The past year has brought significant shocks to the housing market in Hawaiʻi. The University of Hawaiʻi Economic Research Organization (UHERO) reports that overall transactions in 2023 were only half of what they were in 2021, and fewer single family homes changed hands in Hawaiʻi last year than in any of the last 25 years.
A state where, in 2022, one in three locals could afford a median-priced home is now facing an extreme housing crisis, with affordability plummeting to just one in five. Over the past three years, the percentage of households able to buy a median single-family home has steadily dipped from 44% to 30%, and now 20%, according to the report.
Published today, the UHERO’s first comprehensive housing factbook since the Maui wildfires underscores the bleak state of housing affordability across the state. The factbook includes analyses on the high cost of housing, with a spotlight on West Maui; the overall statewide property market; challenges facing the building of new housing; the demand for housing; as well as specific data per county and zip code. To accompany the factbook, UHERO has also released its updated housing dashboard—an interactive tool that allows users to explore housing market data across Hawaiʻi’s neighborhoods.
In 2023, the state of Hawai‘i had the highest median rents in the country, and Maui had the most expensive rent in the state across every type of unit, per UHERO.
“In recent months, there’s basically no inventory,” said UHERO Assistant Professor and lead author Justin Tyndall. “If you’d look on Craigslist in recent months, there’s very few legitimate rental postings. The data becomes very noisy, because we’re trying to dig through all these legitimate ads to get a good sense. The biggest takeaway is there’s just no capacity, no inventory for rentals, or market rents on Craigslist.”
Moreover, analyses of mortgage data revealed only one in five households in the state can now afford a mortgage on a median-priced house, a steep decline from a few years ago when one in three could afford such a home. This drop reflects a broader trend of decreasing housing affordability.
A critical factor contributing to Maui’s housing crisis is the stagnation in new housing development. Despite the pressing need for more housing, there has been minimal new construction of long-term housing, according to the report.
“There are not many buildings or units coming online, because people are sitting on them due to the mortgage rate situation. We’re also not building very much housing,” Tyndall said.
On Maui, the US Census Bureau reported less housing than five years ago. While from 2018-2022, the state of Hawai‘i had expanded its housing stock by 25,000 units, or +1.8%, Maui county had experienced a net loss of housing units during the same period. This loss of housing units even occurred prior to the Maui wildfires, which destroyed additional housing stock.
“Although Maui built a little bit of housing, that expansion is more than offset by vacation rentals taking those units off the market,” explained Tyndall. “So we really have no new supply of housing and huge demand. This shows up in very high prices and un-affordability.”
The UHERO report also writes that Hawaiʻi has both the highest land prices and highest construction costs of anywhere in the country; and yet, Tyndall says “that doesn’t really come near to explaining why housing is so expensive here.”
Permit delays are a significant hurdle in increasing housing supply.
UHERO collected full data on housing permits from the County, current to the end of 2023. With a single-family home taking 315 days to get a permit and 427 days for multifamily developments, Maui had the longest permitting times in the state, per UHERO.
“This is just permits sitting in the permitting office waiting for approval. Whether it’s under-staffing or under-funding or the systems they have, or a combination, that’s the cause of these delays,” said Tyndall. “Across all counties, there have been efforts to reform permitting processes to speed up the process, but we still have extremely long permit delay times.”
The high cost of land and construction is often cited as a reason for expensive housing. However, regulatory barriers also play a significant role, said Tyndall.
“We show that it’s true we have the highest land prices and construction costs of anywhere in the country, but that doesn’t fully explain why housing is so expensive,” said Tyndall. “We have a real inability to approve new housing for people who want to build it. This comes back to extremely long delays for permitting, requiring developers to pay for infrastructure themselves, and affordable housing requirements. These factors add to the cost of new housing, which is why we don’t build much of it.”
