The University of Hawaii recently released a report shedding light on the significant role regulatory costs play in the pricing of new condominiums in Hawaii. The findings are particularly pertinent in a state where high housing costs are driving local-born residents to seek more affordable living options elsewhere. One area of concern highlighted in the report is the potential acceleration of this exodus if housing in places like Lahaina becomes unattainable for the community.
According to the report, the median price of a new two-bedroom condominium in Hawaii stands at a staggering $672,000. This figure is more than double the nationwide average of $300,000, highlighting the acute affordability challenges facing residents in the state. What’s noteworthy is that regulatory costs constitute a significant portion of this median price, accounting for an average of $387,000, which represents 58% of the total cost. In comparison, construction costs make up 41%, while land costs comprise a mere 1.4%.
Hawaii’s condominium market stands out on several fronts compared to the rest of the nation. For instance, the state ranks highest in the nation for average land cost per half-acre and construction costs. Moreover, when it comes to per-unit regulatory costs, California tops the list, followed closely by New York, with Hawaii ranking third.
Justin Tyndall, an assistant professor of economics at the University of Hawaii and one of the report’s co-authors, emphasized that more than half of Hawaii’s regulatory costs can be attributed to long delays in the permitting process and stringent requirements such as the provision of a minimum number of parking spaces. Tyndall highlighted that the median wait time for a construction permit for multifamily projects in Hawaii over the past five years has been a staggering 400 days, significantly hampering development timelines.
Another significant factor contributing to the high regulatory costs in Hawaii is the requirement for developers to bear the expenses of building infrastructure such as roads and sewers as a condition for receiving construction permits. While similar requirements exist in other states, Hawaii stands out for its willingness to have developers shoulder these fees, which ultimately get passed on to purchasers of new housing.
Kauai and Maui are particularly notable on a county basis, with per-unit condo regulatory costs significantly higher than the state average. On Kauai, the figure stands at $567,000, while on Maui, it is $561,000, underscoring the acute affordability challenges faced by residents in these areas.
Tyndall’s emphasis on the need for reforms to streamline the construction process and boost the availability of multifamily housing on Maui underscores the urgency of addressing affordability issues. While the report refrained from prescribing specific solutions for Lahaina, Tyndall’s call for community involvement in charting the path forward highlights the importance of local input in addressing housing challenges.
In summary, the report underscores the significant impact of regulatory costs on housing affordability in Hawaii. To tackle these challenges effectively, it will be essential to implement measures aimed at streamlining construction processes, easing regulatory burdens, and expanding the supply of affordable housing options statewide. By working collaboratively and engaging local communities, stakeholders can work towards creating a more accessible and sustainable housing market for all residents.