Is There a Way Out of Hawaii’s Housing Crisis?

If you’re thinking about moving to Hawaii, you’re not alone. But transplants shouldn’t necessarily expect a warm welcome. Long simmering tensions about who gets to live on the islands have flared over the past couple of years into a full-blown crisis.

When the pandemic began in 2020, Hawaii’s economy reeled. Tourism crashed, and joblessness skyrocketed. Soon after, remote work combined with the state’s low infection rate beckoned people with means from across the country to move to the islands, while sprawling estates owned by the likes of Jeff Bezos, Larry Ellison, and Mark Zuckerberg continued to metastasize. From the end of 2019 to the start of 2022, the median cost of a single-family home on O‘ahu, where most of the population lives, ballooned from $789,000 to $1.15 million. A quarter of all homes sold in 2021 were purchased by out-of-state buyers, who routinely bid well above the listing price, often without seeing the property in person. Homes are on the market for an average of just 10 days.

But the local housing crisis is nothing new; in many ways, the pandemic merely accelerated trends that started when Hawaii became a state in 1959. The cost of real estate has steadily increased since then, fueled by tropical allure and increased accessibility, with only brief and mild downturns. During the Great Recession, Hawaii’s prices dropped less and rebounded faster than those in most of the rest of the country, the whole thing just a hiccup in the state’s ever-hot housing market.

Behind the economic statistics are human tolls. Hawaii continues to have one of the highest per capita rates of homelessness in America while also experiencing five consecutive years of population decline. There’s a growing class of people who have called Hawaii home for generations but can no longer live there. Those who can afford to leave usually do; those who can’t end up on the streets.

These trends disproportionately impact Kānaka Maoli, or Native Hawaiians. (One may be a Californian for living in California, but living in Hawaii makes someone a Hawaii resident, not a Hawaiian.) Native Hawaiians account for about 10 percent of the state’s total population but more than a third of the people without permanent housing. Now, roughly three times as many Hawaiians live outside their ancestral homeland than in it, a cruel legacy of colonialism.

The roots of the crisis are familiar to other parts of the country—not enough supply, too much demand—but on these islands, what are elsewhere surging issues have been whipped up into an economic storm.

As a hilly, isolated archipelago with less total land than Maryland, Hawaii is tightly limited by geography. Try to build out and you’ll run into eroding shorelines or steep mountainsides; try to build up and you’ll hit ordinances limiting building height and intended to protect scenic views. And then there’s the cost: Since most building materials are imported, expenses are not only higher than elsewhere in the country but also especially sensitive to supply-chain conditions, international tariffs, and market variables like rising inflation and oil prices. Myriad state and county land-use restrictions complicate projects, and since Hawaii uses a general excise tax instead of a sales tax, transactions at every stage of development add costs.

"We’re the state with the most regulations and hoops that you have to jump through in order to provide housing," says Cassandra Abdul, executive director of the Maui-based housing nonprofit Nā Hale O Maui. "Navigating them is time-consuming, and time truly is money." 

These days, new developments are built at one-tenth the rate of the peak of the post-statehood boom periods in the 1960s and ’70s, the last time housing was broadly affordable. 

And while supply is almost nonexistent, demand is seemingly infinite. Some of it is driven by locals trying to hold on, but Hawaii real estate is also popular purely for investment. The state has the lowest property taxes in the nation, and real estate appreciation dependably beats inflation. Investors can capitalize on some of the highest rents in the country or simply hold their property and flip it later for almost guaranteed profits. It’s a perfect place to park money. Some estimates show that more than 76,000 units are unoccupied and that 30,000 to 60,000 units have been converted to short-term rentals.

"When you stack all these things together, you get a climate where there’s not going to be much housing at a price point that local people can afford," says Sterling Higa, executive director of the nonprofit Housing Hawaii’s Future.

