Kaua'i home shortage growing into crisis

By Jan TenBruggencate
Advertiser Kaua'i Bureau

LIHU'E, Kaua'i — Real estate professionals on Kaua'i say an influx of buyers from the Mainland and a trend to put houses into vacation rental pools have created a severe housing crisis islandwide.

Habitat for Humanity volunteers from the University of Michigan law school, Seabury Hall on Maui and Americorps help build the foundation of a house on Hawaiian Home Lands in Hanapepe, Kaua'i. Virtually the only low-cost housing available on the island is the kind you build yourself, through programs such as Habitat for Humanity. Jan TenBruggencate • The Honolulu Advertiser

Realtors say demand is strong, but there is little inventory on the market. Units are snapped up quickly, and the volume of single-family home sales is high. Roughly 200 homes a year were sold on Kaua'i throughout the early and mid-1990s. Since then, the market has gone into overdrive, passing 300 in 1998, 400 in 1999 and 500 in 2000. Sales have stabilized, but realtors say that's only because there's little available to sell.

The median sales price stayed in the low $200,000 range until the sales peak of 2000, then began climbing, breaking records in each of the last three years: $255,000 in 2000, $293,000 in 2001 and $330,000 last year.

There is no indication that the trend is changing this year, hitting home-shoppers in the lower price ranges hardest.

"The entry-level housing market has shot up. It's now $220,000 to $250,000. People on a moderate income can't afford anywhere near that," said Steve Moody, a Realtor who serves as a buyer's broker.

Virtually the only low-cost housing available on the island is the kind you build yourself, such as through Habitat for Humanity, which is now midway through a 20-unit project on Hawaiian Homelands in Hanapepe.

Using volunteer help, families can reduce the cost of building a home by doing much of the construction themselves. One day last week, Habitat had 47 off-island volunteers, most of them young. Twenty-five were from Seabury Hall high school on Maui, 12 from the University of Michigan law school and 10 from the national volunteer program Americorps.

Some people looking for housing can't afford to rent, so a program such as Habitat for Humanity is their only hope for reasonable, uncrowded housing.

Growing problem

"Rentals are virtually unavailable, even crummy ones — and it's going to get worse," said Jim Ehle, executive director of Kaua'i Habitat for Humanity. "I've heard an estimate that 600 people on any given night are homeless, and there is an unmeasurable number of working people who are squeezed into grandma's house."

Availability of rentals is a greater problem than price, said Russell Kyono, property manager for Kaua'i Realty.

"One thing I'm experiencing is that people cannot afford the high rents, and that's keeping the rents down. There's a cap on rental rates. Above $1,200 a month for a three-bedroom place, the market is really slim," Kyono said.

The area with the least supply and biggest demand stretches from Lihu'e to Kalaheo, but there is a shortage of rental units islandwide, he said.

In Ha'ena, on the north shore, residents complain that many homes have been converted to vacation rentals, leaving a shortage of long-term rental housing for residents. Community activists have petitioned the county to block building permits for multi-bedroom coastal units, which they say are clearly aimed at the vacation rental market.

Kyono said the only relief is coming from Mainland buyers who plan to retire on the island later, and are putting their homes on the rental market until then.

No building planned

Both Kyono and Ken Rainforth, Kaua'i County executive on housing, said there is no major residential development planned that will significantly increase the supply of rental or for-sale housing in the near future.

Several years ago, when supply was greater than demand, the mayor and County Council ordered the county housing office not to develop new units for sale or rent, to avoid competing with private landlords and developers.

"We used our funds to make mortgage loans. But now things have changed," Rainforth said. His office has just one project in the works, a 40-unit, low-income rental, Kalepa Village in Hanama'ulu.

Most major private development projects are far off. A&B Properties' big Kukui'ula development on the south shore won't have houses for sale until 2006 at the earliest. Habitat for Humanity has a 23-acre west side parcel where it could build 100 to 125 units, but it is just starting the development process. Princeville Corp. does not expect to produce new housing on the north shore until after 2006.

Little relief

"There's been a number of people who have called looking for housing, people who are frustrated," said Mike Loo, Princeville vice president for real estate and development.

Grove Farm is the only developer likely to provide new residential property in the short term. Its chief operating officer, Allan Smith, said the company hopes to put about 16 houselots on the market this year and 50 next year in its Lihu'e-Puhi project, plus about 80 lots in its Molokoa project in about two years. Actual home building will take longer.

Refuge seekers

Much of the housing crunch results directly from real estate investment by Mainland buyers and vacation home shoppers, said Jim O'Connor of O'Connor Realty, president of the Kaua'i Board of Realtors.

"Sales have continued at an above-average pace, and we're entering our fourth year of increase. Prices are still rising, primarily because demand is greater than supply. There's an inadequate supply of vacant lots and housing," he said.

Some demand can be attributed to people seeking a safer place to live in the aftermath of the Sept. 11, 2001, terrorist attacks, O'Connor said. With improved telecommunications, "people are learning that they don't have to work in a high-profile building in an overcrowded city."

O'Connor said low interest rates are fueling sales at the lower end of the price spectrum, while wealthy buyers with discretionary income are driving sales at the high end.

Reach Jan TenBruggencate at jant@honoluluadvertiser.com or (808) 245-3074.