HONOLULU– A University of Hawaii report released Monday found that regulatory costs make up more than half the price of a new condominium in Hawaii, a place where high housing costs are fueling an exodus of locally born residents looking for cheaper places to live.
Some worry that the migration of Native Hawaiians and other local residents could accelerate if rebuilding the wildfire-hit Maui town of Lahaina makes housing there unaffordable for people in the community.
The report from the university’s Economic Research Organization shows that the average price of a new two-bedroom apartment in Hawaii is $672,000, more than twice the national average of $300,000.
According to the report, regulatory costs averaged $387,000, or 58% of the average price in Hawaii. According to the report, construction costs accounted for 41% and land costs for 1.4%.
Hawaii condos rank highest in the nation in average land cost per half acre and construction costs. California led the nation in regulatory costs per unit, and New York came in second. Hawaii is in third place.
Justin Tyndall, an assistant professor of economics at the university and one of the report’s co-authors, attributed more than half of Hawaii’s regulatory costs to long delays in the permitting process, minimum parking space requirements and other regulations. He noted that the average wait time for a building permit to build a multifamily project on the islands over the past five years was 400 days.
Another major contribution, he said, was the requirement that developers build roads, sewers and other infrastructure as a condition of obtaining building permits.
“This just shifts the entire burden of who pays for the infrastructure onto the developers. And ultimately that gets passed on to the buyers of new homes,” Tyndall told reporters at a news conference.
Other states also impose this requirement on developers, but he said Hawaii was “above average” in its willingness to make developers pay these fees.
Traditionally, provincial governments built this infrastructure with property tax revenues, the report said.
On a county basis, regulatory costs per apartment on Kauai and Maui were much higher than the state average, at $567,000 and $561,000, respectively.
Tyndall said Maui overall needs more multifamily housing to make housing more affordable, which means reforms are needed to make it easier to build. The report contains no “specific lessons” for Lahaina, he said, adding that the question “should be left to the people of Lahaina.”
The researchers compared the prices of new-build apartments rather than single-family homes because building materials, labor and land all have observable market prices. In contrast, they said the price of a single-family home is largely determined by the cost of land.