Reserving homes for local residents is a top priority for lawmakers trying to address the state’s housing crisis.
The state Legislature is considering a new approach that would allow homeowners to sell a deed restriction on their property to a county, provided they only allow occupants who work at least 30 hours in that county.
That deed restriction would move with the property from owner to owner – meaning, in perpetuity, that house would be available only to those who work in that county.
It’s something that has worked in other areas in the country where locals are being priced out because of the amount of tourism in the area.
Vail, Colorado — a popular ski destination — implemented a similar program in 2018. Town of Vail Housing Director Jason Dietz explained that the deed restriction program has created a separate, below-market housing economy for people who work in the town.
“We just ran numbers on it this summer to take a look... and it's consistently on average 20% below market, which is the value of the deed restriction,” Dietz said.
The town has been able to transfer about 170 properties into its deed restriction program.
Two different pots of solutions when addressing a housing crisis
University of Hawaiʻi Economic Research Organization policy researcher Trey Gordner explained that one solution is to increase the supply of housing: build more homes. The other solution is to control the demand the housing, which the deed restriction aims to do.
“The demand case.. says lots of people want to live in Hawaiʻi. Hawaiʻi is paradise functionally,” he said. “We could meet local demands, but we could never meet outside demand for housing in Hawaiʻi of all kinds. And so what that means is that we need to, in some sense, reserve or produce some housing units that are strictly for locals.”
However, that’s easier said than done. The state can put restrictions on people outside of Hawaiʻi from buying units that were subsidized with state funds, but it couldn’t outright ban out-of-state investors from buying a home in an average neighborhood.
Two measures making their way through the legislative process aim to create a program similar to the one in Vail. One requires property owners in the program to use the funds from selling the deed restriction to the county to build an additional dwelling unit. The other is broader, leaving it up to homeowners how they spend the money.
Rep. Luke Evslin introduced both measures. He explained that the program would carve out a housing market specifically for local residents.
“Where the value of this program is, over the long run, establishing hopefully more and more and more housing that is separate from our primary housing market and buffered from some of the overseas and investment demands,” he said.
What is the incentive to put a deed restriction on your home?
The nonprofit Holomua Collaborative is dedicated to making Hawaiʻi more affordable. Director Josh Wisch explained that people could even leverage the money from the deed restriction sale as a downpayment they may otherwise have been unable to secure.
“They can go to the county, say ‘We want to buy this home, we need money for the down payment,’” he said. “The county takes a look at it, makes an offer, gives them the money for the down payment, now you've got someone in the house who wouldn't have otherwise been able to get it.”
He imagined people could also use the funds for cesspool conversions, long-delayed infrastructure renovations, or additional dwelling units for family members.
In Vail, homeowners can get up to 20% of the market rate of their home if they sell the town a work-requirement deed restriction.
If the Legislature passes the bill, it would likely be the individual counties negotiating with homeowners on how much they would receive for the deed restriction.
Wisch added that another incentive is that people who work and live in the county will be more interested in adding to the community.
Vail Board of Realtors President Mark Gordon brought up an example where he helped a friend buy a deed-restricted home.
“ They're a business owner, and they just wouldn't have been able to afford in town without it,” he said. “She's working to make our community a better place to live and to work and to visit because she was able to get in and be a homeowner in town.”
Yes In My Backyard Hawaiʻi Chapter Co-lead Damien Waikaloa emphasized that the voluntary aspect of the deed restriction program is a unique and appealing aspect to homeowners.
“ I feel like a lot of the housing discussion – people feel like they're being kind of forced to accept more housing near them, or they're forced to do something,” he said. “But the voluntary aspect of it, and then coupled with the intent of what this program is – to make a dedicated local workforce housing stock – might be more appealing to people.”
How will counties pay for the program?
The proposed bills would direct the Hawaiʻi Housing Finance and Development Corporation to give counties the funds to purchase the deed restrictions through the Dwelling Unit Revolving Fund. It would then be up to the counties to cover the costs of administering the program and enforcing the work restriction.
Kauaʻi Housing Director Adam Roversi explained that the county was already looking into a program like this. Roversi sees deed restriction as one of the missing pieces of the puzzle to address affordable housing on Kauaʻi.
“We often talk about increasing the housing supply in Hawaiʻi generally and on Kauaʻi to address affordable housing,” he said. “But simply increasing supply without attention to the types of homes being built and who the supply is for is not necessarily by itself going to solve our affordability crisis.”
Town of Vail Housing Director Dietz explained that his office has three people, and could have started the program with just one person. However, Vail has about 4,500 people, while Kauaʻi – the state’s smallest county – has a population of about 75,000.
Both bills are awaiting a hearing in the House Finance Committee.
