Honolulu Third most Unaffordable Housing Market
The 2006 Demographia International Housing Affordability Survey (pdf) ranks Honolulu as the 3rd least affordable housing market in the world, behind 1st ranked Los Angeles and 2nd place San Diego. The report gives a number of reasons, such as low interest rates but a major cause is listed as excessive regulation:
In summary, the unprecedented housing affordability crisis could represent a threat to prosperous economies. Research indicates that the crisis may be, in large part, a consequence (negative externality) of the excessive land use regulation that has been adopted in many markets. Severe land use regulations have generally been adopted without any understanding of their ultimate impacts on housing affordability. Indeed, these effects have often not been considered at all. Where housing affordability concerns have been raised, the typical response has been denial rather than informed and objective analysis.
Research is increasingly identifying insufficient supply as the main driver of excessive house price escalation. In particular, the supply has been seriously dampened by government land use regulatory policies that have the effect of rationing land. This raises the price of land and, in consequence, there are markedly higher housing prices where such policies have been implemented. The land restrictions go by the monikers of “smart growth” or “urban consolidation” and they make large swaths of land off-limits to housing construction or impose excessive costs17 or costly delays.
Harvard University published research by Glaeser and Gyourko found that there was little difference in construction costs between US markets and characterized land use controls as playing the “dominant role” in the housing costs differences.
The excessively high prices in highly regulated markets also raise the cost of low-income “affordable housing.” As land prices are driven higher, the public cost of providing housing assistance to low income households also increases.
A must read for anyone who wishes to understand why housing prices are so high in Honolulu and why they will probably remain so despite the state government’s “affordable housing” push. The underlying causes aren’t likely to be changed anytime soon.