raise the county’s 201H affordable housing program requirement from 50% to 75%.

The measure was vetoed last week Mayor Michael Victorino, who said it would only add another layer of regulation “that would further delay development of workforce housing and increase costs to residents.”

Sugimura hailed him for that.

“I stand by the mayor for his veto,” she said. “I tip my hat to him, because myself and others were the minority in terms of passing the bill. But I think that a word needs to be spoken, a loud voice, like the mayor’s, to say that we support working families, that we think there’s a better way of doing this, rather than increasing the affordable rate to 75%.”

Asked if she expected her council colleagues to override the veto, she said, “Yeah. … Well, I don’t want to speak for others, but, yeah.”

Watch the 30-minute conversation below.

4-26-21 Yuki Lei Sugimura with Keli’i Akina on “Hawaii Together”

Keli’i Akina: Aloha, everyone, and welcome to “Hawaii Together” on the ThinkTech Hawaii broadcast network. I’m your host Keli’i Akina, president of the Grassroot Institute of Hawaii. 

Well, one thing is true: Lucky we live Hawaii, and there are beautiful places all throughout the islands, especially the island of Maui. 

I love Maui County because, in one sense, it’s small enough so that we can solve any problem and come up with innovative ideas. But unfortunately, it’s big enough to have some of the biggest problems magnified many times that we have throughout the state, and one of them is housing.

The No. 1 reason young people are leaving Hawaii, as well as retirees leaving Hawaii, is the cost of our housing — it’s exorbitant. A median family home just this week is priced at $920,000 on Oahu. That’s incredible! 

My four children, who are all adults, are living on the mainland, working hard to earn their mortgages and houses there, in the hopes of being able to someday come back to Hawaii. But it may be many, many years. I think we all know that story.

My heart especially goes out to our friends on Maui, where I know that all types of housing that we need are simply not available. Single-family homes that people need to buy, they’re priced out of the market. Even rentals are not available, but recently we’ve had a massive shortage of affordable housing. It’s been very difficult for developers to get through the red tape, as well as the restrictions and other things needed to bring about an affordable housing project. And recently, as you heard, the Maui County Council passed a rule regarding 201H affordable housing, saying that 75% of these projects, in order to be awarded to a developer, 75% have to be affordable housing.

Now, when you think about that, that sounds like a good idea, because the goal is to get affordable housing built. But when we look at the details, we find that it’s actually going to be very counterproductive. It will not actually help to build affordable housing. It will discourage developers from doing so, and in the end, the people will suffer. 

Nobody knows this better than Yuki Lei Sugimura, one of the members of the Maui County Council, who’s been serving for five years there. I’m just so delighted that we’re able to reconnect today online and pick her brain a little bit about this. Please welcome my guest today, Councilwoman Yuki Lei Sugimura. Yuki Lei, aloha. Welcome to the program.

Yuki Lei Sugimura: Aloha. Thank you, Dr. Akina. Thank you very much for inviting me to participate; appreciate you a lot.

Akina: Well, I’ve really appreciated all your involvement in the community throughout the years, and the occasions when we’ve been able to meet one another. We’re going to talk about this issue of affordable housing, but before we get to it, can you tell our viewership a little bit about your background and how you got involved in politics?

Sugimura: First of all, I proudly always like to share that I’m born and raised on Maui, and went through the public school system and the University of Hawaii in Mānoa. So I’ve been a longtime resident of the community, and I’ve seen it change, and that’s what brought me to this political realm. 

Through the years, though, Dr. Akina, I have always been involved with politics in some form, during high school. But one of the things that, as I got older, I had the experience and opportunity to work with our late U.S. senators, Sen. Inouye, Daniel K. Inouye, and then for Sen. Akaka. I was his Maui liaison. I worked with he and his office very closely, as well as the last thing I did in the federal sector, was with U.S. Sen. Mazie Hirono when she stepped in Sen. Akaka’s seat, then I took over. They kept me as a Maui liaison. I’ve always had that in the background of my life, and I could see just from the work that I did, especially the late senators, how important government can be to help the community and open doors. That’s my introduction that I’d like to share, and I will probably say that I worked on all of their campaigns, but I could see the impact of their action, how you get policy to build communities, and I could see the impact and importance of it. 

