Wildfires destroyed Lahaina. Now Hawaii officials are trying to ward off outsiders from scooping up properties on the cheap in the popular tourist destination.
Gov. Josh Green said Wednesday he is working on a sales moratorium for damaged and destroyed properties. He acknowledged it may face legal challenges.
“My intention from start to finish is to make sure that no one is victimized from a land grab,” Green said at a news briefing Wednesday.
“People are right now traumatized,” said Green. “Please don’t approach them with an offer to buy land. Please don’t approach their families to tell them that they are going to be better off if they make a deal, because we’re not going to allow it.”
This is from Joseph Pisani and Ginger Adams Otis, “Lahaina Worries About Real-Estate Speculators After Fire Destruction,” Wall Street Journal, August 17, 2023.
Josh Green, Democrat governor of Hawaii, seems to think the the best way to deal with traumatized people is to prevent them from exercising one of their most important options connected to the trauma: selling their land and starting over.
Later in the article:
Green said he and Maui County Mayor Richard Bissen are considering temporarily blocking permit-issuing as a protective measure.
Seriously? Permits to build? And that protects people who lost their property?
READER COMMENTS
Richard W Fulmer
Aug 21 2023 at 10:01am
It’s likely that many of the people who lost their homes have few assets left other than the land on which their homes stood. Selling it may be their only recourse.
What their land is worth now is anyone’s guess. Once the town has been restored, it will be worth far more, of course, but they must have a way to live in the meantime.
To the extent that the rebuilding effort depends on the Hawaiian government, it will take far longer and be far more expensive than it otherwise would.
J Storrs Hall
Aug 21 2023 at 10:13am
From the “Antiplanner” blog:
The blame for this fire can be traced directly to Hawaii’s 62-year-old land-use law, which was written to protect Hawaii’s agricultural industry but had the opposite result.
The land-use law divided the state into urban and rural zones and heavily restricted development of the rural areas. As the state’s population grew, Maui’s median home prices rose from about 3 times median family incomes in 1969 to 7.9 times median family incomes in 2021. Any prices above 5 times median incomes are unaffordable since banks won’t approve a mortgage for a home that costs that much more than a family’s income.
Between 1982 and 2017, according to USDA’s 2017 Natural Resources Inventory, the number of acres in Hawaiian crop production declined by 72 percent as sugar cane, pineapple, and other crops moved to other tropical countries that didn’t have self-inflicted housing crises.
…when the farms were abandoned, the vegetation that replaced them wasn’t native vegetation but invasive grasses. These non-native grasses had been introduced as cattle feed when farming was still active, and when the farms went out of business, they took over the former crop and pasture lands.
The whole thing at https://ti.org/antiplanner/?p=21268
Scott Sumner
Aug 21 2023 at 2:40pm
Interesting how the “antiplanner” supports government regulations such as zoning laws:
https://ti.org/antiplanner/?p=19643
nobody.really
Aug 21 2023 at 1:05pm
1: This seems like one more acknowledgement of externalities: People with property interests are affected by the conduct of their neighbors. Owners may like their neighborhood “character” as it is and strive to lock it in place. This desire prompts all kinds of policies: nuisance laws, zoning, historic building designations, rent control, Jimmy Carter’s support of “ethnically pure” neighborhoods, immigration restrictions, redlining, restrictive covenants, “sundown town” threats, lynching, etc.
I see three issues: Should government have policies against externalities? Should it have policies designed to preserve “neighborhood character” specifically? And if so, what policies should it have?
I’m often sympathetic to externality concerns. But I’m generally opposed to efforts to preserve local character. Yes, such policies impinge upon the liberty of property owners, who tend to have a lot at stake. But moreover, many of these policies seem guaranteed to produce bad outcomes while rarely producing the desired outcomes. White rural towns sometimes succeed in discouraging immigration–but they rarely succeed in preserving their town’s character because that character entailed having young people around, and white young people are fleeing to the cities. Immigrants are the only source of new blood moving to rural America. You might fight immigration, but you can’t fight time.
