June 2004

Planning

Copyright by American Planning Association

Living With Tourism

By James Goodno

Michael Foley did what many visitors to Maui dream of doing.

He bought a house and settled in, selling art to tourists in the old seaside village of Lahaina. Then, a year ago, Foley returned to his first profession. Now, as Maui County's planning director, he spends much of his time addressing growth, including the influx of tourists-turned-residents like himself.

Hawaii doesn't have the large seasonal fluctuation in employment that plagues many mainland resort communities, but it suffers from similarly high housing costs, traffic congestion, crowded public parks, and low wages that produce a slew of social and environmental problems and threaten its livability.

"Tourism is the engine of our economy, but it's a double-edged sword," says Charmaine Tavares, a member of Maui's county council. "Maui has been named the best island for tourism for 10 years running. This brings people here, and it causes problems with growth."

One of those problems is a distorted real estate market. "There's no place in today's real estate market for the local resident," argues Lance Holder, a Maui real estate agent, building contractor, and affordable housing activist. "When a house comes up for sale, it will attract a mainland buyer. The local resident is left out."

This dynamic is not unique to Hawaii. K. T. Gazunis, housing director for Eagle County, Colorado, which includes the ski town of Vail, says second-home sales account for 80 percent of real estate transactions in some Rocky Mountain communities.

"Sixty percent of the homes in Eagle County are owned by second-home owners," Gazunis says. "The typical second-home owner's income is somewhere in the range of $300,000," Gazunis adds. "It's my impression that homes in the $800,000 range are going like hot cakes."

Most developers in resort areas focus on high-end properties, making it difficult for many members of the workforce to find affordable, market-rate housing close to where they work. Some workers end up living 30 or more miles away. Others share housing with relatives and colleagues and work two or three jobs.

"When families can't find housing close to work, that's two or three hours out of the day that mom and dad can't spend with the kids," notes Eagle County Commissioner Tom Stone. "It adds to traffic on our highways, and it's squeezed mid-level management, making it hard for local businesses to hold onto good people."

In response to problems of this sort, Hawaii is working on a sustainable tourism study and plan, Maui is confronting issues in a new general plan, Colorado counties and regional organizations are creatively tackling housing shortages, and various government entities are seeking help from the tourism and recreation industries. The livability of resort communities hinges on the success of these projects.

Too much of a good thing

Travel and tourism is among the nation's largest industries, generating $545 billion in revenues and in 2002 employing 7.2 million workers in the U.S., according to the Travel Industry Association of America (TIAA). The association describes travel and tourism as the nation's third largest retail sales industry and one of its largest employers.

Tourism ranks among the top three employment sectors in 29 states. Travelers spent roughly $70 billion in California, $55 billion in Florida, $35 billion in New York and Texas, and $20 billion in Nevada in 2001 alone. In smaller states such as Colorado and Hawaii, the dollar figures are lower, but the impact is still great.

"Tourism accounts for roughly 25 percent of our total economic activity and 30 percent of total employment," says Pearl Iboshi, chief economist for Hawaii's Department of Business, Economic Development, and Tourism (DBEDT).

In the Rockies, the impact of tourism is greatest in the Rural Resort Region west of Denver, where Aspen, Vail, and other resort communities lure skiers and hikers. According to a 1999 study by Denver's Center for Business and Economic Forecasting, tourism accounted for nearly half the jobs in six mountain counties and 34 percent or more in seven others. In contrast, tourism employed less than four percent of the workforce in 14 eastern Colorado counties.

Tourism typically helps local economies, but the benefits come at a price. Construction may degrade the environment. Tourism jobs frequently pay less than disappearing jobs in mines or lumber mills, and housing costs rise as outsiders, particularly affluent outsiders, discover the beauty of a place.

"Attitudes towards tourism growth depend upon how you phrase the question," says John Knox, a DBEDT consultant who coordinated the public input and social impact portions of Hawaii's sustainable tourism study. "Ask them if they want more people, and they say, 'Sure.' Ask if they want more buildings, and they say, 'Let's think about this.' Ask about the impact on the environment and they say, 'Wait a minute.'"

The housing quandary

For many locals, affordable housing is the most pressing need confronting a resort region. "Survivor Mountain Style," a presentation made in September 2003 to the Rural Resort Region Mountain Workforce Housing Summit, reveals the depths of the issue in four Colorado counties.

A typical household in Eagle County spends $30,000 a year on housing compared to less than $10,000 elsewhere in Colorado. In 2001, the market value of an average home exceeded $1 million in Pitkin County and $400,000 in Eagle County and reached $200,000 in Grand County; the nationwide average was $100,000. These values represent increases of 60 percent, 120 percent, 100 percent, and less than 20 percent respectively since 1995.

The share of homes owned by non-local residents stood at 49 percent in Eagle County, 63 percent in Grand County, 55 percent in Pitkin County, and 67 percent in Summit County.

