Category Archives: Economics

ALICE in paradise: Struggling to stay afloat

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An interview broadcast on Hawaii Public Radio’s “The Conversation” on Wednesday put some facts and figures behind what we all know, that its hard to survive in Hawaii’s economy.

As a result of economic woes during the Covid pandemic, three out of five families in Hawaii (59%) are now either living in poverty, or fall in a category of “asset limited, income constrained, employed,” referred to as ALICE, a term for working households that are just barely able to make ends meet. That figure is up from 42% in 2018.

Michelle Kauhane, senior vice president of community grants and initiatives for the Hawaii Community Foundation, “we’re talking about households who have very little savings because they are living paycheck to paycheck. So there’s not a lot of reserves.”

And the number could easily grow, since there are additional families with incomes just above the ALICE threshhold, and could easily fall as a result of any kind of economic shock.

Hawaiian and hispanic families have the highest proportion living in below the ALICE upper limit, which was $148,771 in 2018. And the overall rates were highest in Hawaii and Maui counties, according to data Kauhane cited.

Aloha United Way and the Hawaii Community Foundation are partnering with a group of nonprofit agencies is focusing on promoting family financial stability and affordable housing.

There’s a lot more information available in a report, “ALICE in Hawaii: A financial Hardship Study,” published in 2020.

This puts our situation in pretty stark terms. But we’re not alone. Communities across the country are reflecting the pronounced growth in income inequality that began in the 1970s and has worsened progressively since.

More on the question of our older reinforced concrete buildings

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The sudden collapse of the 12-story condominium has prompted lots of talk about the problem of our older buildings and the combined effects of age, deferred maintenance, water intrusion, climate change, and so on.

Here are a few more links.

An old friend, Chuck Smith, summarized a lot of the concerns in a blog post a few days ago on his “Of Two Minds” blog (“A Few Things About Reinforced Concrete High-Rise Condos“).

The second most remarkable thing about the sudden collapse of the Florida condo building was the rush to assure everyone that this was a one-off catastrophe: all the factors fingered as causes were unique to this building, the implication being all other high-rise reinforced concrete condos without the exact same mix of causal factors were not in danger.

Before we accept this conveniently feel-good conclusion, there are a few things we should consider about reinforced concrete high-rise condos.

He then goes on to make a number of excellent points, discussing the problems of reinforced concrete, the specialized business of analyzing and repairing such problems, questions of liability, and what happens in more affordable buildings when the costs of repair exceed the sometimes modest original apartment prices.

This one seems to state the bottom line:

Reinforced concrete high-rises built decades ago to the building codes of that time may not be up to snuff should ground settlement exceed modest limits or structural weaknesses develop. Age and water are enemies of all structures, but multi-story buildings are especially at risk.

Then, thanks to Jay Hartwell, here’s a link to the first in a Hawaii Business Magazine series published last year (“A Condominium Can Last Hundreds of Years, But Not Its Components“).

Here’s the beginning of the excellent series by Noelle Fujii-Oride. Links to the next two articles in the “Condo Owners Beware” series are found at the end of the first story.

A 40-year-old Honolulu condominium can show its age in many ways: brittle, leaking pipes; cracks in its concrete walls and decks; rusted rebar; and corroded railings and window frames.

Dana Bergeman is the CEO of Bergeman Group, a local construction management company. He says many of Hawai‘i’s condominiums were built in the 1960s and ’70s and are reaching the point where they will need major infrastructure, cosmetic and architectural improvements to keep their value and remain liveable.

“As these buildings become older and older, they’re going to need more and more care,” he says. “Buildings are a lot like people in that sense. As people age, they have greater needs and greater health care needs and need additional attention. Buildings are no different.”

Hawaii Business Magazine spoke with plumbers, exterior renovators, homeowner association managers, real estate experts and reserve planning specialists to learn more about these capital improvement projects. They say that keeping an aging condo functional and safe can cost millions of dollars, take months or even years to complete and requires that condo boards plan well in advance.

What follows is a report on some of the larger capital improvement projects, typical for aging condos, and how much they will cost on a per unit basis.

Highly recommended!

And today an article in the New York Times explored similar issues confronting Chicago. Yes, the city of Chicago, a city, it reminds us, was built on a swamp. Read on.

See “The climate crisis haunts Chicago’s future. A Battle Between a Great City and a Great Lake.”

I’m trying to process these contrasting realities

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What’s wrong with this picture?

Here are two factoids drawn from yesterday’s evening news (Tuesday, June 9, 2020).

Hawaii News Now reported that Hawaii Foodbank distributed 2,500 boxes of food at Aloha Stadium.

The depth of the need is suggested by this sentence: “Vehicles tried to get in place before dawn over two hours before the official line up began and four hours before gates even opened. Packs of groceries ran out by noon.”

And in yesterday’s financial news, the stock of Apple Inc. and Amazon stock both closed at record highs.

What does that mean? Well, let’s say you decided to invest (gamble?) just over $3,000 in mid-1981, not long after Apple’s stock began trading on the over-the-counter stock market. You could have bought 100 shares of the company’s stock with your money. In inflation adjusted 2020 dollars, that would have been about $8,770.

But if you held on to those 100 shares, through the ups and downs of the stock market, and through a series of stock splits over the years, your Apple stock would now be worth $1,926,344. That’s right, nearly $2 million.

I had to double check those figures, and I’m pretty sure they’re right.

These seem to be describing two different worlds existing simultaneously.

And that’s the problem. They are.

Will hotels join malls on the growing list of deserted former landmarks?

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A few years ago, I linked to the review of a photo book featuring dead and abandoned shopping malls, including one in Ohio that was once the largest mall in the country.

Changing tastes and demographics undercut the viability of many retail centers that had become common features of suburbia, and the photos convey the eerie reality that is normally out of public view.

Now I have to wonder whether the landscape is soon to be similarly littered with shuttered and abandoned hotels and motels whose owners or investors were unable or unwilling to wait out the current collapse of the travel market. With leisure travel virtually flatlining in less than two months, it is not at all clear how many properties with be able to resuscitate their businesses if and when the world starts traveling again.

And certainly some of those financially marginal property owners are likely to be asking for public assistance to stay afloat, citing their importance to their employees and the larger community. What’s the proper response going to be?