That’s what brought me here, and Dr. Akina, what really brought me here, what we’re talking about today is my support for working families, as I felt that I could provide a voice to those people that I grew up with, that maybe wer’e not speaking out, that maybe I can provide a vote, one of nine members, and become the voice of the working families.

Akina: Well, thank you very much, Yuki Lei. By the way, call me Keli’i. We’ve known each other long enough.

Sugimura: Keli’i. OK.

Akina: You did mention that you want to be the voice of the people; but specifically, why did you run for county council? There are many different things you can do politically, and you’ve spent most of your life doing them behind the scenes and working for other political figures. You’ve stepped out into the county politics. You’re upfront. Why county council?

Sugimura: A lot of my community work– Before I did this, I had my own business. I was a small business owner for a company called Connec, C-O-N-N-E-C, which was connecting the community. I always did projects in the community, and the option became available because our council member had term-limited. This is something that I was eyeing for 10 years prior. When it became available, I stepped in. 

Our state representative is Kyle Yamashita, and I work very closely with him. There’s no way I want to try run against him or Sen. Kalani English. Both of them, I respect their work a lot, Keli’i, so I would not even think of running against them. But this seat became available, and I felt that I had been working with the community by doing many projects and that this seemed a natural next step for me.

Akina: Well, I’m glad you’re involved in county council. You bring a breath of fresh air on many issues, and I’m glad that we can support your stance. 

One of the areas where we have a lot of commonality is in our passion to see that housing that is affordable is available to the residents of Maui. As you know, Grassroot Institute is very involved on the island of Maui. One of the things that disappointed us was what I referred to at the beginning of the program, the recent Bill No. 10, which the county council passed, in which it states that 201H housing projects have to have 75% affordable housing or be sold, not at what it costs the developer to sell it, but at below-market rate, in order for them to get permission to do such a project. 

Now, you understand this bill quite well. Mayor Victorino recently vetoed it, and we’ll talk about that later on. Could you tell our viewers what this bill is all about? Could you put it in layman’s terms to explain what it means?

Sugimura: Yes. What Bill 10 does, it would require a development project to have a certain level of affordability for different area median incomes. I think if I talk about it in percentages, it’s not as meaningful [as] if I talk about it in [terms of] people who work in those percentage area median incomes. What the bill does, it says we’re going to provide affordable housing prices for different families that live and earn certain levels of income. There would be for the firefighters, nurses, teachers, government workers, the people that I sit here in this building with, we want to keep prices affordable so that if their family of four, [and] would make $65,000 to $143,000 — that’s a family of four now — that they would then qualify to purchase an affordable home.

That’s not workforce housing developers or that’s the higher level. There’s also- it goes to 30% to 60% and of course below. The important thing about this bill is that we’re saying, “You’re a developer, you must build affordable and 75% of your project will need to be in these ranges because we want to provide houses for these working people.” That’s great.

Akina: Councilwoman, that sounds like a noble goal. It sounds like an ambition we would all want to see fulfilled, which is a lot more affordable housing being built. But what I’m hearing is that it’s a government mandate. It’s telling developers if you build on these projects, 75% has to be affordable. Before we talk about what’s good or bad about that, what do we mean by affordable housing?

Sugimura: If you’re talking about what actually happens to a project or a developer that’s going to build a house, it’s that — can I give you an example of what’s happening here in Maui?

Akina: Sure.

