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How Urban Planning Made Honolulu 'Impossibly Unaffordable'
By Selected News Articles @ 9:44 PM :: 1593 Views :: Honolulu County, Development, Hawaii Statistics, Land Use, Cost of Living

Demographia International Housing Affordability, 2024 Edition

from Demographia, June, 2024  (excerpts)

This annual report assesses housing affordability in 94 major markets across eight nations (Australia, Canada, China, Ireland, New Zealand, Singapore, United Kingdom and the, United States). The 2024 edition focuses on data from the third quarter of 2023….

The least affordable market in the English-speaking world in 2023 was Hong Kong, with a median multiple of 16.7, followed by Sydney at 13.3, Vancouver at 12.3, San Jose (CA) at 11.9, Los Angeles at 10.9, Honolulu at 10.5, Melbourne at 9.8, San Francisco and Adelaide at 9.7, San Diego and 9.5, and Toronto at 9.3.

THE HOUSING AFFORDABILITY CRISIS: CAUSES AND A PATH FORWARD

Middle-income households face rapidly escalating housing costs, which is the primary cause of the present cost-of-living crisis. For decades, home prices generally rose at about the same rate as income, and homeownership became more widespread. But affordability is disappearing in high-income nations as housing costs now far outpace income growth. The crisis stems principally from land use policies that artificially restrict housing supply, driving up land prices and making homeownership unattainable for many.

Urban containment policies (greenbelts urban growth boundaries, densification) are designed to limit sprawl and increase density. While well-intentioned, these policies severely constrict the land available for housing. In constrained markets, higher land values translate to dramatically higher house prices….

With this 20th annual edition, we add a new category, “impossibly unaffordable,” which will apply to markets with a median multiple triple or more the “affordable” standard (3.0) which predominated in most geographies only three decades ago.

The term ‘impossible’ was selected to convey the extreme difficulty faced by middle-income households in affording housing at a median multiple of 9.0. This level of unaffordability did not exist just over three decades ago. Furthermore, securing financing for a house at this median multiple is largely impossible for middle-income households….

United States:

The US median multiple in 2023 was 4.8, up from 3.9 in 2019, indicating an increase of 0.9 years of median household income since before the pandemic.

The United States had five impossibly unaffordable markets, four of which are located in California. San Jose was the least affordable major US housing market in 2023, with a median multiple of 11.9 (91st internationally). Los Angeles was the second least affordable in the US (90th internationally), with a median multiple of 10.9, ranking, while San Francisco (CA) had a 9.7 median multiple and San Diego’s median multiple was 9.5. Honolulu was the third least affordable, with a median multiple of 10.5 (89th internationally). Figure 12 (above left) compares historical trends in housing affordability between California markets in other states…..

The range between the least affordable and most affordable markets in the US was 8.8 years of median household income in 2023, compared to 1.7 in 1969. This increase is the equivalent of 7.1 years of median household income…

Net domestic migration out of the severely unaffordable markets has increased substantially and is now by far the highest among the affordability categories. Between 2010 and 2015, the severely unaffordable markets (value to income ratio over 5.0) an net average loss of 76,000 residents annually. This worsened to an average loss of 315,000 between 2015 and 2020 and had increased approximately 10 times, to an annual loss of 810,000 during the pandemic period in 2020 to 2022. Among the seriously unaffordable markets (value to income ratio of 4.1 to 5.0) and the moderately affordable markets (value to income ratio of 3.1 to 4.0) in-migration increased substantially. These areas accounted for nearly all of the net domestic migration losses in the severely unaffordable markets. Finally, the affordable markets (value to income ratio of 3.0 or less) rose from an annual net migration loss of 171,000 to 4,000 gain annually in 2020-2022.

4: THE EXISTENTIAL THREAT TO THE MIDDLE-CLASS

For decades in the high-income world, a hallmark of a strong middle class was the widespread ability to own a home – house prices generally rose in line with household incomes. As late as the 1990s, house prices were three times or less than household incomes in most, if not all, the housing markets of New Zealand, Canada, the US, Australia, the UK and Ireland.

However, this nexus has been broken in many markets, with house prices escalating far above household incomes (measured by the price to income ratio, or “median multiple”). Land prices are now much more expensive, and house prices relative to household incomes have tripled in markets such as San Francisco, Sydney, Vancouver, Honolulu and Auckland. These early urban containment markets have each had house prices that are the equivalent of 9 to 15 years of household income.

In ‘Under Pressure: The Squeezed Middle-Class’, the OECD: “finds that the middle-class faces ever rising costs relative to incomes and that its survival is threatened.” Further that “…, the cost of essential parts of the middle-class lifestyle have increased faster than inflation; house prices have been growing three times faster than household median income over the last two decades.”

Housing is generally the most expensive item in the household budget. This trend has reduced standards of living and increased poverty. In the United States, where there is the greatest gap between the most expensive and least expensive housing markets, more than 85% of the cost of-living difference between the most expensive markets is due to higher housing costs…

5: THE INTERNATIONAL PLANNING ORTHODOXY AND THE HOUSING AFFORDABILITY CRISIS

Over the last half-century, urban planners have successfully managed to shape housing policies implemented to reflect their visions. Fundamentally, these policies seek to stop the expansion of urban areas (sprawl) and increase urban population densities. This international planning orthodoxy relies on urban containment, with its strategies of greenbelts, urban growth boundaries, rural zoning (large lot zoning) on urban peripheries and compact city policies (densification).

Urban containment, as explained by its own proponents, is contrasted with “...traditional approaches to land use regulation by the presence of policies that are explicitly designed to limit the development of land outside a defined urban area...” Each of these strategies reduces the land available for development of middle-income housing in the form that most households prefer (ground oriented, such as detached and semi-detached or row houses).

The middle-class is under siege principally due to the escalation of land costs. As land has been rationed in an effort to curb urban sprawl, the excess of demand over supply has driven prices up. This is consistent with economic principles. Alain Bertaud, former principal urban planner at the World Bank, asserts that “arbitrary limits on city expansion” (such as urban growth boundaries and greenbelts) result in “predictably higher prices.” Moreover, rising house prices can be driven even higher by the attractive returns from speculative activity. The net effect is that land values and house prices have become skewed against the middle-class, whose existence depends upon the very competitive land market destroyed by the planning orthodoxy.

All of the Impossibly Unaffordable Markets in Demographia International Housing Affordability follow the “international planning orthodoxy” as do nearly all of the severely unaffordable markets. A central message of this report is that the most severe housing affordability losses have occurred in markets that follow the international planning orthodoxy….

read … Demographia International Housing Affordability, 2024 Edition

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