Why It’s Always Been Expensive To Buy a Home in Hawaii

Oct 3, 2016

Credit Flickr / EDMUND GARMAN

As most of you know, it is hard to break into Hawai‘i’s housing market. The latest census numbers show the state’s median housing value increased 7.4% to nearly $567,000, making it the highest in the nation. But as HPR’s Molly Solomon reports, that’s nothing new. 

When it comes to affordable real estate in Hawai‘i, the conversation hasn’t changed much. That’s according to University of Hawai‘i economics professor Sumner Lacroix, who’s also a fellow at UH’s economic research organization. He says entering the housing market is expensive — and always has been.

“Even if we go back to 1950, we’re still finding that there’s a premium of almost 100% in the Hawai‘i home prices,” said Lacroix. “It’s always been expensive to buy here.”

Lacroix used census data to show that home prices in Hawaii more than 60 years ago were already higher than all 48 states on the mainland. In 1960, the national median price for a single family home was $58,600. In Hawai‘i it was almost double that. He says that problem was especially apparent on O‘ahu.

“Housing was expensive in Hawai‘i after World War II, partly because there was this influx of people from the neighbor islands,” Lacroix explained. “They’d all lost their jobs on the sugar plantations due to mechanization and relatively high union wages. So they were coming to Honolulu to look for jobs.”

At the same time, commercial jet planes filled with tourists were also coming to Honolulu.

“All of a sudden, people from the mainland find it much cheaper to get to Hawai‘i. They come to Hawai‘i, they like Hawai‘i — and we have a booming tourist industry,” he said. “So people’s wage rates are going up, as they do they’re more than willing to bid up the price of housing. We also see a big increase in the demand for housing; the supply just didn’t keep up for a variety of reasons.”

One of those reasons is the fact that we live on an island. Other states facing population growth and development have the advantage of more open space, and the ability to expand from the urban core out into the suburbs.

“Here, when you drive out to Hawai‘i Kai, there’s ocean. Drive out to Nanakuli, you can’t go that much further,” said Lacroix. “On the mainland there’s just more rings of suburbs, there’s more places where there could be some expansion.”

In the late 80’s through the 90’s Honolulu did see significant growth for single family homes in areas like the ‘Ewa plain, ‘Aiea, and Mililani. But homeowners also began to demand — and get — more restrictions on development.

In a UHERO report earlier this year, Lacroix says Honolulu has some of the countries most severe regulation on land development. Projects that do get built often take years to get through the red tape. In the meantime, more people need homes. Lacroix says at some point we have to ask ourselves, how much more growth can the islands really sustain?

“That’s certainly one of the things that people of Hawai‘i have to think about, is just how many people ultimately we want to have here in the islands,” said Lacroix. “Do we want another 500,000 people living here in 50 years, another one million in 100 years? Those are things that we should ponder over and think about really carefully in our decisions in how we develop housing.”

To further complicate the issue, Hawai‘i has a serious lack of affordable housing for people who already live here.