A report by the Hawaiʻi Housing Finance and Development Corp. says systemic barriers in Hawaiʻi constrain housing production and lie at the root of the state’s housing shortage and residents’ high cost of living.
“Hawaiʻi faces a chronic housing shortage that affects its residents’ quality of life and economic well-being,” says the agency’s Dec. 16 report to state legislators. “The high demand for housing and the limited supply of affordable units have resulted in soaring housing costs that burden households across a wide range of income levels.”
The HHFDC report was prepared in response to House Concurrent Resolution 131, passed last year in the wake of the August 2023 Maui wildfires that destroyed more than 2,000 habitable structures. The resolution called for the agency to develop a 10-year plan to satisfy Hawaiʻi’s housing demand.
Even before such a plan can be developed, “the systemic barriers that impede housing production need to be addressed in advance of any preparation of any reasonably implementable plan to accelerate the production of housing in the state,” the report says.
It says there are three basic prerequisites for a “healthy and functional housing market.” These are:
The HFDC makes suggestions for lawmakers, this session, to enact legislation to lower the barriers to housing development.
Systemic barriers that constrain the availability of suitable land include “state land use law, restrictive zoning regulations, pervasive community opposition, permitting obstacles, land aggregation challenges and restrictions on developing state lands,” the report says. “These barriers limit the areas and types of land that can be used for housing, which increases development risks (and therefore costs) by creating uncertainty and delays for developers.”
The report says state land use law that classifies Hawaiʻi land into one of four districts — urban, agricultural, conservation and rural — “creates an artificial scarcity of land for housing, as only 5% of the state’s land is classified as urban.”
“The law also duplicates county zoning, which itself dictates specific land uses and adds another layer of bureaucracy for developers. The law’s quasi-judicial process (through the State Land Use Commission) to reclassify land use is complex, time-consuming and subject to legal challenges, creating uncertainty and delays for housing projects,” the report says.
The agency’s report recommends that lawmakers streamline state land use law so that areas designated as “urban” in county general and development plans are automatically included in the “urban” state land use district, eliminating the need for commission approval, simplifying the process and reducing regulatory duplication. The result would be to increase the supply of land available for housing.
The HHFDC and state Office of Planning and Sustainable Development have drafted legislation to make amendments to state land use law for the 2025 legislative session.
The report also takes aim at county zoning restrictions that dictate where and what kind of housing can be built. Zoning often limits the density, height and design of homes and includes minimum parking requirements.
“Zoning regulations also create inflexibility in land use, preventing the adaptation of underutilized areas, such as agricultural, industrial or commercial lands, for residential purposes,” the report says.
The report recommends reforming zoning regulations, including allowing for mixed-use development, reducing lot sizes and parking requirements.
Sen. Angus McKelvey (West and South Maui, Mā‘alaea and Waikapū) and a half-dozen other senators have drafted Senate Bill 378, which would establish an HHFDC working group to identify existing mixed-use developments in Maui County that could be acquired by the state housing agency for use as affordable housing and commercial rental leases.
An example of a mixed-use development on Maui would be the redevelopment of Queen Kaʻahumanu Center. The Kahului complex has more than 2,700 parking spaces, often mostly vacant.
The HHFDC report notes last year’s passage of two acts that allows for flexibility and adaptive land use:
“This maximizes the efficient use of the state’s limited lands that are suitable for residential development and will allow more families, especially kūpuna, to live on the same lot,” the report says.
Regarding Hawaiʻi’s notoriously slow permitting processes, which require approvals from various state and county agencies, they’re “often time-consuming due to the understaffing of resource-constrained agencies, complexity and multiplicity of requirements, the sequential and contingent nature of reviews, the need for public hearings and environmental documentation, and the potential for legal challenges.”
For example, the state Department of Land and Natural Resources’ State Historic Preservation Division (often known by the acronym SHPD) enforces legal requirements pertaining to potential effects on historic properties.
“The SHPD review process can add years to the approval process,” the agency’s report says.
The state’s definition of a “historic property” subjects SHPD review to any building, structure, object, district, area or site which is 50 years or older, regardless of historical significance.
“As most construction occurred in the mid-1960s following the state’s admission in 1959, and SHPD lacks staff and funding to keep up with the reviews, bottlenecks are common. SHPD typically reviews between 2,400 and 2,700 permits a year,” the report says.
A quick look at the division’s online phone directory shows five vacancies, including the Maui archaeologist and Maui office assistant positions. The chief architecture branch division position is vacant as well.
West Maui Sen. Angus McKelvey said he’s looking at a bill that would set aside one SHPD staff member to be assigned for three or more years to help with rebuilding in West Maui.
McKelvey said he’s looking at a bill to set aside one staff member to be assigned for three or more years to assist with rebuilding in West Maui.
The HHFDC report says that community opposition to residential housing project is a “common barrier,” often referred to as NIMBYism, the acronym for “Not in My Back Yard.”
“Though there may be instances where legitimate concerns may arise and need to be addressed, there are many where there are not,” the report says. “Residents and activists may resist changes in their neighborhoods, particularly when it comes to rezoning or approving new housing projects, due to concerns about increased traffic, congestion, noise, pollution, changes in neighborhood character, strain on local facilities and potential decreases in property values. Community opposition can adversely impact housing projects by delaying project approvals, increasing development costs, reducing project viability and deterring investment in affordable housing.”
The report says community opposition can be addressed through a “multifaceted approach” that includes educating the public about the benefits of affordable housing and Transit Oriented Development. Stakeholders should be engaged early in the planning and design processes for developments, and incentives can be provided for community support, such as infrastructure improvements or public amenities.
Transit Oriented Development is an urban planning approach that focuses on creating compact, walkable communities near high-quality public transportation systems. This approach is considered more feasible for highly urbanized Oʻahu with its extensive city bus and rail lines, while Maui continues to rely mostly on passenger vehicle transportation between bedroom communities and centers for shopping, restaurants, medical care and other services.
Regarding project financing, the housing agency’s report says there’s limited financing available to developers of affordable, for-sale housing.
“Coupled with high interest rates, developers are required to lower their sales prices while having to pay higher interest costs,” the report says. “When rates were above 6.5%, developers reported their projects did not pencil out, even at 140% of the adjusted median income.”
The HHFDC recommends expanding financing options for affordable for-sale housing projects so that Hawaiʻi residents have more housing options. Administrative rules to implement the program became effective in January 2024. Units in two projects have participated in the program so far: Kuilei Place and The Flats at Sky Ala Moana, both on Oʻahu. The housing agency has drafted legislation to refine the program and make it permanent. It’s also working to restart programs for the Hula Mae Single Family and Downpayment Loan programs to help homebuyers.
The state’s projected housing demand for the next 10 years ranges (depending on which forecast method is used) from 24,823 to 41,118. The average of the two is 32,970 housing units through 2035.