Sugimura: There is a project that’s coming up in the Lahaina area, or the West Maui area. The total cost of the project is $64.6 million for 88 units. That’s about $735,000 per unit. But to sell a project in affordable for the categories that I just mentioned: teachers, for firefighters, policemen, our fellow government workers, they need to guarantee that the house is actually sold for — I’ll just choose $350,000. I just told you that there’s a project. The actual cost per unit of 88 units is $734,000 per unit. But the developer has to sell it for 350,000.

Akina: Now, let me see if I understand this correctly. It’s going to cost the developer $734,000 per unit to build, but if he gets permission to go ahead and build from the county, he’s going to have to sell three-fourths of those units at less than half the price it cost him to build. That just doesn’t sound like a very sound business decision for the developer. It sounds like it would definitely disincentivize that developer from actually building.

Sugimura: Exactly. What the developer would need to do — now, you and I are taxpayers, Keli’i, so you understand this, so what the developer has to do is find other money. You’re either going to find other money by — we have a project that has to be 75% affordable, then the other 25%, which is market homes, will have to pay for this discrepancy in the price to make it affordable. That’s one option.

Akina: OK. Just before you go on to another option, I want to make sure we punctuate that: One way to deal with it is to make the remaining houses, the fourth of the project, the 25% of the units, pay an exorbitantly high rate to cover the cost that is being lost on the affordable homes?

Sugimura: Yes.

Akina: That would contribute to the inflation in the cost of housing on the island of Maui. As the price goes up and supply is short, it’s just not a good situation for the people.

Sugimura: Exactly. Yet, these are the people that we say we want to help, so we’re going to mandate 75% of the affordable housing project to be affordable prices, but who’s going to pay for it? It’s a math problem, I always say, and the math problem is that there’s a shortage, and who’s going to pay for the shortage? If we require the 25% to pay for the shortage, Keli’i, what will happen is these are going to be the mega-mansions, which residents get upset about — seeing too many mega-mansions, for various reasons. That’s a whole another discussion. But that’s who could pay for the discrepancy between what it actually costs versus what we’re requiring developers to sell it for. That’s one option. Or, to get government subsidies. As taxpayers, that’s what you and I would end up paying for, through government subsidies.

Akina: In other words, in order to make the projects work, the government would have to tax the taxpayers more, taking that money in order to make up the difference for the developers. It kind of goes back to the basic definition of economics: There ain’t no such thing as a free lunch. If a deal sounds too good, like it’s a free lunch deal giving 75% affordable housing, there ain’t no such thing as that. It has to be paid from somewhere.

Yuki, I want to dive into this a little more with you in just a moment, but we’re going to take a short break. I want our listeners and viewers to stay on board, because Councilwoman Sugimura has a lot to share about this affordable housing dilemma on the island of Maui. I’m Keli’i Akina, with “Hawaii Together,” on the ThinkTech Hawaii broadcast network. Don’t go away. We’ll be right back in a moment.

[Intermmission]

Akina: Well, thank you for being back with us again. We’re with a county councilwoman from the island of Maui, Yuki Lei Sugimura. We’re talking about a fascinating subject, how an affordable housing policy is actually going to reduce affordable housing. 

Now, Councilwoman Sugimura, has this kind of policy been adopted before? Can we look at any results of that?

Sugimura: This was before I was on the council. Basically, housing in Maui County, or building of housing, I would say, paused. This was in 2006/2007, where it went from a 25% housing requirement for affordable housing [to 50%], I think with the same thought. If we increase the percentage, then more houses will be built. I wasn’t there. Basically, what happened was during that period, it got changed through our workforce housing policy, that we said, “OK, from now on, houses that would be built for affordable houses — ” only 14 homes got built until 2014, when the council at that time changed the ordinance to go back to 25% because not many homes were being built.

So Maui County has a history of seeing what happens with policy of this nature, and probably with the same intent of “let’s build more houses.” The council at that time took a chance and changed it from 25% to 50% during a seven-year period. Seeing that there were only 14 homes that were built during that time, it was changed again and went back to 25%, and thereafter, housing was being built.

