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Property rights, deregulation Lahaina’s best hope

The following commentary was originally published by RealClearPolicy on Nov. 20, 2023.
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It took less than a day in early August for wildfires to kill almost a hundred people and destroy billions of dollars’ worth of property in Lahaina, on the western side of Maui island in Hawaii. But it will take years for the former whaling town and tourism mecca to rise from the ashes.

How many years will depend on which path is taken.

Will it involve a long, drawn-out, top-down planning process dictated by government officials that likely would make few people happy other than the planning officials?

Or will it involve a respect for property rights and significant deregulation that, as with Germany’s “economic miracle” after World War II, likely would result in a quick and robust recovery?

Foreshadowing the possibility of the former approach, Hawaii Gov. Josh Green suggested shortly after the fire a moratorium on Lahaina property sales to out-of-state buyers. He also floated the idea of the state using some of Lahaina’s oceanfront for public housing.

Similarly, a group of economists affiliated with the University of Hawai‘i Economic Research Organization proposed creating a state agency to oversee the rebuilding efforts, and the Maui County Council is considering a resolution that would create a “comprehensive recovery and resiliency plan” for Lahaina and other parts of Maui that were ravaged by the Aug. 8 fires.

The governor has since stated that it will be up to Lahaina residents to decide the future of their community. But even if the central planners keep their distance, to what extent do Lahaina residents really have the freedom to decide their fate?

Turns out it will still be difficult to rebuild Lahaina quickly because of all the many existing state and county regulations that have hindered Hawaii’s economy all along.

Those include some of nation’s the most burdensome land-use and zoning regulations that limit homebuilding. Maui already had a serious housing shortagebefore the fires. Now it’s even worse. According to the UH economists, the recent Maui wildfires destroyed approximately 3% of the island’s housing stock.

Other roadblocks are the state’s high tax burden, its many occupational licensure laws, and extra transportation costs imposed by the federal Jones Act, which restricts shipping competition between Hawaii and the U.S. mainland.

All things considered, it’s little wonder that tens of thousands of residents have been leaving the state every year since 2016 to live in more friendly, lower-cost states such as Texas, Florida and Nevada. Since the fires also destroyed thousands of jobs on Maui, this exodus is likely to escalate.

Yet the allure of central planning and regulatory overreach remains strong. At a Maui County Council hearing in late September, even some Lahaina residents were calling for the government to block tourism to the area, prohibit land sales to “outsiders,” ban short-term rentals to free up housing for locals, and other economic restrictions.

Their passionate pleas reflected a desire to “keep Lahaina the way Lahaina is.” But a hankering for the past aside, it seems clear the best way to facilitate a quick recovery in Lahaina — to get people back into their own homes and back to work — is, above all, to respect the property rights of Lahaina residents and deregulate.

Whether property owners in the area want to recreate what they lost or build something entirely new, that should be up to them. If they want to sell their lands to people who are not from Lahaina, that should be their right too.

In general, suspend or loosen state land-use laws and the county’s zoning code so Lahaina residents can start reclaiming their lives. Repeal or reduce the requirements for lot sizes, setbacks, parking, accessory dwelling units and multifamily homes. The mayor and Council already have been offering property tax relief, but more can be done.

The new Lahaina might not resemble the picture-perfect town that existed before. But either way, a respect for property rights and deregulation would enable the residents of the area to more quickly get back on their feet, and someday we all might find ourselves talking about Lahaina’s “economic miracle.”

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