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New report: Hawaiʻi’s high home prices tied to stiff regulations; Maui 2nd strictest in state

Waikapū Country Town, aerial imagery. PC: County of Maui / Shane Tegarden

A new survey released today by University of Hawaiʻi Economic Research Organization shows that Hawaiʻi has some of the most restrictive housing regulations in the nation, with Maui as the second most restrictive county in the state.

“One of the factors that may explain Hawaiʻi’s high home prices are government regulations that limit the ability of the housing market to create the units necessary to meet demand,” UHERO said in a news release.

Home prices in Hawaiʻi are among the highest in the nation. In fact, the median single-family home resale price last year was about two and half times the national median. 

The new UHERO study found that Hawaiʻi’s counties have some of the highest regulatory burdens, even when compared with the nation’s 30 most expensive counties.

For example, affordable housing requirements are particularly widespread in Hawaiʻi, and permitting wait times are roughly triple the national average, the study said.

Maui County is in the top 5% of the sample, and the second most restrictive county in the state. 

It follows Hawaiʻi County, which was within the top 1% of the sample.

Honolulu and Kauaʻi counties are ranked within the top 10% of the sample.

Michele McLean, Maui County Planning Director who oversees the department that handles much of the permitting required for developments, acknowledged the housing development permitting time is long and that things can be done to increase the turnaround time.

Developing housing in Hawaiʻi is special, though, because of cultural and historical significance of the land. It therefore requires environmental and cultural reviews, she said.

“I would point out that we have such a demanding regulatory process because Hawaiʻi is unique in being a state with extensive coastlines and a rich cultural history.”

— county Planning Director Michele McLean

“I would point out that we have such a demanding regulatory process because Hawaiʻi is unique in being a state with extensive coastlines and a rich cultural history,” McLean told Maui Now via email. “These are two things that slow development: Most development is sought within the Special Management Area (meaning, and perhaps because, most supporting infrastructure is already there) and these areas must usually undergo archaeological review.”

“This simply is not the case in many other states,” she added. “Both SMA and archaeological review are incredibly important, I cannot see that these requirements would be changed any time soon.”

The county and state have several regulations, such as SMA permits, that govern land development near the shoreline.

While McLean said she doesnʻt refute the studyʻs findings, she provided context for local regulations.

The UHERO study identifies county-level affordable housing requirements as a contributor to slower permitting times.

“While that may be true, I believe that if no affordable housing requirements existed, then no affordable housing would be built,” she said. “This is because we live in a very high-end market, and there is enough demand for high-end housing that all developable land would be developed for only high-end housing.”

McLean added that other barriers exist to affordable housing in Hawaiʻi and in Maui, such as the high costs of land values and of goods and services.

The Planning director said things the county could do to help expedite affordable housing on Maui includes looking for lands outside SMA and away from known cultural or historical resources, which are already designated urban by the state, and proactively change zoning and community plan.

Also, the county could look at existing under-developed urban land outside the SMA and pursue redevelopment opportunities; survey existing entitled land to see if its infrastructure needs to be upgraded to allow for denser housing development to meet affordable housing needs; and find existing entitled projects that may be stalled due to onerous infrastructure conditions and consider revising them or assisting in fulfilling them, McLean added.

To gauge where Hawaiʻi ranks in comparison to similar areas across the US, the UHERO study compared the state’s counties to the nation’s top 30 counties with the highest median home prices.

While clearly important to the production of new housing, regulatory barriers are difficult to measure, UHERO researchers said.

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.

However, the Wharton Index excludes the Hawaiʻiʻs housing markets, resulting in the elimination of the state from many national studies on the burden of housing regulation. 

To fill this gap, UHERO administered the Wharton Index survey across Hawaiʻi counties in 2021, according to a news release issued today.

Reducing the regulatory burden of housing construction could lower housing costs, the report said. One way may be to expand the number of locations where denser housing can be built without obtaining a variance to existing zoning rules.

A recent UHERO report reviewing affordable housing policy in Maui also found that allowing more as-of-right development would be an effective way to increase housing production.

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.

* This story will be updated later today after UHERO meetings with media. 

Original source: https://mauinow.com/2022/04/14/new-report-hawai%ca%bbi%ca%bbs-high-home-prices-tied-to-stiff-regulations-maui-2nd-strictest-in-state/

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