2006 Housing Policy Study by SMS Research & Marketing Services, Inc.

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New Units Needed, an Estimate: The new unit estimate was developed from data collected in the Housing Demand Survey, 2006. The estimate begins with the assumption that the housing market in Hawaii is saturated, i.e. that all existing units (except a reasonable vacancy rate) are being used by current residents. Potential buyers who are currently doubled -up would all need a new unit. The Housing Demand Survey measures doubled -up households, those in which more than one family is residing in a single household, and thus provides an estimate of new units needed to facilitate the housing market. The initial estimate therefore reflects the number of housing units needed to eliminate pent -up demand and accommodate new household formation. Estimating Need for Specific Unit Types and Sizes: The initial estimate of needed units did not provide any further details on the types and sizes of units that might be needed. The Housing Demand Survey 2006 did not identify unit characteristics preferred by the specific family within doubled -up households that wanted to move. Therefore a method of estimating an appropriate distribution of needed units was required. The logic of the estimation method was as follows. By definition, the family within doubled -up households that wanted to move could not do so because they could not afford to buy or rent in the current market. Therefore, we might reasonably expect that their unit preferences might be very similar to those of other households who wanted to move but could not afford to buy in Hawaii's current market. The Housing Demand Survey has a very large sample size (n= 4,997), and includes a lengthy battery of items19 to measure qualifications to buy or rent. Those items were used to identify within the total number of potential buyers and renters, those who could not afford to buy or rent the unit of their choice 20. Estimates were developed separately for each of HUD's income classifications. The next step was to develop a demand profile by summarizing, for each HUD income classification, the number of buyers and renters, and the number who preferred single - family and multi - family units, within the group who could not afford the unit they needed. Finally, we expanded the survey profile to the number of needed units produced in the previous step. The result was the configuration of needed units shown in Table 13 on the following page. The estimation procedure is sound and based on reasonable assumptions. Befitting the realities of Hawaii's housing market, it is also complex and involves numerous factors that affect buyer decisions. The estimation method was developed to replace the simpler and somewhat more arbitrary method of estimating needed units in past iterations of the Housing Policy Study. In the end, its utility will depend on the extent to which policies based on the estimates are successful in managing Hawaii's housing needs. We look forward to monitoring its use for that purpose and to refining the estimation methods as required. 19 The battery includes questions on current tenancy, years in unit, estimated unit value, current rent or mortgage payment, household income, household size, preferred tenancy, preferred unit type, number of bedrooms and bathrooms required, affordable down payment, affordable monthly rent or mortgage payment, household savings, and household debt. 2° Note that the "choice" was not their first choice, but rather the type and size unit they would be willing to accept in order to buy or rent a unit they could afford. Hawaii Housing Policy Study, 2006 Page 26 © SMS, Inc. February, 2007