The state has tried to rein in the market. A 2015 ordinance allowed accessory dwelling units to be built on any single-family lot on O‘ahu. A bill that will go into effect in October requires short-term rentals in non-resort areas to have a minimum booking period of 90 days, among other restrictions. A measure was proposed in the Honolulu City Council earlier this year to raise taxes on homes that sit vacant for half the year or more, from 0.35 percent to 3 percent, with revenue going to the city’s affordable housing fund, though discussion of that bill was postponed indefinitely.

On the supply side, the Hawaii Housing Finance & Development Corporation develops and finances low- and moderate-income housing projects. It manages an affordable housing fund and grants developers exemptions to certain planning, zoning, and construction rules if a majority of a project’s units are affordable. The state also directly provides housing through the Hawaii Public Housing Authority (HPHA) and the Department of Hawaiian Home Lands (DHHL). HPHA currently oversees more than 6,000 units reserved for low-income residents, with average rents under $400. DHHL provides housing specifically for Native Hawaiians by offering 99-year leases for $1 per year. It currently oversees roughly 10,000 units, about 8,400 of which are residential (the rest agricultural or pastoral).

These measures help, but they haven’t been enough to turn the tide. There are 28,000 Hawaiians on the DHHL waiting list, some of whom have been waiting for decades. And slow government application processes can’t keep up with the overheated market.

"I applied for a grant from the affordable housing fund in September 2020," Abdul says, "but by the time we got through the process a year later, the median price of a house went from $750,000 to over a million."

"It’s death by a thousand cuts," says Higa. "Regulations add friction, uncertainty, and risk to development, and so there’s less development overall. When it does happen, the developer has to increase prices to balance the cost." 

Nonprofits like Abdul’s and Higa’s are stepping in to cover some of the gaps left between the government and for-profit developers.

"Without some of the nonprofits, you only have two types of housing: rental or market rate," Abdul says. "Our workforce can’t afford the median-price house, which is now $1.2 million in Maui County." Her organization is a community land trust, a nonprofit that acquires and holds land and sells only the house on top of it, which lowers the cost considerably for buyers. Nā Hale O Maui focuses on buying foreclosed and abandoned homes without any owner in place—"We’re not going to evict anybody," Abdul says—and sells them to qualified, low-income buyers. An application process that considers household income as well as community involvement impedes speculative buyers. "Most of our families are local families," Abdul says. "They’re firemen, teachers; they work for the county and state. They’re the people who really run our world." 

One of those families is Lavy Sisouvong’s. Sisouvong grew up on Maui and now heads the engineering department at a local resort. Prior to buying a Nā Hale O Maui home, he lived with his wife and three kids in the downstairs part of his parents’ house for five years, paying them more in rent than he currently does on his mortgage. "When we moved into Nā Hale O Maui, it gave us freedom," he says, adding that his friends thought it was too good to be true to buy a four-bedroom house for $385,000 with only $8,000 down.

Nā Hale O Maui currently oversees 47 homes and recently acquired 17 undeveloped lots in Kahului, a town on Maui. The space had been sitting idle for over 10 years after the previous developer sold it to the county as part of a legal settlement. Nā Hale O Maui will build affordable housing generally, while the nonprofit Maui Health Foundation, which received 16 adjacent lots, will develop workforce housing specifically for medical professionals, who often make too much to qualify for government programs but not enough to afford a house on the market.

"There are government subsidies available for 60 percent area median income [AMI] or below," says Talitha Liu, architect and program director at Housing Hawaii’s Future, "and the market takes care of 120 percent AMI and above. But there’s a gap."

Hawaii’s warped housing market means that gap affects not only nurses, teachers, and artists, but also higher-earning professionals elsewhere considered to be wealthy. 

"Doctors, engineers, architects—they can’t afford housing either. They’re leaving, but we need them here to collectively flourish," says Liu.

Addressing housing needs for this middle class doesn’t just ensure the state has enough educators and healers. Solutions here have ripple effects across the spectrum. 

"When you affect one end of the market, it affects the others," Abdul says. "You cannot just focus on one section."

