Why we have a Housing Crisis

From Grassroot Institute, October 25, 2019

It’s as true for housing as it is for designer jeans: When supply can’t keep up with demand, prices go up and people get angry.

The big difference, of course, is that a shortage of denim doesn’t generally create a crisis. A shortage of housing does.

No one contests the fact that Hawaii is experiencing a housing crisis. There is a severe lack of affordable housing; some families have even left the state to find places where they can afford a home.

Local policymakers should be asking more questions about why that shortage exists. And here is where recent research from the Mercatus Center at George Mason University might be helpful.

Mercatus Center senior research fellow Salim Furth looked at the housing supply numbers for Oahu and the rest of the state and discovered something interesting about housing supply growth in Hawaii. 

At first glance, the numbers look good. Though there’s no boom in housing supply, there are several areas that show modest growth or at least little change.

However, when Furth compared the growth to other parts of the country with similar population densities and similar levels of housing demand, the picture changed completely. That’s when it became clear that housing growth in Hawaii is far behind comparable areas on the mainland. 

Furth calculated that on Oahu, housing growth in the majority of census tracts is at least 5% behind similar locales on the mainland. On Hawaii Island, the only other island with enough data to make a good comparison, nine of 14 tracts showed negative growth surplus from 2012 to 2018.

In other words, housing supply growth in Hawaii is stagnant at best. In other cases, we’re falling behind.

Once again, this goes back to the regulations that throttle development in our state. Approximately 95% of the land that could be used to spur housing growth is reserved for agriculture or conservation, preventing it from being used for new homes. A modest increase of 1 to 3 percentage points of the land available for residential use would greatly increase the housing supply.

In addition, zoning rules often preventing common sense changes, like allowing duplexes in areas zoned for single-family homes or apartment buildings in certain commercial areas.

Some believe the best way to address the housing crisis is to apply more government. But government regulations are what brought us to this point, where our housing supply growth lags far behind the mainland. 

What we need is less government — fewer regulations, fewer land use restrictions — to spur development and ease the housing shortage.

E hana kakou! (Let's work together!)  

Keli'i Akina, Ph.D.

President/CEO