A recent report from the University of Hawaii has shed light on the exorbitant costs of regulatory requirements in the state, particularly when it comes to the construction of new condominiums. The findings reveal that regulatory costs account for over half of the price of a new condo in Hawaii, making it increasingly difficult for local residents to afford housing in their own communities.
The median price of a new two-bedroom condo in Hawaii is a staggering $672,000, more than double the national average. According to the report, regulatory costs make up an average of $387,000, or 58% of the median price. Construction costs account for 41%, while land costs make up just 1.4%.
One of the major factors contributing to Hawaii’s high regulatory costs is the lengthy permitting process and the requirement for a minimum number of parking spaces, among other regulations. Over the past five years, the median wait time for a construction permit for multifamily projects in the state has been a staggering 400 days. This kind of delay only serves to drive up costs for developers and ultimately gets passed on to the purchasers of new housing.
Additionally, developers are burdened with the responsibility of building infrastructure, such as roads and sewers, as a condition for receiving construction permits. This requirement places an unfair financial burden on developers, which is then transferred to homebuyers.
While other states also impose similar requirements on developers, Hawaii stands out for its willingness to have developers bear the costs. This approach is detrimental to the affordability of housing in the state and only exacerbates the housing crisis that is driving local-born residents away in search of more affordable options elsewhere.
County governments in Hawaii traditionally funded the construction of infrastructure through property tax proceeds. However, the shift in responsibility onto developers has only served to further inflate the prices of new housing units. In particular, Kauai and Maui have experienced significantly higher per-unit condo regulatory costs compared to the state average.
To address the issue, the report suggests that Maui needs more multifamily housing to increase affordability. Reforms are needed to streamline the construction process and make it easier for developers to build. However, the specific solutions for Lahaina, a wildfire-stricken town in Maui, should be left up to the community itself.
It is clear that Hawaii’s regulatory environment is hindering the affordability of housing for its residents. The burden placed on developers and the excessive costs associated with regulatory requirements are driving up home prices and contributing to the exodus of local-born residents. It is imperative for policymakers to address this issue and enact reforms that will make housing more accessible for all residents of the Aloha State.