In the current case, moreover, I read something about the local character being already disrupted by a FRIGGIN’ INFERNO. I understand sympathy for people who have survived this blaze and a desire to offer some kind a stability to people amid their dashed hopes, dreams, and visions–but honestly, I can’t help but suspect that this is a lost cause. To create a symbolic gesture, government is creating practical impediments for people trying to move on with their lives.
2: In contrast, should government regulate sharp practices by funeral homes–by, say, granting a longer rescission period for any contract? As a default, we have a caveat emptor posture. But it’s foreseeable that customers of funeral homes are newly bereaved and in a psychologically diminished state. Do these circumstances justify more paternalistic policies for this industry?
And if so, would a similar rationale justify greater paternalism for people following a fire? I don’t know that prohibiting sales is the right form of paternalism–but maybe offering some kind of trauma support?
Jose Pablo
Aug 21 2023 at 3:15pm
This seems like one more acknowledgement of externalities: People with property interests are affected by the conduct of their neighbors
How come?
This does not seem to be about the “conduct of their neighbors” but about “who” the neighbors are. New owners could have the same “conduct” than the previous ones. In this case, should the selling of properties be allowed?
Why permits that would be allowed under the present zoning laws (an acceptable “conduct” by all means) should not be allowed to new owners?
Is “acceptable conduct” in Hawaii owner dependent?
“Externality” is an extremely dirty word …
nobody.really
Aug 21 2023 at 4:18pm
A fair point. Maybe “attribute” would be a more generic term.
And yes, a neighbor’s race is one attribute that people have cared about and tried to control. My list of policies for controlling externalities included “Jimmy Carter’s support of ‘ethnically pure’ neighborhoods, immigration restrictions, redlining, restrictive covenants, ‘sundown town’ threats, lynching”–all phenomena addressing the racial composition of a neighborhood.
I regard it as a fairly standard term in econ parlance. But please do not let semantics impede the discussion. I merely offer a positive/objective observation that people care about their neighbors, and thus have an incentive to try to control their neighbors. This observation reflects no normative/subjective view about the merits of people’s caring or actions.
Jose Pablo
Aug 21 2023 at 5:08pm
I regard it as a fairly standard term in econ parlance.
Indeed! to the point that it could easily win the contest to be the most abused term in econ parlance.
And every time that is summoned, it raises more questions that it solved
https://www.econlib.org/the-simple-economics-of-public-toilets/
Thomas L Hutcheson
Aug 21 2023 at 3:23pm
Of all the little tringles in all of the towns in all of all the world, and Henderson has to walk in on this one! 🙂
What about the water that could have helped to fight the fire used for growing _sugar cane_, not a stalk of which would exist without the US sugar quota?
steve
Aug 21 2023 at 3:24pm
I think most of us agree that govt has a role in providing protection from physical harm and helping those who have been harmed or suffered injury. Is there a role for protecting financial interests? There are an awful lot of very financially unsophisticated people. If you have a fairly isolated older person living on a property with a market value of the land at $1 million and they get offered $100,000 not realizing that if they just wait a year or two it will be worth close to that $1 million again they may panic and sell rather than borrow money to cover costs until then. Scammers routinely bilk people, sometimes because they are stupid but sometimes because they are older and in a situation they couldn’t plan for and they are absent family supports.
Which is a long way of saying if someone really understands the situation and their options I have zero problems with them selling now but I dont think it puts us on the path to socialism if we make some effort to protect those in a stressful situation from being taken advantage of due to ignorance or panic.
Steve
Jose Pablo
Aug 21 2023 at 3:39pm
So, what you seem to mean, if I understand it right, is that the government should design a kind of “ability test” to determine which individual is “wise enough” or “young enough” to exercise their right of selling their property.
That is a very interesting approach, but certainly raises a lot of questions:
Should this “ability test” being defined at a Federal, State or local level?
Who should define the questions and evaluate the answers? how many “wrong answers” still allow you to freely sell your property?
Should a similar test being implemented to define who is enough “politically sophisticated” to vote?