The gap in median household income between residents and second-home owners ranged from $58,000 in Grand County to $239,000 in Eagle County.

Gazunis believes these trends will accelerate. The oldest baby boomers entered the prime age for buying second homes two years ago, and she expects the recent federal tax cuts will encourage more families to do so.

"We look at the 18 years ahead of us and see a crisis to come," Gazunis says. "Millions of Americans are ready to buy a second home and are pushing moderate-income workers out." Eagle County already has a labor shortage — employers could hire 2,000 to 3,000 more workers — and this chasm could balloon to 35,000 by 2025 if current trends continue.

Regional solutions

Long-range planning is taking place on a regional level through the Rural Resort Region, an alliance of local governments in seven counties, and the Northwest Colorado Council of Governments, an association of five of those counties. RRR identified workforce housing as its primary focus in 2003, establishing four committees that developed priorities, recommendations, and options for presentation at the September summit. Officials from various towns and counties who attended that meeting agreed with Eagle County's focus on moderate-income housing.

"Ski resorts do a pretty good job of housing seasonal workers," says Liz Finn, coordinator of the Rural Resort Region. "We focused on people earning between $10 and $20 an hour who want to buy a house." She notes that the summit purposely kept hands off local issues, including land use.

The group identified five first steps: The RRR will organize workshops on public-private development partnerships, ask the Federal Housing Administration to raise its mortgage limit for the region, lobby the U.S. Department of Housing and Urban Development to increase the area median income for the region (qualifying more residents for subsidized programs), work with local business organizations to develop housing for employees, and attempt to draw Colorado congressional delegates into the loop.

"We're taking it one year at a time in small steps," says Finn. "We want to see some tangible results before we identify the next steps."

Much of the nitty-gritty planning and development work continues to take place at the county or local level. In Eagle County, this means developing affordable housing, encouraging employers to contribute to the housing stock for employees, reforming planning codes, and working through an ongoing debate over the role of incentives versus regulations. It also means overcoming opposition to development in a setting where nature is the prime attraction.

"There's a big lack of political will to zone properly for workforce housing," contends county commissioner Tom Stone. The public gives priority to open space preservation, in 2002 approving — by a 52-vote margin — a special property tax that will raise $1.5 million to $3 million a year for open space. With 85 percent of the county land owned by the federal government, and more open space being set aside, property prices could go up — and the land supply for housing could go down.

Among the ideas being considered by county housing and planning departments are these: incentives, deed restrictions, consolidating the final review of workforce housing projects by the planning and county commissions, and limiting the timetable for the review process to 90 days.

Eagle County currently finances a down payment assistance program and provides technical support to residents earning up to 100 percent of the area's median income. It also partnered with a private developer and other public agencies to develop Miller Ranch, a residential community located 15 miles from Vail that ultimately will contain 262 single-family homes, duplexes, row houses, and condominium lofts.

Owners must agree to deed restrictions that cap annual price appreciation and improvement, and they must be employed full-time in Eagle County or earn 75 percent of their income from an Eagle County business. They must occupy the homes full-time. Prices for the units will range from $120,000 to $270,000, allowing people earning 80 percent to 120 percent of the median income for the area to buy.

Engaging the industry

Using taxable bonds and zoning tools and regulatory power, the county and its towns have pushed developers and employers to add to the workforce housing stock. The most notable successes have involved Vail Associates, operators of the popular ski resort. Most of the resort's seasonal workers live in company-owned housing, and permanent employees can get down payment assistance from the company when they seek to buy a home.

Vail revised its zoning code in 1992 to allow property owners to build employee housing on already developed sites. The town created its own down payment assistance program, in which home buyers and the town each provide 10 percent. Deed restrictions limiting appreciation to three percent per year are used in conjunction with this and other incentive programs.

Nearby Summit County has also reached out to the resort industry. In 1998, the Summit County Commission surrendered its authority as the housing authority board, transferring its duties to a group that includes representatives of the resort and recreation industry and the local business community. "Private sector representatives brought a business approach to the authority," says Jim Sheehan, the county housing director. "They're politically attuned to the community and have been invaluable in that regard."

The live-work gap

In Hawaii, some complain that resort-based employee housing is located too far from local communities. "Hawaii has employee housing ordinances, but they haven't been integrated into the community planning system," observes George Atta, a community planner with Group 70, Hawaii's largest architectural firm, and president of the local APA chapter.

He adds, "In Hawaii, it's hard to say, 'Develop employee housing.' There are ideas floating around, but there doesn't seem to be a lot of awareness. It seems rather herky-jerky. I don't get a sense of a trend."

In Placer County, California, near Lake Tahoe, a draft workforce housing ordinance is being tied to the county's general plan, says Charlene Daniels, supervising planner for the county. That link would allow the county to require that most new developments in the Tahoe area provide housing for 50 percent of employees, she notes.

