President's Message - Don't Let it Happen Here (Evelyn Bender)|
Leasehold in Hawaii
Update on Educational Revitalization (Libby Oshiyama & Marion Saunders)
Time for Action - League Supports Gejdenson Proposal
Health Care Consensus
Urgent: Leasehold Conversion and Lease rent cap Legislation Needed (Richard Port)
Mandatory Conversion Laws Covering Leasehold Projects (Bruce C. Dinman)
Small Landowners' Perspective on Leasehold (James K. Mee)
Legislature and the Elusive Leasehold Issue - 1991 (Virginia Isbell)
Talk to LWVHI on Nov. 5, 1991 by Oswald Stender (Irene Coogan)
Mandatory Conversion Could Benefit Lessors (Joan Hayes)
Small Landowners' Perspective on Leasehold
Unlike single family leasehold housing, which was composed almost exclusively of large landowners, the great majority of condominium and cooperative landowners are small landowners. That is, they own only one parcel of land. The 1987 study commissioned by the State Legislature found that 89% of condominium and cooperative landowners own land under only one project.
The make-up of lessees who own units in these projects is also quite different. According to the 1987 State study, statewide only 31% of condominium and cooperative units are owneroccupied. The owner-occupancy rate is highest on Oahu, where the State estimates that it is approximately 34% of the total. Owner-occupancy rates for the Neighbor Islands are far below that, ranging from a high of 11.5% on Maui to 2.9% of the total on Kauai.
Non owner-occupant lessees can be classified as investors in one sense or another. The State study stated that "Condominium purchases have been dominated by non-owner occupants, and not by individuals seeking home ownership." Many of the units are rented out by these investors to short-term renters. Many are part of tourist-geared rental pools. A number of tourist resorts and hotels, both on the Neighbor islands and on Oahu (e.g., the Hawaiian Monarch) are actually leasehold condominium projects.
A final group that is becoming more predominant, especially in Waikiki and in luxury leasehold condominiums, are offshore investors. Good examples of such projects are Nauru Tower, which was pre-sold 100% to offshore investors, and Waterfront Towers, where foreign ownership of units is probably in the over 95% range. The Japanese are the largest component, who have been investing in Hawaii real estate market, in part, as a hedge against international currency swings between the dollar and the yen. Many, if not most of these units, are kept vacant and are basically being held and traded by their owners as securities on the Japanese market.
Although various politicians, both at the City and State level, have been complaining about the "evils" of the residential leasehold system, both the State and the City and County of Honolulu are in the process of developing luxury residential leasehold condominium projects. For example, the Aloha Tower Project, being developed on State land, calls for the development of a number of luxury leasehold residential condominiums. Not surprisingly, when Lt. Governor Cayetano introduced the administration's bill for mandatory conversion and rent control in last year's legislature, there was a specific exemption for the State's leasehold condos at Aloha Tower.
Similarly, the City & County's developer recently commenced work for developing the former municipal garage at the comer of Nimitz and Bethel Among the improvements being developed on the property is a 28 story, 120 unit leasehold residential condominium. The land price upon which the rentals and $15 million rent premium paid to the City was based is the highest that has ever been set for land under a residential leasehold condominium project.
Therefore, small landowners feel that it is very unfair to single them out as somehow being the culprits for the current housing and rental crisis. For many years, they have collected only nominal rents on these properties. It is only now, when some of these projects are starting to be renegotiated at a market rent, that the outcry is occurring. The rents which are being charged at renegotiation nearly reflect the general trend in Hawaii real estate.
James K. Mee, Esq.
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