I dont think it puts us on the path to socialism
That’s precisely what the course of action that you are proposing does: if the government knows better than the individuals what is right for them the only logical destiny at the end of this road is socialism
Implementing a “previous test” that allows the government to define which individual knows better and which one doesn’t only make things even more “socialist”
Don’t forget that the road to hell has been always paved with good intentions.
Jon Murphy
Aug 21 2023 at 5:36pm
Fraud already is illegal. This move blocks legal transactions
Richard Fulmer
Aug 21 2023 at 9:11pm
You contradict yourself. First, you say that the land has a market value of $1,000,000 and then you say that it won’t have that value for another year or two.
The land doesn’t have the same value today as it did the day before the fire started. Then the land had access to utilities and was surrounded by a fun, quirky town with great restaurants and shops. All that is gone now, and it won’t be back in just a year or two.
Very possibly anyone 65 years or older won’t be alive to see Lahaina fully restored. In the meantime, they have to live and their only asset may well be the lot on which their home once stood.
Jon Murphy
Aug 22 2023 at 11:52am
Building off Richard’s point, one of the points I stress in economics is that irrelevent alternatives are irrelevant. Yes, that is a tautology, but it’s a surprisingly common mistake. Take, for example, your comment:
That the land may be worth a million in a year or two may be irrelevant if the person wants to sell now. The choices they face may be “sell now and live elsewhere comfortably” and “do not sell but be homeless.” Waiting for the price to rise is not a relevant alternative. Forbidding those sales just harms people because it is forcing them to reject a realizable and relevant alternative or an irrelevant one.
Perhaps they will not sell if they realize the land could be worth more in the future. But I doubt many people are in such a perpetual state of panic that they do not consider that possibility (especially with real estate sales, which are very slow to happen).
Jose Pablo
Aug 22 2023 at 12:56pm
It is not only that the “as is” value is the only relevant value in real estate, it is also that IF buyers believe that if they just wait a year or two it will be worth close to that $1 million again, then the actual value of the property will reach this $1 million discounted at a discount rate that reflects the risk of this “$1 million again in two years” (by no means a “sure event”) not being the case
If Steve believes that buying property in Lahaina is a bargain, what he should do is raise money and starting a real estate fund focused on buying property there. He could offer the actual owners $200,000, making them better (for real, not “pretending” to make them better from his couch) and, if his own predictions come to happen, making good money for his investors (and himself)
As a matter of fact, what Green and Bissed should do is encourage and facilitate the presence of more real estate “speculators” in Hawaii (not precisely the opposite as they pretend to do).
Having more competition on the “buying” side of this market could benefit the actual owners: they will get the price resulting from the “most optimistic” future valuation and/or discounting rate among the “speculators” buying property there. And real estate “speculators” are famous for imagining future property values way of the mark. It is always worth giving us a chance of being mistaken.
steve
Aug 22 2023 at 4:23pm
You guys miss the point. There is a big fire and some older people suddenly have no home. 2 days later someone offers to buy the land. What are the chances these are just nice guys offering to alleviate the financial suffering or people who know that the land is worth a lot more than they are offering but are hoping to take advantage of someone who is vulnerable. We have a fair number of older people in our church. What we have noticed is that almost 100% of the time when a spouse dies the surviving spouse receives a call from some scammer. Our pastoral group makes it a point to remind survivors to avoid buying or selling in the immediate period after the death.
One fo the characteristics of scammers is rushing people to a decision. In this case I think it would be easy to have a short moratorium on sales. You could also ask the local realtors with roots in the community and a good reputation to act as advisors and/or have them put some general advice in writing.
” But I doubt many people are in such a perpetual state of panic that they do not consider that possibility”
It’s not panic but confusion with the elderly. Loss of routine, difficulty sleeping in a new place and living in a different environment can cause cognitive dysfunction. There is a reason people try to sell/buy stuff to older people who have recently had a trauma.
