The Great Maui Dust Bowl is on the Way - Maui Property Values to Fall?

Today, Hawaii Commercial and Sugar announced the end of sugar cane production by the end of the year 2016. According to the Maui News, sugar losses in 2015 could top $30,000,000.

What is Going to Happen?

When Wailuku Sugar shut down in the 1980's and moved in to macadamia nuts, Wailuku was a vibrant sugar town with its own mill, and all of the area surrounding Wailuku was mostly in sugar. Now it is a mix of residential neighborhoods, commercial areas, the last large scale agricultural subdivision prior to the 1999 zoning change ending large lot, 2 acre agricultural subdivisions, and abandoned macadamia nut farms that proved not to be viable after a very expensive experiment by C. Brewer/Wailuku Agribusiness, the successor to Wailuku Sugar. There are very few productive farms in the entire area that used to be in sugar.

When Pioneer Mill in Lahaina shut down in 1999, the nature of Lahaina totally changed both for good and bad. No longer did the periodic harvesting, burn and planting cycle take place, but a lot of people were displaced from their jobs and had to either move or find other work. Over time and economic cycles most were adsorbed in to the visitor industry in some form, or found jobs working on the gentleman estates that have succeeded sugar from Launiopoko to Puamana.

For many years however, after sugar left, the hillsides were just left fallow and the subsequent periodic fires have created regular havoc on the west side. The only area that is immune to the fires is the Kaanapali Coffee Farms, which were planted and maintained and now represent a true model for maintaining property in agriculture combined with residences.

What can Alexander and Baldwin do with all of this land? Simply stated, most of it has to stay in agriculture because in June 2009 A & B dedicated 27,294 acres to be re-classfied to a new state classification called "Important Agricultural Lands," in exchange for continuing low tax rates and the ability to develop some other properties not as valuable for agriculture. In other words, forget residential housing, commercial, and condos on this acreage for the foreseeable future.

This is the last surviving Sugar Mill on Maui

This is the last surviving Sugar Mill on Maui

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What About the Rest of It?

A & B is the master of entitlements for Maui and will be for years to come. They control the land and they control the water via their subsidiary, East Maui Irrigation. All of the new development around the airport was planned and entitled in the 1990's for commercial purposes by the State Land Use Commission. A & B is moving forward with new projects in Wailea, a large housing project at the entry to Kihei, a proposed large residential subdivision in Haliimaile, and probably a lot more...

What this means is that for A & B to stay in business it is going to have to build a lot of homes, fast. This is great news for a product-starved Maui housing market. Affordable rentals are nonexistent. The median home price on Maui is over $500,000 and there are bidding wars on 80-year-old plantation homes, complete with termites, being offered for $400,000.

What About the Farming Part of the Deal for the 27,294 Acres?

A & B will probably develop large lot agricultural plots under lease terms and make them available to local farmers very quickly. Even with Maui County doubling the Kula Agricultural Park, there is huge demand by aspiring local farmers and ranchers for plots with water to farm them. Since County government typically moves very slowly, A & B can get the jump on the county and probably will do so. It is more likely that A & B will get out of farming entirely or they would have diversified already, which they have not. They will do what they do very well, get in to the landlord business and out of farming.

What About Property Values in Kihei and Wailea?

It is going to be a big mess for quite a while. If people think cane burning is a menace, imagine the summer dust storms that are going to happen after the last harvests, the irrigation stops, and there is no vegetation to hold the soil. My prediction is that it is going to look like the 1930's during the great Depression for a while. Until a cover crop is established that can survive without irrigation, Central Maui, Kihei, Maalaea, and Wailea are going to be very dusty. After that, when vegetation grows back, look out for huge wildfires, unless a crop like coffee is cultivated.