2019 Hawaii Housing Planning Study

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population, households, and household size. Hawai`i's rise in pent-up demand was not unique Ideally, if there were a five percent change in the in the United States. National data show more population, we would expect a five percent pent-up demand from 2010 to 2018. Observers31 change in households and a zero percent change note that lower housing sales were related to in average household size. If supply were running decreasing supply as well as a reticence among ahead of demand, we would get a five percent (or young people to enter the real estate market. perhaps even greater) increase in households as That caused pent-up demand in housing markets pent-up demand is relieved. That would result in across the country. a zero or even a negative change in average household size. The State's population growth was relatively slow during the nineties. The average household size If demand runs ahead of supply, then a five (Table 10) fell off a bit by 2005 and even more by percent growth in population will produce less 2006. It then resumed faster growth but did not than five percent growth in households and larger quite reach the level seen in the years before average household size. This is a primary 2000. In 2017,the average household size for the indicator of pent-up demand. State was 3.02 persons. Table 9. Population Increase: Counties, 2007-2017 Census numbers reported for 2017 were equal to %Change 2007 to 2017 2015 for Honolulu and the State. Average Total Number Average household size was slightly lower for the County Population of HH HH Size of Hawaii and slightly higher for Maui and Kauai Counties. Honolulu 6.8% 3.8% 2.8% Hawaii 12.7% 10.9% 7.9% Table 10. Average Household Size, 1990-2017 Maui 12.3% 10.2% 4.7% County Ka ua`i 11.9% 5.7% 10.7% State 8.5% 5.6% 6.4% Honolulu Hawaii Maui Kauai State Source: Calculated from Table 6 and Table 8. 1990 3.02 2.86 2.99 3.09 3.01 2000 2.95 2.75 2.91 2.87 2.92 At the State level, the total number of households 2005 2.91 2.77 2.86 2.85 2.88 grew by 5.6 percent between 2007 and 2017 (Table 9) - faster than the population (8.5%) and 2010 2.96 2.73 2.89 2.98 2.92 indicating a constrained household formation 2015 3.06 2.90 2.96 3.07 3.02 rate. The average household size grew by more 2017 3.06 2.88 2.97 3.12 3.02 than 6 percent, indicating a corresponding Sources: U.S. Decennial Census, 1990, 2000, 2010, ACS increase in persons per household. This is 2005 (1-yr. Estimate), 2010, 2015, 2017 (5-yr. Estimate). evidence of pent-up demand. d. Building Permits Data for three counties were consistent with a housing market where demand exceeds supply. The number of building permits awarded in a single year is often referenced as an indicator of Hawaii County had an 11.7 percent increase in the demand for new housing units. Since builders average household size over the 10-year period, are unlikely to build new units they cannot sell, the while Kauai County had a 10.7 percent increase. number and nature of building permits is certainly The situation in Maui County was closer to the related to the demand for housing units. Similarly, preferred circumstances: population growth and the number of building permits is related to household formation grew at nearly the same housing supply in that new units cannot be rate, and average household size grew by the constructed if permits are not approved. For both smallest percent. demand and supply, however, the number and nature of building permits approved each year is 31 Rappaport, Jordan. 23018. Pent-up demand and 2018, The Macro Bulletin, Federal Reserve Bank of continuing price increases: The outlook for housing in Kansas City, January 10, 2018. Hawai'i Housing Planning Study,2019 Page 15 ©SMS December,2019