Akina: Well, I think we can say déjà vu, to some extent. As you know, at the Grassroot Institute, we’ve researched this issue. We’ve done a survey across the nation for best and worst practices. We have found the story you just told of Maui’s experience is what happens all over the nation. In fact, if built-in becomes law, it ultimately will put Maui into the position of being the second most burdensome housing regulation in the nation. This is something that is shown to be the case in terms of the research.

My question is this: Why are lawmakers pushing it? They have the numbers before them. They can see the reality of the situation. I know there’s a lot of emotion around the whole issue of housing, but why is this being pushed?

Sugimura: Well, you opened talking about what a median price for a home on Oahu is. On Maui, it’s almost a million dollars. It’s $980,000. It’s almost a million dollars for a cost of a home here on Maui — short supply. If we keep at this, if the council keeps at this, our supply, well, even our inventory, is even less. This is not about affordability. This is about availability of resources. We are on short supply. So the cost of houses are becoming more and more expensive.

I don’t want to have Maui County to have the honor that you’re talking about. Thanks for doing the research. It’s sad for us to be part of that, because I think, in general, what we want is to have more housing, as I said from the beginning, for working families. What we’re seeing is that because of our housing prices being so high — we don’t have enough rentals either — that people from our local families are moving away. It’s heartbreaking. There are strangers who are coming and buying lots of houses in our community.

Akina: Councilwoman, in my understanding, many developers want to build affordable housing. In fact, it’s a myth to say that developers make more money building mansions. In reality, many of them have shown us the figures that if they do the projects that are reasonably divided between affordable and market-rate housing, they ultimately will make more of a profit, so it’s in the interest of developers to move in that direction, and many have expressed their willingness to do so. 

But in the rhetoric that I’ve seen at the hearings and elsewhere, and in social media, there seems to be an image of developers as being evil and greedy, and wanting to really just wring out blood from every last drop of profit they can make on any project, and so forth. What do you think of that image, and what are your thoughts as to why it persists?

Sugimura: It’s not true, first of all. I don’t feel that. I will tell you, because I’m a community person, that whenever there’s — and before pandemic, pre-pandemic — if there ever was a need in the community, it would have — for example, a really good example is Goodfellow. They’re a construction company here, and they do good work. Every time there was a massive fire up in the sugarcane fields, or open land, or wherever, even the most recent ones we had, they were the ones that just fired up their bulldozers or fired up their crew and they went charging in the fire like our firefighters, and it’s to help solve — they’re right there.

They’re a really good example, and they’re developers. For some reason, people fear that they’re going to build too much. I wish they would build more houses, is what we’re talking about, but it’s the reputation that is ill-conceived. Yes, it’s an ill-conceived reputation. They’re the ones who are there. They open their pocketbooks to help the people who need food and whatever. They’re first in line. 

It’s those kinds of people, they have big hearts, and seeing our housing shortages, I think that the people who just came and testified, who said, “Yes, make it 75, vote for this bill, and that it’ll bring more housing,” they don’t understand the math, they don’t understand developers. I don’t know what that answer is, Keli’i. 

Akina: One of the arguments that proponents of the bill have put forward is that 201H housing projects are what we call fast-track projects. They argue that it’s still possible to create housing with the slow track, so to speak. What is your response to this type of argument?

Sugimura: The 201H is a state process. It’s a state process. Every county has it. It was always 50% plus 1, and this is what we changed to 75 now. Going through the 201H process, it allows developers to ask for forgiveness of certain fees or whatever that would be added to — because we’re trying to get cheaper homes. It allows developers to ask for exemptions from certain costs that would normally hit the developer, and that, of course, gets always passed down to the project or to the homeowner. It encourages developers to be able to cut their costs as well as cut their time. That’s what it’s about, the 201H process.

Akina: Some argue that even with the passing of this Bill 10, we have a slow track option that it’s still available. Is that a feasible way of approaching the affordable housing crisis issue?

