UHERO: Reforming housing regulation needed for more affordable housing
A new survey on housing by the University of Hawaiʻi Economic Research Organization (UHERO) found that Hawaiʻi has some of the most restrictive housing regulations in the nation.
PDF: "Measuring the burden of housing regulation in Hawaii."
from UH News, April 14, 2022
Home prices in Hawaii are among the highest in the nation: in 2021 the median single-family home resale price was about two and a half times the national median. One of the factors that may explain Hawaii’s high home prices are government regulations that limit the ability of the housing market to create the units necessary to meet demand.
While clearly important to the production of new housing, regulatory barriers are difficult to measure. To study the impact of regulation on housing markets across the country, researchers have often relied on the Wharton Residential Land Use Regulatory Index (Wharton Index). The methodology relies on surveying public officials to quantify the stringency of local regulation surrounding new home production. Unfortunately, the Wharton Index excludes the state’s housing markets, resulting in the elimination of Hawaii from many national studies on the burden of housing regulation. To fill this gap, UHERO administered the Wharton Index survey across Hawaii counties in 2021. This brief presents the first results from the survey findings.
Highlights from the brief:
- Hawaiʻi’s counties have some of the highest regulatory burdens, even when compared with the nation’s 30 most expensive counties.
- The categories that contribute most significantly to the regulatory burden in U.S. housing markets are court involvement, state political involvement and local political pressure. Hawaiʻi ranks highly in all three categories, and its level of local political pressure is particularly high, ranking in the top 5% of the national survey sample.
- Affordable housing requirements are particularly widespread in Hawaiʻi, and permitting wait times are roughly triple the national average.
- Reducing the regulatory burden of housing construction could lower housing costs. One way may be to expand the number of locations where denser housing can be built without obtaining a variance to existing zoning rules.
Executive Director Carl Bonham explains in the first episode of our new video series “UHERO Focus”
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Grassroot: New UHERO study supports what we've been saying about housing
One of the researchers stresses correlation is not causation, but it's pretty clear that heavy regulation has limited housing supply
from Grassroot Institute, April 14, 2022
"Measuring the burden of housing regulation in Hawaii."
It's a new policy brief that could have been written by the Grassroot Institute of Hawaii. But we are happy that it is the prestigious Economic Research Organization at the University of Hawaii stating what most economists and housing experts have known for years.
Written by Rachel Inafuku, Justin Tyndall and Carl Bonham, the report cautiously states:
"One of many factors that may explain the incredibly high home prices in Hawaii is that government regulation has severely limited the ability of the housing market to create the units necessary to meet demand."
A little more strongly, it says: "High home prices in Hawaii arise from a number of factors, [but] regulation plays a key role in setting the supply of housing."
Some regulations, it adds, "can often be in the public interest." But they aren't without cost:
"Such rules come with lengthy permitting processes and other financial obstacles that create a disincentive for developers to build new homes. Furthermore, development limits are designed to outlaw large multifamily development in virtually every neighborhood, forcing developers to seek special permission if they want to provide new multifamily housing.
"The processes to secure multifamily permits can be extremely complicated, requiring coordination between many levels of government, the local community and the legal system. By raising the cost of housing production, regulation reduces the supply of new homes, and leads to higher prices."
You can read the brief here or see the news articles about it in the Honolulu Star-Advertiser ("Hawaii ranks highest in nation for housing development regulations"), Honolulu Civil Beat ("How Hawaii’s Land-Use Regulations Are Helping Drive Up Housing Prices") or Maui Now ("New report: Hawaiʻi’s high home prices tied to stiff regulations; Maui 2nd strictest in state").
In the Honolulu Star-Advertiser article, UHERO Director Bonham stresses that the study "doesn’t prove that the regulation is causing home prices to go up. It’s a correlation. It doesn’t necessarily show causation."
OK, duly noted.