Placer County has required resorts to provide or finance workforce housing since 1992. But the policy allows resorts to pay in-lieu fees that are insufficient to develop housing. The proposed ordinance will extend requirements to other types of development around Lake Tahoe and close the existing loopholes by indexing in-lieu fees to inflation.

Steps are also being taken to encourage development of housing on-site. "We're encouraging developers to tailor housing to the site, for example, by building housing over commercial spaces," Daniels says.

What if your world is an island?

Hawaii faces unique challenges. As a cluster of islands situated thousands of miles from the mainland, Hawaii must solve its problems locally. "The big difference is, if you work at Tahoe, you can commute to Carson City, to Reno, or to Placerville," says Maui county planning director Michael Foley. "If you work in Maui, you have to live in Maui."

When Oahu faced a shortage of housing in the 1980s, it set about addressing the problem on its own. "Twelve, 15 years ago, housing was the number one issue in Honolulu," recalls Mayor Jeremy Harris. "Migration and Japanese investment were driving up prices, and citizens couldn't afford a home. The city became involved in building homes — rental properties that the city financed and built. It was all affordable housing. With the burst of the Japanese bubble, values dropped, there was a shift in the market profile, and now private developers are building affordable housing and we find ourselves competing with them."

Honolulu is now trying to divest itself of its housing holdings, inviting nonprofits to take over apartments developed by the city. It is also trying to encourage nonprofit builders to construct new housing. This isn't easy. Hawaii doesn't have a strong community of local nonprofit builders, and the climate is not attractive to mainland firms.

"I argued that we shouldn't come to Hawaii," says Al Bennett, vice-president for development for the Ecumenical Association for Housing, a California-based nonprofit housing developer and manager. EAH manages three facilities in Oahu and is developing a fourth. "Limitations on funding are quite severe." In addition, projects can take three times as long to complete in Hawaii as on the mainland.

The situation is more pressing on Maui, which is facing a real estate crunch. Migration, investment by off-island individuals and firms, and some deals undertaken by large landowners are driving prices up and generating tensions.

"There was a so-called affordable housing development that I spoke out against, and I was physically attacked by the developer," Lance Holter remembers. "The project got built at $291,000 for an 1,100-square-foot house. Nineteen of the 24 units were bought by realtors and off-island people. The developer used loopholes in our affordable housing ordinance to build retail housing."

Figuring out how to fix the loopholes in Maui's housing laws is the challenge confronting local officials and county staff. Unlike Colorado, Maui has not figured out how to use price caps effectively. "Unless we can put a cap on price increases, properties will rapidly shift to market prices," Foley says. "Some argue that the price should be capped forever; others say it should apply only to the first owner. We haven't been able to prevent speculators from flipping properties for a large profit."

Maui County considers housing its top issue, and Tevares says the council recognizes the need to create policies on income qualifications. She expects the revised general plan to provide solutions.

Foley hopes the plan will address broader issues affecting island residents. "We have 42,000 visitors a day and 120,000 full-time residents," he says "The visitors are discovering our secret beaches, impacting areas where locals go surfing, impacting beaches where there are no facilities."

"Tourism is everywhere," adds Donna Wong, director of Hawaii's 1000 Friends, an environmental organization. "Half the guidebooks promote our secret places and call it eco-tourism. There's no licensing for guides, no baseline for illegal bed and breakfasts."

"Instead of the self-contained resort, the impact is being felt elsewhere," agrees Marsha Wienart, the state's tourism director, who notes that Maui alone has 3,000 illegal vacation rental units. But while this might cause problems, it also brings benefits to local businesses. "You can feel the economic impact throughout the islands."

Local and state officials want to spread the wealth, but they also want to prevent or mitigate the negative impacts. In Maui, it took 46 public meetings before the county council approved an enabling act for the planning process. The result was a 17- member advisory committee and a call for growth management tools, including urban growth boundaries.

While Maui planners and officials struggle to find solutions to the island's problems, they're not working in a vacuum. The future of the island's big agricultural industries — pineapples and sugar cane — will determine the fate of tens of thousands of acres of land. "If we don't have good land-use laws in place when and if sugar goes under, we're in big trouble," Tavares says.

Hawaii is now wrapping up its sustainable tourism study, which includes an infrastructure assessment, review of the economic outlook, and study of social, environmental, and cultural impact. The final report on the study is due to be completed this spring.

"We're looking at making the transition from growth management to sustainability," says John Knox, who is putting the final touches on his portions of the report. Critics say the report fails to deal with the most controversial issues, like carrying capacity. But participants were pleased with the discussions and the process of bringing different interests together.

"Where we get at the end of the study is just the beginning," notes DBEDT's Pearl Iboshi. "It raises the questions that we have to answer."

Jim Goodno is a contributing editor of Planning.