Sugimura: The County of Maui passed our old version of the 201H. It’s called 2.97. It’s for 100% affordable — I know it’s not on discussion today, but it is another option for developers. That would be for 100% affordable projects that come before the county. 

There are other options. I guess it’s slower just because it’s 90 days versus 45 days. I think the 201H process, the 45 days, scares people in the community that maybe it’s not being vetted enough, the project is not being vetted enough. But I believe that our housing department vets the project along with all the departments before it comes to council. So I believe the system works, and that council still has the ultimate say of turning down projects that you and I may think make a lot of logical sense to build, and it’s happened before.

Akina: If subsidies are needed in order to make affordable housing projects work, how feasible are we in relying on them, because the county, as well as the entire state, is facing real budget woes right now, and especially following the coronavirus lockdowns, it’ll be quite a while before we see surpluses and so forth. Ultimately, we’d have to go back to taxpayers and raise taxes, which is not a popular thing to do.

Sugimura: It is exactly what the council is doing right now, Keli’i. We’re going through our budget process, and we just did this. We’re raising the Affordable Housing Fund, I think it’s $7.3 million above the mayor’s. 

The mayor provided to us a very flat budget. The departments tightened their belts, did not hire excessively during this pandemic, cut expenses. But the council is saying that we’re going to raise property taxes so that we can pay for these affordable homes through affordable housing. I believe that this is not the time. This is not the time.

Akina: Well, councilwoman, we’ve been talking about Bill 10 and the problems with that. Are there other regulatory issues that make it difficult for developers to move forward with affordable housing?

Sugimura: Yes. You know what it is, it’s coming before the council. One of the things that the county council does, and I’m not sure what all the other county councils do, but we add conditions, add conditions onto development projects that — you and I know — that gets passed down to the home purchaser. It’s very expensive, that when projects come before us, and we add on conditions, like, put a driveway here, build this road, put a sidewalk here — those are all important things. But I think that the departments, when they review this project, they look at those considerations, and the council hears from the community, and then we add on more conditions.

Those are very expensive things. That’s the kind of thing that happens here in Maui County with us council members, that make it very expensive to build on top of it being 75% — that requirement. I stand by the mayor for his veto, and I tip my hat to him because myself and others were the minority in terms of passing the bill. 

I think that a word needs to be spoken, a loud voice like the mayor, to say that we support working families, that we think that there’s a better way of doing this rather than increasing the affordable rate to 75%.

Akina: Do you anticipate your colleagues on the council overriding the mayor’s veto of this bill?

Sugimura: Yes. Well, I don’t want to speak for others, but yes.

Akina: We may be looking at that in a few days. In closing, just real quickly, what are some solutions to the affordable housing crisis that you favor?

Sugimura: What the council is trying to do, one of the things that I tried to do, is to develop residents that we have this first-time homebuyers program. But I’m trying to build financial literacy, giving back to the community. I’m proposing an independent development account. This is the first time we’re doing it. It’s to educate the community, build residents and families that are more astute as to how you buy a house, how much is it going to cost? What do you need to do? I think that we as a community can do projects like that; that’ll be very beneficial.

The other thing that we should be doing is that we the county should be building infrastructure. Right now, I don’t know what other counties do, but in Maui County, we rely on the developers to build infrastructure, roads, wastewater system. They put in these septic tanks and different things, whereas I think it’s our job to do that.

Akina: Well, Yuki Lei, maybe we’ll have you back to talk about infrastructure. I want to thank you so much —

Sugimura: That’s my committee.

Akina: Councilwoman Yuki Lei Sugimura. Much aloha for your insight today.

Sugimura: Thank you, Keli’i. Thank you for inviting me. I appreciate this opportunity.

Akina: Glad to have you onboard, and aloha to everyone. We’ll see you again next time on “Hawaii Together” on the ThinkTech Hawaii broadcast network. I’m Keli’i. Bye-bye.

Sugimura: Thank you. We’ll see you on Maui, hopefully.

Akina: Aloha.

 

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