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Friday, September 16, 2022
Why housing in Hawaii is expensive--Are outsiders buying up Hawaii?
By Grassroot Institute @ 3:45 AM :: 1335 Views :: Development, Land Use, Cost of Living

Grassroot Institute launches new channel on YouTube: 'Hawaii Matters'

News Release from Grassroot Institute, Sept 16, 2022

The media outlet hits the ground running with three short videos that make sense of vexing local issues and can easily be shared

The Grassroot Institute of Hawaii expanded its reach on social media this week with the launch of its new YouTube channel, "Hawaii Matters," which presents brief "explainer" videos about important Hawaii issues.

The three videos posted so far on the channel, each about 4 to 5 minutes long, are:

>> "Why is Hawaii so expensive?"

>> "Why housing in Hawaii is expensive"

>> "Are outsiders buying up Hawaii?"

Joe Kent, Institute executive vice president and narrator of the three videos, said the purpose of the new channel is to "provide answers to some of the questions we always hear from people about life in Hawaii."

He said he hopes anyone searching for matters about Hawaii on YouTube "will find our videos and hopefully find them entertaining and enlightening."

In addition, he said, "the videos will also be re-uploaded on Facebook, Instagram, TikTok and other social media channels, so we hope to eventually help liberty go viral."

Transcripts of the videos are being posted as separate articles on the Institute's own website, which you can see here.

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Why housing in Hawaii is expensive

by Joe Kent, Grassroot Institute, September 15, 2022

The following is the transcript for a video that was posted Sept. 14, 2022, on the Grassroot Institute of Hawaii’s “Hawaii Matters” YouTube channel.
___________

Why are Hawaii’s housing prices so high?

Hawaii has the highest median home prices in the nation, and the main reason housing is so expensive is because we have really strict housing regulations, which has resulted in a shortage of housing.

But what are those regulations, and how do they get in the way of creating housing? And most importantly, what can be done about it?

Hawaii has the most burdensome housing regulations in the nation. On average, it takes over 10 years for home builders to turn a raw piece of land into a house, and sometimes it takes even longer.

There’s like six layers of housing regulation in Hawaii. It’s like a six-layer cake. There’s the state Land Use Commission, the island plans, the community plans, the county zoning, the historic district and the special management area. That’s a lot of layers to get through for someone to build a house.

Consider the top layer: the state Land Use Commission. They classify Hawaii’s land into four districts: agriculture, conservation, rural and urban.

Now, urban land is the only place where you can build housing, with a few exceptions. So, if you wanted to build a neighborhood or single-family homes or an apartment or affordable housing, that could all basically be done in the urban district, which only makes up about 5% of the land.

Take a look at this map. The black dots show the 5% of the land that’s designated as urban. Now, if that percentage were increased by 1 percentage point from 5% to 6%, that would barely change the map at all — but it would amount to a 20% increase in the supply of land available for housing.

But even if that happened, it’s not like you would automatically see a bunch of housing spring up. And there are five other layers of regulation to get through.

You still need to get through the island plan and the community plan. Now, these are plans that are developed by each island and each community that specifies what kind of housing they want in each area. So, just because a piece of land is zoned as urban doesn’t necessarily mean that you can build there. If the island plan or the community plan say no, then you could be out of luck.

Now, after all of that, you still have to get through county zoning. I mean, remember at the state level, you had four separate zones, right? Well, at the county level, there’s over 30 different zones, and each zone has its own restrictions on what you can build and what you can’t.

For example, this is the county zoning map for Oahu. Now, you see in yellow here, you’re only allowed to build single-family homes on each plot of land, which is about 5,000 square feet of land. So generally, you can’t build duplexes; you can’t build fourplexes; no multifamily units; no second kitchens; no low-rise apartments; and basically, very little affordable housing.

But look how much of Oahu is zoned in yellow. I mean, most of the urban zone land statewide is zoned only for single-family homes; so that means even on the land that you can build housing, the housing isn’t very affordable.

Now, this kind of zoning means that you need a lot of land to build a very little bit of housing. Now, Oahu does have some land where apartments are allowed in the red or brown areas here; but still, most of the land is dedicated to single-family homes.

Now, some states have allowed some wiggle room with their single-family zoning.

St. Paul, Minnesota, Portland, Oregon, and the state of California have all passed laws to allow more multi-family homes in single-family areas, and that would mean you could build another house in your backyard if you had the space for it, or you could add a few rooms and a kitchen to your house or you could rent to another family. Now, if Hawaii did that, it would definitely allow for more housing units to be built, so that’s a possibility.

Now, even if you build in the right place with the right zoning and everything looks perfect, you still have to get a permit to build almost anything — and the permitting departments in Hawaii have huge backlogs. Some people wait for years to get their permit approved. Even getting a response from the department can take months.

