Current Trends in Relation to Foreign Investment
“There is a chance to make this one of the most beautiful cities of the world – all one great park with a city tucked in between” (Harris 2004, 1). These are the words of planning theorist Charles Mulford Robinson, who in 1905 visited Honolulu, the capital city of the newly annexed American territory of Hawai’i. Today, in 2014 Honolulu is not the realization of the City Beautiful movement as Robinson had envisioned, but rather, it is a sprawling metropolis shaped by the confluence of eastern, western, and indigenous culture. This culture, known as the "Aloha spirit", is the driving force behind the "life-affirming qualities of social harmony, tolerance, and respect for the natural environment" (Harris 2004, 8). It is also this spirit that has attempted to act as a counter weight, balancing policies of rapid urban expansion as a result of massive foreign, primarily Japanese investment. This paper will discuss three urban trends affecting daily life in Honolulu that came about due to this foreign investment, and the critical points in history that allowed them to transpire. Those three trends were: (1) the rise of city real estate prices, (2) the repurposing of former agricultural land into suburban bedroom communities, and (3) expanding current public transportation infrastructure.
During the height of the agricultural economy on Oahu, immigrants were brought in from Japan, Korea, China, and the Philippines to work the sugar cane and pineapple plantations. The subsequent families developed a community and culture on the island that as compared to the mainland was uniquely accepting of foreign culture. This, in addition to its geographic proximity to Japan and exquisite natural beauty drew out Japanese real estate investors in the late 1970s and early 1980s looking either for a vacation/retirement home or to profit from the island’s bourgeoning tourism industry. As this trend of investment was gaining traction, a critical point in history occurred that ensured continual Japanese real estate investment in the O’ahu economy.
In September of 1985, during Ronald Reagan’s first term in office, the United States signed the Plaza Accord which artificially decreased the value of the US dollar by 50% in relation to the Japanese yen. This type of policy that Reagan had campaigned against subsequently increased US inflation, and doubled the buying power of Japanese investors of American assets. Due to its characteristics described above, Honolulu’s real estate and tourism markets became a natural fit for Japanese investment (Bonham 1998, 3). These investors began a campaign of massive consumption of Honolulu’s most prestigious real estate. At its peak between the years of 1986 and 1990, Japan brought in a total of 10 billion dollars in capital to the state of Hawaii, the majority of which remained in Honolulu (de Lama 1994).
No one on O’ahu epitomized this state of crazed real estate investment more than Japanese tycoon Genshiro Kawamoto. In 1988 Kawamoto became a fabled character as he would cruise Honolulu’s most desirable neighborhoods in a black limousine dubbed the “Kawamotomobile” and send his representatives to ring doorbells to make offers above market value in cash (Lindsey 1988). By 1990, and the end of the real estate bubble, he had purchased nearly 200 properties (de Lama 1994). During this time period, the price of an average home rose from 188,900 in 1985, to a staggering 498,511 only five years later (Nuar 2013). Following the 1980s the Japanese markets went into a gradual recession known as “the lost decade”. This dried up their ability to invest in foreign markets, and all but halted the rise of real estate prices in Honolulu (Hayashi et al. 2001).
Currently, Honolulu is going through yet another real estate boom. However, though it includes foreign investment, this time the economic inputs are diversified. Capital is now being generated from the US military, construction, tourism, and the local government. As the federal government turns its focus towards the pacific, military installations in that region are receiving an influx of capital which allows for the construction of new developments in both the private and public sectors. As the United States and the global economy recover from the 2008 recession, tourism figures have begun to steadily rise bringing capital back into that crucial sector. With this economic gain, the local Hawaiian government based in Honolulu has ended its hiring freeze, which has continued to help the situation.
Foreign investment in Honolulu’s real estate market has diversified as well. Where, the majority of foreign owned businesses in the urban area are still held by Japanese nationals, a steady stream of investment from South Korea, Hong Kong, Taiwan, and mainland China has begun spurring additional growth. The Honolulu economy is benefitting especially from investment out of mainland China, as a new class of Chinese investors looking immigrate and take further advantage of the American market can receive a green card by investing 500, 000 USD into a local company that employs at least eight American workers. All of this investment and recovery has caused local real estate prices to rise at levels not seen since the 1980s. It is projected by the University of Hawaii Economic Research Organization (UHERO) that an average family home that would cost 650,100 USD in 2013 will hit 815,000 by the end of 2015; a 25% increase in a matter of two years (Nuar 2013). The market is so saturated with buyers that even Genshiro Kawamoto recently sold off his holdings in the prestigious Kahala Ave. neighborhood to local real estate developers Alexander & Baldwin for an estimated 98 Million USD (Lincoln 2013).
