New report removes divisive distraction
by Keli'i Akina, Ph.D., President/CEO Grassroot Institute, August 21, 2022
It is tempting to look for scapegoats when we talk about Hawaii’s housing crisis.
Often taking the blame are people from the mainland and elsewhere, who allegedly are crowding out local buyers and driving up Hawaii home prices.
However, a landmark new study from the Grassroot Institute of Hawaii, “The ‘outsider’ theory of Hawaii’s housing crisis,” shows that it ain’t necessarily so, and instead we should look closer to home if we want the true culprit.
The true culprit, of course, would be Hawaii’s extensive land-use, zoning and other homebuilding-related regulations, which this study and many others have shown actually are significantly correlated with housing shortages and high median home prices, not just in Hawaii but throughout the nation.
In other words, the problem is about supply. Yet, despite overwhelming evidence showing this to be true, too many local politicians and others attack the issue by focusing on demand — as if prohibiting or punishing outside buyers is going to result in a significant increase in new housing.
In the case of out-of-state buyers, Institute researcher Jensen Ahokovi looked at nationwide tax-assessment records provided by the AEI Housing Center in Washington, D.C., along with sales data from the Hawaii Bureau of Conveyances and found that “there is no statistically significant relationship between out-of-state buyers and home prices.”
In fact, he found that the share of homes being sold to outside buyers actually trended downward between 2008 and 2021, yet home prices still continued to increase.
As Ahokovi said to reporter Allison Schaefers in Monday’s Honolulu Star-Advertiser: “Considering these two trends, it is difficult to associate rising housing costs with fewer out-of-state buyers.”
I’m happy to say, the Institute’s new policy brief has been making waves in the media.
In addition to the Star-Advertiser, Pacific Business News, KITV 4 and Hawaii News Now have all shared news of the report with their audiences — and more coverage is in the works.
Of course, when you introduce a study that challenges conventional wisdom, you can expect a few objections, so I want to take a moment to answer a few of the most commonly asked questions about the report:
>> If 25% of total home sales between 2008 and 2021 went to out-of-state buyers, isn’t that a lot?
Yes, but the real question is whether those outsiders were driving up housing prices. As I noted, the trend of outside buyers during that period was downward — from 33.5% in 2010 to 19.4% in 2020 — yet home prices kept going up.
Beyond that, the report shows that outside buyers in Hawaii do not necessarily buy the same properties as local residents anyway, and more important, there is no statistical basis for blaming outside buyers for high housing prices in Hawaii or anywhere else in the U.S., even though it might feel like they’re responsible..
>> The report defines “local buyer” as someone whose primary address is in Hawaii. Isn’t this too broad and vague? How do we know if they are really local?
For this report, we used the same criteria as the state Department of Business, Economic Development and Tourism, which has the benefit of being objective and measurable.
It is possible that this results in some outsiders being classified as “local.” But by the same token, what about a former Hawaii resident, an aunty perhaps, who had to relocate to the mainland for several years and only now can afford to return and buy a home here?
In the end, we decided that such outliers had an insignificant effect on the larger statistical trends we were studying.
>> You’re saying that outside buyers have no impact at all, but Hawaii isn’t like other states. We can’t just spread out like Texas. So isn’t every outsider home purchase a problem?
Our report doesn’t say that outsiders have had no impact, rather that their impact is statistically insignificant. It’s a small but important difference, not least because it points toward more effective ways to address our housing shortage.
As for the claim that Hawaii lacks available land for housing, the truth is that only 5% of the land in Hawaii is zoned urban, and even that amount is not all zoned for residential. We may not be as big as Texas, but relatively speaking, we still have a lot of land available for housing, if only homebuilders were allowed to access it.
Meanwhile, don’t forget about California: Its outside-buyer share is a mere 1.9%, yet despite having considerably more land than Hawaii, it has the nation’s third-highest median home price. The culprit, as in Hawaii, is excessive homebuilding-related regulations.
Speaking of which, the question I have heard most often regarding our report is:
>> What is the solution?
Since we know that the main problem is excessive regulations, the answer lies in identifying which ones are most responsible, then working together to get them out of the way.
You probably have noticed that there has been no shortage of advice from the Grassroot Institute regarding how to address Hawaii’s housing crisis.
In policy reports, commentaries and legislative testimony, the Institute has discussed how to reform the state Land Use Commission, ways we could liberalize Hawaii’s many zoning laws, why we should consider the “Tokyo model” of by-right zoning and light-touch density, the benefits of “building out,” and why we should encourage “Yes in my backyard” policies that discourage the politicization of new homebuilding.
Regarding our latest report, I am pleased that it has prompted so many people to think about the real causes of Hawaii’s housing crisis. Think of how much further we could have gone in providing more housing if not for all the debate about outside buyers, among other unfortunate distractions.
My hope is that the Institute’s new study will make future policy discussions about housing more fruitful by removing from the agenda a popular notion that has been more divisive than anything else.