Now, some people are so desperate to get their permit through that they just bribe the government workers. So there’s a lot of corruption in these departments, and some government workers have actually gone to jail recently because of that. So getting your permit through is another hurdle.

But keep in mind, there’s still a lot of layers. I mean, I’m not even going to talk about the historic district or the special management area zone or the water commission or other regulations. I mean, this topic could just go on forever.

But the main point is that Hawaii has more housing regulation than any other state in the nation, and that’s limited the supply of housing, which is why we have the highest median home prices in the nation. And until people decide to rise up and change that, housing in Hawaii will probably remain very expensive.

  *   *   *   *   *

Are outsiders buying up Hawaii?

by Joe Kent, Grassroot Institute, September 15, 2022

The following is the transcript for a video narrated by Joe Kent that was posted Sept. 14, 2022, on the Grassroot Institute of Hawaii’s “Hawaii Matters” YouTube channel.
___________

Are outsiders buying up Hawaii?

Hawaii has the most expensive home prices in the nation, and a lot of people say that’s because of outside buyers. People say that outsiders from foreign countries or from the mainland are swooping in and buying up so many homes in Hawaii, and that’s the main reason housing prices are sky high, right?

Well, no. Actually, outside buyers aren’t the main reason for Hawaii’s high home prices.

I mean, it’s true that outside buyers do buy a lot of homes in Hawaii. In 2021, buyers from the mainland made up around 22% of home purchases in Hawaii, and buyers from foreign countries made up around 2%. So definitely, there are outside buyers, and they do affect the price of housing just like anyone buying a home affects the price of housing.

But that’s not the main reason for Hawaii’s record high home prices. The main reason our prices are so high is because Hawaii has the greatest number of housing regulations in the nation, and that has led to very few homes being built.

But hang on. You’re telling me that outside buyers — all those people from foreign countries or from the mainland buying homes here — they aren’t the main driver of Hawaii’s high home prices?

Well, yes, that’s what I’m telling you.

But of course, you don’t have to take my word for it. Just look at the data. Since 2010, the share of outside buyers in Hawaii has trended downward. So, over time, outside buyers have generally been buying a declining share of the homes in Hawaii. And yet, home prices skyrocketed.

Now, keep in mind that during the same timeframe, local residents have been buying a larger share of the homes. So, as you can see, there’s more to the story.

I mean, you’d think that states with lots of outside buyers would have high home prices, right? But that’s not necessarily the case.

If you just look across the nation, some states with high percentages of outside buyers have low home prices. Check out Vermont and New Hampshire. They actually have higher percentages of outside buyers than Hawaii, and yet they have much lower housing prices.

And other states with low percentages of outside buyers have high home prices. Like California, which has the nation’s third-highest median home price, but it also has one of the nation’s lowest shares of outside buyers. So, statistically, when you look across the nation, there’s no clear pattern.

I mean, just look at that chart. It just looks like a big blah. It looks like someone sneezed on the chart. I mean, there’s no clear trend line. It’s just all over the place. We call a chart like this “statistically insignificant.” There isn’t a clear relationship between the effect of outside buyers on home prices.

OK, so, then why are Hawaii’s home prices so high? Well, we did find one clear pattern when we looked out across the nation: housing regulations.

Now, take a look at this chart. The states with the highest housing regulations had very high median home prices, and the states with lower housing regulations had lower median home prices. Now, that’s a clear pattern — a clear relationship.

I mean, just look at Hawaii. We have the highest housing regulations in the nation, and we also have the highest median home prices in the nation. And that same pattern emerges in state after state. Regulations limit the supply of housing, and that increases the price.

And Hawaii’s regulations really limit the supply. I mean, on average, it can take over 10 years just to get approval to build a home.

Now, to learn more about Hawaii’s strict regulations and how they get in the way, click on the video in the description.

Now, if the government somehow allowed more housing to be built — even a little bit — that would probably help ease home prices.

But wait a minute — I mean, if more housing were built, wouldn’t all those homes just be bought up by outside buyers? Well, not necessarily.

I mean, it would probably be bought mostly by locals just like it is now. And it’s important to remember that outside buyers and local buyers are in different markets for different types of homes.

Local buyers are looking for less expensive homes, while mainland and foreign buyers are interested in the more high-end real estate properties — homes around luxury resorts or golf courses or along beaches or [in] luxury high-rise buildings.

If we just made it easier to build homes local residents could more easily afford, that would probably ease home prices.

So, what do you think? Do you agree or disagree? Leave a comment below; I’d love to know your thoughts.

And by the way, if you want to find all the data or charts for this research, you can find that in the description.

And again, if you want to learn more about why mansions are easier to build in Hawaii than less expensive homes, click on this video.

Thanks for watching, and I’ll see you next time.

 

 

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