Why is Hawaii so expensive?

The following is the transcript for the video above, narrated by Joe Kent, Grassroot Institute of Hawaii executive vice president, which was posted Sept. 14, 2022, on the Institute’s “Hawaii Matters” YouTube channel.

Why is Hawaii’s cost of living so high?

Hawaii has the highest cost of living in the nation. The median price of a single-family home on Oahu, Maui and Kauai is over a million dollars. But prices are also high for gas, groceries, electricity and, well, basically everything else.

But, why is Hawaii so expensive? Is it just because it’s an island? And is there any way to bring down the cost of living?

Hawaii’s cost of living is high for many reasons. First, there’s a shortage of housing in the islands. This single-family home is worth over a million dollars, as are many other homes in this neighborhood.

Since many homes are out of reach, most Hawaii families live in condos or apartments, but even those are expensive. The median condo on Oahu is over half a million dollars; and the rent is this [gestures to $1,600 graphic] for a one-bedroom and this [gestures to $2,100 graphic] for a two-bedroom in Honolulu.

But income hasn’t kept up with the cost of living. In order for the average family to buy a house in the islands, they would need to spend over nine times their annual income. That’s way higher than on the mainland, where homes can be bought for only three or four times the annual income.

So, what caused the housing shortage in Hawaii? Well, in the 1970s, there was plenty of housing being built; but the state created government agencies and regulations, which made it more difficult to build. And today, Hawaii has the highest housing regulations in the nation, and that’s made it more difficult to build homes.

The state also restricts the urban development to only 5% of the land, and urban development is the only place that you could build affordable housing or low-rise apartments or, you know, basically homes for regular people. That means that even though there are plenty of appropriate places to build housing, the government doesn’t allow it.

Hawaii also has high taxes, and that makes everything more expensive.

We have among the highest income taxes and tourism taxes. Now, Hawaii also has a tax called the general excise tax, which is kind of like a sales tax, except it’s on all goods and services at every step in the production process. So even though it looks small, it’s actually really big by the time it hits the consumer.

Adding to these costs are the Jones Act, which is an old federal law from 1920 that makes shipping things in the U.S. more expensive. And of course, since Hawaii is an island, everything needs to be shipped here.

Now, the Jones Act says that you have to use U.S. ships to carry goods from one U.S. port to another U.S. port, and that means the ships have to be built in the U.S.; they have to fly the U.S. flag and be mostly owned and crewed by U.S. citizens. But U.S. ships are more expensive to build and operate and maintain, and that increases the cost of shipping to Hawaii.

Now, if you’d like to learn more about the Jones Act and how it affects Hawaii, you can click the video in the description.

So, the Jones Act adds costs, too, but there are a few other things that make Hawaii really expensive.

Hawaii has the highest energy bills in the nation. The average energy bill in Hawaii is $321 per month. Now on the mainland, that’s more like $100 or $200 per month. But Hawaii’s energy costs are probably going to get much higher since the state is switching to 100% renewable energy by the year 2045.

Now, that’s a change that some people may like; but it’s probably going to make energy prices higher as alternatives are phased out, and that’s going to increase the cost of living.

Finally, Hawaii’s government has among the highest debts in the nation per capita. And the thing to remember about debt is that it usually turns into a tax somewhere down the road. That means that the cost of living is likely to go up even more in the future because those debts have to be paid off through taxation.

Now, if you’d like to learn more about all of Hawaii’s debts in 15 seconds, you can look at the link in the description.

Now, could it be possible to bring down Hawaii’s cost of living?

Well, maybe. But that would mean rolling back all the long-standing policies such as tax law, maritime law and housing regulations.

Now, there may be a way to do that; but until people can adopt a friendlier attitude towards relaxing those policies, the cost in Hawaii will probably remain high.

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