If, for example, higher earners like doctors don’t leave the state, they end up buying houses that lower-income workers would have been able to afford, choking the already-strained market. It’s a downward spiral that hurts everyone, especially those at the bottom, which is why development at all levels and in all communities is so important—something many planning groups don’t want to hear.

"Neighborhood boards are often NIMBY institutions in part because they’re usually full of people near retirement age, so they’re removed from concerns about housing that are faced by young people who are just starting their careers and families," Higa says. His and Liu’s organization, Housing Hawaii’s Future, helps young people get more involved. "Our goal is ultimately to give young people the skills to sit at the table and advocate for their own interests."

Getting young people on neighborhood boards is one part of the nonprofit’s mission to rally communities and create political pressure to take action on the housing crisis. It has also launched pledge programs to get individuals and institutions to support workforce housing, and last year it started the From Hawaii, For Hawaii challenge with Hawaii clubs at mainland universities, where local kids living away from home often come to believe they’re better off outside the state. The challenge connects students with nonprofits back home that are addressing different housing-related issues. Last year, students from four schools raised $2,500 for organizations that assist houseless communities and provide financial literacy services.

Those efforts may not be enough to overcome all of today’s challenges, but for Higa, the goal is not just to achieve immediate results. "The intention is to show students that there actually is cause for hope," he says. These problems may seem insurmountable, but early involvement from organizations like Housing Hawaii’s Future may inspire young, disaffected locals to work collectively toward solutions over their lifetimes.

"We view our role as helping to educate and organize the community," says Higa. "The problem can’t be solved by one single person. Our hope is to get a lot of people involved." 

Getting community involvement in the development process allows the benefits of affordable density to be communicated clearly. In Hawaii, the idea of increasing population density often evokes cereal box apartment complexes vandalizing the islands’ natural beauty.

"Part of the concern of new development is that it’ll look generic and it won’t feel like Hawaii," says Liu. "We want to return to a building format that is specific to Hawaii, that addresses a sense of place, identity, and community needs." 

Liu cites as an example three-story walk-ups as a potential way to gently increase density. "They’re not visually abrasive like skyscrapers," she says, "and they can leave room for green spaces, communal spaces, and public spaces."

Suspicion about new construction runs deeper in Hawaii than in most other places. Throughout the islands’ history, development has typically benefited particular groups—usually wealthy white or Japanese businessmen—and excluded nearly everyone else, especially Native Hawaiians. That dynamic has generated deep distrust of new development and demand for more radical solutions.

"All the displacement comes from the continued theft of our kingdom and illegal colonial occupation by the United States," says Laulani Teale, a Hawaiian rights activist who works directly with unhoused people through the nonprofit Ho‘opae Pono Peace Project. "That’s why people are displaced. That’s why they’re houseless. That’s why developers are able to make huge profits while the people of the land are kicked to the streets or kicked out of Hawaii entirely."

For Teale, any real solution starts with Hawaii’s becoming a sovereign nation again. Hawaiian sovereignty is a perpetual Big Issue here, albeit one without much sustained, large-scale political action around it. Since the ’70s, disparate groups who identify with the sovereignty movement have rallied to protect the land—from military weapons testing, for instance—and protest developments like the Thirty Meter Telescope on Mauna Kea. During the pandemic, the absence of tourists and the influx of wealthy digital nomads buying property—often seen not only as selfish and dangerous to the local population, but also evocative of the original displacement of Kānaka Maoli by wealthy foreigners—reignited discussions about the idea. The Kingdom of Hawaii, which preceded U.S. dominion for a century, always had a law tying the authority to govern to the well-being of the poorest.

"The first law of the Kingdom of Hawaii was Kānāwai Māmalahoe, or the Law of the Splintered Paddle," says Teale. It explicitly permitted people to lie in the streets without being harmed. The original law, decreed by King Kamehameha I in 1797, stated that anyone, including chiefs, who hurt those who "lie by the roadside" should be put to death. "The way we interpret that now is that if you have a government that can’t respect the rights of the people, then you need to no longer exist," Teale says. "You’re not fit to govern if you can’t take care of those with the least power."