For single-family homes, zoning restrictions further limit available land for development. “For the single-family home market, we’ve zoned such that there’s really not a lot of other places left to build, with the exception perhaps being the Big Island,” Tyndall continued.
To test the potential of building new housing, UHERO continues to conduct studies on a concept coined “Housing Market Filtering.” The theory is such that “a household moving into new housing frees up older, more affordable housing, through a process housing economists have labeled ‘filtering,'” UHERO wrote.
Included in the UHERO report, an analysis of a new (2021) condominium in Ala Moana—The Central—looks at the ability of people to trade up the housing ladder, moving into a newer condo, thus, freeing up their old home for someone else to move into at a more affordable price.
“While The Central provided 512 units of new housing, we also identified 130 local housing units that became vacant because of households moving to The Central,” according to the UHERO report. “These 130 units were located in a diversity of neighborhoods, included lower-priced units, and included a mix of single-family homes and condominiums. These represent 130 local families who were able to upgrade their housing situation because a new condominium building was constructed, even though they didn’t live there themselves.”
UHERO concluded that, moving through subsequent rounds of vacancies, homes trend toward affordability.
“While the median value of a new unit in The Central was $886 per square foot, the housing vacated by these movers was 23% cheaper at $685 per square foot,” stated the report. “Median prices fall further in additional rounds of moves.”
Last year, wildfires destroyed an estimated 3,000 homes on Maui, exacerbating the existing housing shortage and generating a population of displaced families. Recovery efforts aim to replace these lost units, but the need for new housing was already critical before the fires.
“Maui already needed to build a lot more housing than it has, so we’re just playing catch up,” said Tyndall. “If we wanted to make things more affordable, we would need to think a lot bigger in terms of how much housing needs to be built. Converting 7,000 vacation rentals is one example, but we would need many thousands of units on Maui to start bringing prices and rents down.”
Efforts to address the disaster’s consequences have run up against familiar roadblocks including rigid regulatory barriers, slow permitting and infrastructure bottlenecks, according to the UHERO report.
Across the state, UHERO notes that policymakers have shown a willingness to act to address the housing crisis.
“The governor’s emergency proclamations on housing and county efforts to reform permitting processes are examples of government action. However these efforts will take time to show progress, and data continues to paint a picture of a market experiencing an extreme affordability crisis,” UHERO said.
High interest rates in particular are making it difficult to finance a home purchase, for developers to finance new construction and disrupts the filtering process as homeowners are reluctant to trade up and forfeit their existing low mortgage rates.
“The consequences of unaffordable housing continue to show up in out-migration (of Hawaiʻi residents), homelessness, and more families being priced out of the local market,” UHERO said.
Vacation rentals and out-of-state buyers significantly impact Maui’s housing market. Following the fires, vacation rental listings initially dropped by 40% but have since rebounded, with current listings slightly higher than a year ago.
“We’ve seen some listings go away in Lahaina and surrounding areas, but other areas have picked up the slack and we’e really gotten back to the number of vacation rentals we were at before,” said Tyndall.
Meanwhile, Maui Mayor Richard Bissen is considering policies to phase out Transient Vacation Rentals (TVRs) in apartment districts. “This would be potentially 7,000 units added to the supply,” said Tyndall. “That’s something like eight or nine percent I think of the overall housing stock on Maui. If this did come to fruition, and we poured all these units back onto the market, this would be an enormous shock to supply, and I would be almost certain this would show up in lower prices and rents, at least in the neighborhoods that are affected by the new regulation.”
Out-of-state buyers also play a major role in the housing market. A large share of transactions goes to people with out-of-state addresses, particularly on Maui and Kauaʻi. Per UHERO, approximately one-third of housing on Maui is owned by out-of-state individuals.
The lack of affordable housing contributes to persistent homelessness, which hasn’t improved significantly over the past 15 years, according to UHERO. Additionally, the state is experiencing out-migration, with about 1% of the population moving to the mainland in 2022. The primary reason cited for leaving is housing affordability.
