A new economic report shows that an enormous majority of Hawaiian residents have been priced out of the housing market due to a number of factors.
Shedding Light on a Serious Problem
Economists at the University of Hawaii have shared some insights into the shocking state of housing affordability in Hawaii, which has decreased significantly in recent years.
One in Five Households
A new report from the University of Hawaii Economic Research Organization called the Hawaii Housing Factbook 2024, indicates that only one in 5 households living on the island can afford to buy a single-family home.
Huge Change in 3 Years
Those numbers have dropped drastically in the last 3 years, based on an equivalent 2021 report. Back then, 44% of households could afford a mortgage on an average single-family home. Now, that statistic is just 20%.
House Sales at 25-Year Low
Because so many families have been priced out of the local property market, house sales have also hit a 25-year low. Unfortunately, there has been no corresponding decrease in prices.
“A Huge Increase”
“We haven’t really seen any drop in prices, but there’s this huge increase in what it costs to buy a house because of interest rates,” said Justin Tyndall, the lead author of the report and a UHERO Assistant Professor.
From ⅓ to ⅕
“As recently as a couple years ago, 1 in 3 people could afford a house. Now it’s down to 1 in 5,” Tyndall continued.
“As Bad As It’s Ever Been”
According to Tyndall and the other collaborators on the report, housing affordability is now “as bad as it’s ever been,” with no clear indication of whether things will improve.
Several Factors
There are a number of factors that have contributed to the unaffordability of housing in Hawaii, particularly high interest rates that have inflated mortgage repayments and limited how many houses are on the market.
Fear of Selling
Because many long-term homeowners are paying off mortgages with a 4% interest rate, many are hesitant to sell their homes for fear that a new purchase would leave them with a much higher rate.
Long Permit Delays
Tyndall and his team also pointed to permit delays as a specific problem on certain islands, particularly Maui, that contributed to the issue.
315 Days Wait for a Home
As of 2023, it took the average single-family home 315 days to receive a permit, and 427 days for a multi-family development.
County of Maui Speaks
According to the County of Maui Communications Office, permit delays have been a chronic issue throughout the island for years.
Focused on Expedition
“The County has been focused on handling expediting permits to rebuild in Lahaina and Kula,” the statement confirmed. “After contracting with 4LEAF, Inc. to expedite permits, the first residential rebuild permit was approved last week just 14 days after the Recovery Permit Center was opened.”
Maui Wildfires
The fallout of the wildfires in Maui, which ripped through the community of Lahaina in August last year and led to the loss of more than 100 lives, has also had an effect on overall housing affordability, particularly in Maui.
“Exacerbating the Housing Shortage”
“Devastating Lāhainā and Kula fires upended the housing market on Maui,” the report reads. “The fires destroyed an estimated 3,000 homes, exacerbating the existing housing shortage and generating a population of displaced families.”
3000 Fewer Homes, 6000 More Homeless
There’s no doubt that the fires have played an enormous part in decimating housing affordability in the last year, removing 3000 homes from the market and adding higher demand through the displacement of over 6,000 households.
Rental Market Also Affected
It is far from only homebuyers who are affected. The rental market has also become increasingly unaffordable over the last two decades, with a noticeable change in the last year.
Highest Rent in the US
Median rent across the Hawaiian islands is the highest of any state in the US, and 56% of renters now spend more than 30% of their income on housing – officially placing half of the state under the category of “rent-burdened.”
Things Look “Bleak”
“The fallout from the fires has underscored the bleak state of housing affordability across the
State,” the report reads. High interest rates, high prices, and low supply have continued to make housing extremely unaffordable.”
A Problem Everywhere
While the report researchers acknowledge that housing affordability has become a problem across the United States, particularly due to high interest rates, they hope to use the report to draw attention to particularly serious issues in Hawaii.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
