The Political Economy of Urban Land Reform in Hawaii

In the mid-1960s 26 percent of the single-family homes in Honolulu were on leased land. Dissatisfaction with leasehold led to reform legislation in 1967, allowing lessees to buy leased land. By 1991 only 3.6 percent of the homes were on leased land. We examine why landowners elected to lease rather than sell land and attribute the rise of leasehold to legal constraints on land sales by large estates and the federal tax code. Ideological forces initiated land reform in 1967, but rent-seeking forces captured the process in the mid-1970s. We conclude that Hawaii's experiment with leasehold was a failure due to the difficulties associated with specifying and enforcing long-term contracts in residential land.