A sovereign Hawaii might have a stronger mandate to address the housing crisis, but it would still have to grapple with the same fundamental challenges: not enough supply to meet demand, and exorbitant material expenses. State Senator Stanley Chang believes the conditions demand a solution that’s less revolutionary than Teale’s but still ambitious: Build more—a lot more—and in a way that has not been tried before in Hawaii.

"In 1983, my dad was a state worker with one salary," Chang says. "He was able to buy a house, put my brother and me through school, buy investment properties, and retire comfortably. Back then, we didn’t ban short-term vacation rentals. We didn’t tax vacant homes at 500 times the rate of owner-occupants. We didn’t prohibit migrants from coming here. We didn’t prohibit mainlanders from buying property here. We just built 10 times as much housing as we do now."

Chang believes Hawaii’s housing catastrophe "leaves us with no other option than super-high-density, superregulated developments. But you can’t commandeer the private sector to build these units, so we have no other option than a public sector, state-led solution."

The legislator wants to redevelop underused urban sites like the decrepit Aloha Stadium in Honolulu, around which he wants to build a 100,000-unit complex. The scale of development would make the per-unit cost of building materials cheaper, and no green space would be lost. He argues that since the state would be responsible for construction, it could streamline the regulatory process, restrict sales to residents and owner-occupants, and easily recoup costs, all while limiting subsidies to make it sustainable for taxpayers. According to Chang, this would naturally rein in speculative investment, too.

"Speculation is profitable because we have a housing shortage," he says. "The only reason speculators find it profitable to invest in Hawaii is because they know we won’t build enough to meet demand." 

Chang has taken trips with architects and urban planners to other cities that have faced similar challenges, like Singapore, Hong Kong, and Vienna, and says the proof of viability for something like this is out there.

Singapore, for example, is an island less than half the size of O‘ahu but with over five times the population. "Every Singaporean is entitled to a condo on a 99-year lease that costs $180,000," Chang says. "Singapore is different in many ways from Hawaii, but they don’t have a magic wand or a genie in a lamp. If they can do it, so can we."

But high-density proposals have met legislative losses so far, as well as significant public pushback. The state has a mixed record on these kinds of large, ambitious government projects. Honolulu’s rail line has come to symbolize a sort of incompetence. It was supposed to cost under $5.2 billion and be finished in 2020 but has cost over $12 billion and isn’t expected to be completed until 2031. If the government can’t manage a single 20-mile rail line, how can it build a 100,000-unit housing development?

People won’t believe these dense developments are good until they see them built, but they won’t be built until people believe in them enough to support them. Overcoming that catch-22, he says, will require real, courageous leadership.

"The only way the housing crisis is going to end is if someone says, ‘I will build these units and they will go here and nowhere else,’ " Chang says. "Once a person takes responsibility—let’s say it’s the next governor—they’ll quickly find out it’s the only way to make a change on housing. It’s easier to fight one really big battle and get a ton of units than fight a hundred battles in a hundred neighborhoods."

Whatever happens here is more than just a local concern. The rest of the country is dealing with a broader housing crisis that may not yet be as acute as Hawaii’s but is heading in that direction. In the same way that Chang looks to Singapore, other states may soon turn to the Aloha State—hopefully as a model and not a cautionary tale. The mosaic of efforts from nonprofits gives hope that people are earnestly addressing the problem, while also chipping away at it, one person and one home at a time. Such solutions, though limited, have proved to be effective.

But the enormity of the crisis may only be matched by the ambitious scale of plans like Chang’s. When the reality of a problem is so extreme, even extreme solutions can become realistic, if not downright necessary.

"What is the plan to end the housing shortage?" Chang asks. "Not just make things better—actually end it? I want to inspire people to have the ambition to actually solve the problem. We need to start with responsibility, then a vision, then a plan, and things will fall into place." 

—

Top illustration by Alice Quaresma; Photo courtesy Andrew Pereira/CommPac.

Head back to the July/August 2022 issue homepage