The rise in real estate prices is also due to the scarcity of supply, which occurs in Honolulu as a result of the city’s unique geographic and topographic features. It is “limited by the natural borders created by the Koolau Mountains to the east, the Waianae Mountain Range to the west and the Pacific Ocean” to the south (“Honolulu Planning”) (see Figure 1). A trend of expanding Honolulu’s housing stock into Central Oahu and the Ewa plain began to take shape as the population grew. During the first two decades following Hawaii’s statehood the development of Honolulu operated without any formal restrictions from the state or city governments. This was not an issue as the population was not large enough to exceed its natural borders. However, during the real estate boom from 1985 to 1990 Honolulu reached its urban peak population of 376,937 ("Honolulu, Hawaii Population").
Worried that the City of Honolulu would begin to lose its sense of place by following the urban sprawl trends on the mainland, it was determined that the city would benefit from the writing of Honolulu’s first general plan. In this first plan, which represents a critical point in the city’s history, the planning commission included a clause that called for the demarcation of an urban growth boundary. This boundary is meant to preserve valuable agricultural resources and protect the Windward, North Shore, and Waianae Coast from suburban development. This growth boundary, along with city additional incentivizing programs, Honolulu has revitalized neighborhoods of Chinatown and Kakaako. Chinatown which has a history of being a den of drugs and prostitution has become a vibrant arts district zoned primarily for mixed use (Figures 2 and 3). Kakaako on the other hand which was a vast industrial port area and the location of the dole canning plant is now a vibrant mixed use shopping district ("Honolulu, Hawaii Population").
Currently under litigation from the local chapter of Sierra Club, the proposed Koa Ridge Development project, which was approved by the Honolulu City Council, is a threat to the continued urban sprawl of the Honolulu landscape. The project’s developers Castle & Cook are clearly going against the growth boundary set by the General Plan and the Primary Urban Center Development Plan of 2004 (Harris 2004). In the wake of ever increasing real estate prices and a scarcity of housing stock, the developers successfully marketed their project to city council under the guise of “smart growth” and “sustainable development”. Castle & Cook imply that the addition of 3500 homes and 1600 jobs which are not beneficial to environment and exacerbate congestion through urban sprawl will greatly affect the housing market. Opponents to the project site that the development is not close enough to the proposed 5.2 billion dollar rail project, and will only lead to further highway congestion in the downtown region (Hofschneider 2013).
Bolstering one’s public transportation system is common trend associated with a period of economic and population growth. Honolulu is not a special case. Honolulu first began its public transportation by operating electric streetcars during the early growth of the city. As World War II began the streetcars were phased out, and buses became the only mode of public transportation available to residents of the greater Honolulu area. After the privatized company Honolulu Rapid Transit (HRT) became a public entity in 1971, its name was changed to Mass Transit Lines until a week later when it was referred to simply of TheBus (The History of Today). TheBus is considered to be one of the most effective autobus transit systems in the country, winning the American Public Transportation Association’s award for America’s Best Transit System twice (Lee).
Even with the high ridership numbers for TheBus, and the fact that Honolulu residents are the most likely Americans to carpool to work, traffic congestion remains a divisive and policy driving issue (McGee 2014). In an attempt to stem the congestion problem the City and County government of Honolulu have begun construction on the Honolulu High-Capacity Transit Corridor Project. The ground breaking which took place on February 22, 2011 may be a critical point in the history of the city. This will depend if the transit system is completed, weather it is able to stay on budget, if it is able to guide further mixed use development along its route, and if it is able to stem the worsening of the region’s massive highway congestion problem. Completion of the project is scheduled for 2019, so time will only tell.
The city of Honolulu stands at the crossroads of the east and west. In this ever globalized economy, its role as ambassador to our Asian partners will only increase in importance. With a growing population and a limit of easily available resources the United States government must support this city in being an innovative leader in creating new critical points in history that can buck the trends of cities past. Therefore, it is paramount that the issues that face Honolulu in the present era be understood and approached from a sustainable and economically viable way