2019 Hawaii Housing Planning Study

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b. Impediments to Production Furthermore, our geography becomes more constrained over time. As more area is In this section, we discuss some major barriers to developed, fewer acres of undeveloped land housing supply in Hawaii. They all affect the State remain. The value of undeveloped land increases and its four counties in like manner, and a and the political power of owners of developed significant amount of research has been reported land grows. Supply is attenuated which causes in peer-reviewed journals to estimate the prices to rise12 and geographic constraints reduce statistically significant correlation between the housing supply by limiting housing investment13 barrier and supply inelasticity and/or high housing prices. There is, however, no research that The purely geographic limitation may not be the defines the net contribution of individual most critical element in limiting housing supply, impediments to a change in housing production. but it is the most resistant to political attempts to Nor is there research that identifies the mitigate its impact. Short of sweeping mechanism by which those elements affect technological advancement in construction housing prices or housing supply inelasticity. techniques, the geographic impediment will Finally, no definitive research has been remain constant. conducted in Hawaii concerning these production barriers. To address these issues effectively Lack of Major Off-Site Infrastructure: Lack of would require research that is outside the scope off-site infrastructure to support new housing of this study. development is the issue of concern here14. It has appeared in public policy documents15 and was Hawai`i's housing market is supply inelastic10. A mentioned by developers, affordable housing change in demand does not lead to a change in advocates, and government housing officials in supply in a timely or efficient manner. That leads our stakeholder interviews this year. to low production and high prices. Previous versions of the HHPS and other studies have Public infrastructure like roads, sewers, water, identified major impediments to the development drainage, and schools has historically been of housing in Hawaii, including the lack of developed by local government. In Hawaii, as the "reasonably priced," developable land, lack of cost of infrastructure increased and development major off-site infrastructure, high development requirements grew16, the responsibility for off-site costs, government regulations; community infrastructure was passed to developers. Housing opposition; and growing environmental developers and those who support affordable requirements.11 We briefly recap the primary housing production agree that this increases the sources of the supply problem below. cost of housing. Some stakeholders noted that it places the burden of developing on the first Geographic Limitation: Hawaii lacks sufficient developer in line and spares any who follow and land near its major population centers. If we make use of the new infrastructure. subtract open water or wetlands and all areas with slopes in excess of five percent (Rose, 1989), the Government policymakers respond that the costs remaining land might be called suitable for are passed to the owners and renters of the new development. As an island state, comprised of development, who are the primary beneficiaries of mountains rising from the ocean floor, Hawaii the housing units developed. The alternative — percentage land suitable for development is the the county provides the infrastructure -- is lowest among the 50 states (Saiz, 2010). 16 A market situation in which any increase or decrease in 13 Paciorek, Andrew D. 2013. Supply constraints and the price of a good or service does not result in a housing market dynamics. Journal of Urban Economics, corresponding increase or decrease in its supply. Vol. 77, p. 11-26. 11 State of Hawai'i, HHFDC, Consolidated Plan for Program 14 As distinguished from the issue of inadequate or Years 2015 through 2019, May 15, 2015. antiquated infrastructure in developed areas. 12 Hilbert and Robert-Nicoud identified a highly significant 15 Mayor's Advisory Housing Advisory Committee, City and independent variable in their analyses of housing prices County of Honolulu, Final Report & Recommendations, was the ratio of acres of developed land to acres of April 2006. developable land. 16 Adding requirements for water prospecting, bike paths, jogging paths, etc. Hawai'i Housing Planning Study,2019 Page 10 ©SMS December,2019