Steve
Mark Z
Aug 22 2023 at 4:31pm
Ok, … but people whose house just burned down also probably have very good rational reasons for wanting to sell their property, which I’ll hazard a guess is a much, much more common motivation for people in Maui selling their property now. If we’re going to ban every kind of transaction where someone might conceivably be scammed in that kind of transaction, we’re going to have to ban all of them.
Jon Murphy
Aug 22 2023 at 5:09pm
Again, scamming people is already illegal. Scams are a red herring. Stay focused on the problem at hand.
Jose Pablo
Aug 22 2023 at 5:17pm
Our pastoral group makes it a point to remind survivors to avoid buying or selling in the immediate period after the death.
That is great! good advice and kindly reminders are always welcomed
You could also ask the local realtors with roots in the community and a good reputation to act as advisors and/or have them put some general advice in writing.
Again, good idea. Don’t know Hawaiian law but it probably already requires the involvement of a licensed (by the State) real estate agent and both parties been deemed “legally competent” (you know, “licensing” is a kind of American favorite sport … sure to “protect” consumers!).
to have a short moratorium on sales.
Ah!, if you want it “short” (I am glad that you feel guilty about the “moratorium”!) don’t worry; the typical closing period in Hawaii after having a formal offer is 35 days, and I would not expect closing agents in the area been in full operation any time soon.
The problem is probably the opposite: that properties can not be sold fast enough.
I know that you are much cleverer than “elders” and “affected locals” and I know that patronizing others feels so good. But remember, it is always worth having somebody whispering in your ear that you are mortal too.
And legally forcing everybody else to behave as you deem appropriate with a total disregard for their will is a very dangerous and slippery slope. Maybe they do know better, after all they have an awful lot of information that you don’t.
Letting you or the Hawaiian politicians decide who has to be declared impaired to freely dispose of their assets as they deem appropriate, is considered, in my pastoral group, the (well intentioned) beginning of a road to serfdom.
David Henderson
Aug 22 2023 at 7:27pm
I’m glad that your pastoral group does this. It speaks well of you and your church.
I’m guessing that the group doesn’t use force to prevent the sale. That’s the issue here.
steve
Aug 23 2023 at 7:51am
There are laws about scamming people with fake products. There is no law that says it is illegal to take advantage of someone who just had a major life event and pressure them into selling something that they would not if not under stress. It would be possible to use markets to determine the value of the property by publicly putting it up for sale. If the person really needs the money that is the best way to determine its value.
Seriously, who calls someone the day after they just lost their home, family, friends to try to buy their property? Odds are overwhelming it’s someone who has done this before and knows that if you act right away you can pressure someone into making a decision they wouldn’t make if they had a week or two to recover.
Steve
Jon Murphy
Aug 23 2023 at 9:20am
There sure as shoot is. Contacts can be voided for numerous reasons, including duress and not acting in good faith.
robc
Aug 22 2023 at 8:37pm
Most does a lot of heavy lifting there.
Jose Pablo
Aug 21 2023 at 3:26pm
Mr. Green and Mr. Bissen certainly seem to believe they are the “fathers of the Hawaiian people”, definitely not a new or surprising mindset in a politician.
Otherwise, how do they know that not selling their properties right now is a better option for individuals that seem to think otherwise (since they are willing to sell)?
If Mr Green and Mr Bissen have insider information regarding future property values in Lahaina, what they should do is make this information available to the general public.
And, of course, they should also have some more trust in the acumen of the people that elected them in the first place.
Believing that they are smart enough to choose the best governor and mayor but not smart enough to know what is best for them regarding the selling of their properties, is walking a very thin line.
BC
Aug 21 2023 at 4:10pm
“Hawaii officials are trying to ward off outsiders from scooping up properties on the cheap…
…Local organizations pushing for a stop to land sales worry that real-estate developers buying up destroyed properties will drive locals out and make it more unaffordable.”
I wish “officials” and “local organizations” would make up their minds as to whether they oppose low housing prices (“on the cheap”) or high housing prices (“more unaffordable”)…
TB
Aug 24 2023 at 10:56am
I’m curious what will happen once locals start to file for bankruptcy and the lenders take ownership of those properties.
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