As trustees of the Office of Hawaiian Affairs (OHA), our constitutional mandate is to better the conditions of Native Hawaiians. This is no small task given the challenges many Hawaiians face such as poverty, homelessness, high rates of disease, and over-representation within the prison population.
Even for Hawaiians who have risen above such difficulties, there are numerous obstacles to prosperity shared by all residents of Hawaiʻi: the rising cost of living, low home ownership, and growing numbers of young people and kūpuna leaving the islands for better conditions.
While education and job opportunities are fundamental to lifting up the Hawaiian people, it must not be overlooked that creating wealth is essential to resolving the issues our people face. Therefore, OHA trustees have a fiduciary duty to protect and grow the financial capital we manage on behalf of our beneficiaries.
I have been a strong advocate of protecting OHA’s funds from fraud, waste and abuse. I am as passionate about growing those funds to meet the needs of Hawaiians.
OHA has conventionally generated most of its funds from two sources: 1) revenues from the Public Lands Trust (PLT) distributed by the Legislature; and 2) returns from the Native Hawaiian Trust Fund (NHTF) investments.
While these are two essential sources of funding, is it time for OHA to seek another generative means of building capital to carry out its mission of serving Hawaiians? I ask this question because OHA’s long-established sources of funding do not always follow a smooth path.
OHA continues its struggle with the state to procure anticipated revenues from the PLT. Although the 2022 legislative session passed Act 226, increasing OHA’s pro rata share of the PLT from $15.1 million to $21.5 million, this amount is far less than the annual payment of $78.9 million that OHA seeks.
Although OHA has exercised conservative stewardship of the NHTF, returns on its portfolio have not been exceptional. Since its 2003 inception, the trust has grown by nearly 9%, representing an annual growth of approximately 0.45%. Inherent risks in investment, market volatility and fluctuations, government policy, and world events to name a few, have negatively impacted holdings. Categorically, the COVID-19 pandemic, global conflicts, inflation, and increased interest rates undermine growth. This year, nearly all trust fund accounts are underperforming with global market losses of as much as 30%. Notwithstanding anticipated market fluctuations, OHA’s investments continue its slow growth.
How can OHA increase its revenue stream to fulfill its mission? The answer may lie here at home in real estate. Neighborhood Scout, an online database of U.S. real estate investments, reports that Hawai’i real estate appreciated by 17%-18% annually over the past five years. Rising demand and low inventory are forecasted for Honolulu’s housing market which is expected to result in increasing real estate value by potentially 13%. Pearl City, Kapolei, and Mililani Mauka real estate have appreciated between 30%-60% over the past 10 years. Housing trends suggest that real estate across the ʻāina will continue to grow at higher rates than the securities market. How wonderful for OHA, committed to mālama the ʻāina, to serve the Hawaiian people through returns from local real estate investments.
OHA has taken significant steps towards diversification through real estate purchases of 500 Nimitz, Nā Lama Kukui at 560 Nimitz, and the vision to develop residential properties at Kakaʻako Makai.
As we pursue this direction with greater purposefulness, imagine what can be done in terms of housing, jobs, education, healthcare, and more. Real estate can be a sustainable and independent source of revenue for generations to come!
I look forward to working with my fellow trustees and OHA’s administration in this pursuit.