Editor’s note: The following article was written by national housing expert Randal O’Toole shortly after he appeared on the Oct. 24, 2023, episode of “Hawaii Together,” hosted by Grassroot Institute of Hawaii President Keli‘i Akina. The program was summarized in the Grassroot Institute‘s Weekly Report and appears on the Institute’s website under the headline “‘Affordable housing’ making housing worse for everyone.”
On the Hawaii Together” program, OToole said Hawaii’s focus on producing so-called affordable housing will not solve the state’s affordability crisis, and that instead, local policymakers should reduce the state’s strict land-use and zoning regulations so homebuilders can produce housing for people at all income levels.
At least one Grassroot reader took issue with O’Toole’s thesis, repeating the often-heard claim that “There will always be a shortage of affordable housing here, unless we recognize that the problem is not supply, but demand.” The reader specifically blamed the “virtually endless” supply of “visitors and transplants” for driving up Hawaii home prices.
The reader further suggested mandating a “living” wage so local residents could compete with outside buyers for homes “from the existing stock.” He said “increased wages would undoubtedly raise some prices of things and services here, which are directly affected by higher labor costs. [But] we would see a decline in the cost of shelter, which would lower the cost of living, by making housing more affordable for the people of Hawaii.”
At the request of Grassroot Institute staff, O’Toole addressed this reader’s assertions.
By Randal O’Toole
In response to the Grassroot Institute podcast in which I expressed dismay over the high housing prices caused by Hawaii’s land-use laws, some people have suggested that such high prices are necessary to keep Hawaii from being overrun by outsiders.
Hawaii is such a paradise, they reason, that everyone in the world would want to move here were it not for the unaffordable housing.
I’ve got news for those people: Not everyone wants to move to Hawaii.
In fact, if Hawaii is so popular, why has its population declined for seven years in a row?
I love visiting Hawaii, but every time I think about moving here, I get claustrophobic. As a lifelong resident of mainland North America, I like the idea that I can point my car in almost any direction and travel thousands of miles, seeing something new and exciting around every corner, before running into an ocean or other barrier.
I’m not the only one who thinks this way. Based on Hawaii’s current housing prices, any household whose income is more than $200,000 a year should be able to afford to live in Hawaii. According to the U.S. Census Bureau, there are almost 15 million such households in the United States. Yet only one-half a percent of them actually do live in Hawaii.
Whether Hawaii’s housing shortage is a problem with supply or demand is a legitimate question. However, it is clear to me that it is a supply problem.
Before the COVID-19 lockdowns, there was no part of the United States where demand was so high that it outstripped the ability of homebuilders to meet it so long as government doesn’t artificially restrict the supply of land.
The Houston area, for example, grew by about 100,000 people per year from 1990 through 2020, and yet remained one of the most affordable urban areas in the country.
When Hurricane Katrina hit New Orleans, about 100,000 New Orleanians permanently moved to Houston on top of the 100,000 people who were moving there per year from other parts of the country. It didn’t even register as a blip in housing prices.
Since the lockdowns, supply chain and labor shortages have hampered the ability of homebuilders to meet demand, making housing more expensive everywhere in the country. It still is a lot less expensive in places like Houston that don’t have land-use restrictions.
While it is too soon to tell for sure, recent changes in housing prices suggest that the supply-chain problems are working themselves out. We can also fix the labor shortages, so long as government doesn’t make them worse by throwing billions of dollars at ridiculous rail transit projects and high-speed rail — which it is doing.
Next time you hear someone say that a particular government-subsidized project will “create jobs,” remind them that we have a labor shortage, not an unemployment problem.
In any case, Hawaii’s land-use laws weren’t passed to be a barrier to immigration. Their stated purpose was to protect Hawaii’s agricultural industry. Instead, Hawaii’s laws killed it.
According to the U.S. Department of Agriculture, acres of crop production in Hawaii peaked in 1969, just a few years after the state Legislature passed Hawaii’s first land-use law — but before that law had made housing expensive.
Since then, the number of acres used for growing crops has declined by more than 50%. The smallest decline was on Hawaii Island, whose cropland acres declined by only about 10%. The biggest declines were on Kauai and Maui, which lost more than 80% of their cropland acres, while Oahu’s acres fell by about half.
Cropland acres didn’t decline because of urban development. Instead, it was because high housing prices made it impossible for Hawaii farmers to hire workers at rates that would allow them to compete with tropical farmers elsewhere.
It is no coincidence that Hawaii Island, which saw the least decline in cropland acres, has the most affordable housing on the islands, while Kauai and Maui, which had the biggest declines in croplands, have the least affordable housing.
Farms weren’t the only thing destroyed by the land-use laws. The fires that burned Lahaina this year are also traceable to those laws. Native Hawaiian vegetation is naturally resistant to fire. Croplands are as well. But as cropland acres declined, most of those acres were turned to pasturelands, and the non-native grasses that were introduced for pasture are highly susceptible to wildfire. If Maui’s farm industry hadn’t been devastated by the land-use laws, Lahaina wouldn’t have been devastated by the fires.
What would happen to Hawaii’s rural lands if Hawaii repealed its land-use laws and allowed housing to become more affordable?
On Hawaii Island, Kauai and Maui, you probably wouldn’t notice any difference. According to the U.S. Census Bureau, less than 4% of Kauai and Maui and well under 1.5% of Hawaii Island were urbanized as of 2020.
The population densities of the urban parts of these islands aren’t particularly high — about 3,000 people per square mile in Maui, under 2,000 in Hawaii and Kauai.
More affordable housing might lead more people to move to these islands, but I doubt the population would come close to doubling. Urbanization might extend to 2% of Hawaii and 5% or 6% of the other two islands.
The big changes would be seen in Oahu. The urbanized portion of Honolulu has about 5,400 people per square mile, which is far denser than most Americans want to live. Abolishing the land-use laws would lead many of those people to leave the denser parts of the city and move to lower-density areas.
Currently, about 30% of Oahu is urbanized, and I can imagine that, between a movement to lower-density areas and an increase in population in response to more affordable housing, this might increase to 50%.
We can debate whether 50% is too much. For me, the fundamental issue is fairness.
Is it fair for people who already own their homes to deliberately make housing expensive, which simultaneously increases their wealth and acts as a barrier to newcomers?
Is it fair for middle-class and upper-middle class elites to pass laws whose impact is mainly felt by the working class, who are more likely to rent than own a home?
Is it fair to pretend that spending money that is often collected through regressive taxes on affordable housing that will be occupied by only a tiny percentage of people somehow makes up for policies that make housing expensive for everyone else who didn’t already own their homes before those policies went into effect?
The answer to all of these questions is “No.”
A case can be made that, to the extent that Hawaii’s land-use laws act as a barrier to the movement of U.S. citizens from other parts of the country, those laws violate the U.S. Constitution’s guarantee that all citizens of the country can move to any part of the country they want.
Social justice for low-income residents, fairness to newcomers and the health of Hawaii’s agricultural sector all demand that the state repeal those laws. Until that happens, housing will remain expensive.
Randal O’Toole is president of the Thoreau Institute based in Oregon and a Grassroot Scholar. In 2019, he wrote the Grassroot Institute policy brief “Build up or build out? How to make housing more affordable.” He also is the author of several books, including “American Nightmare: How Government Undermines the Dream of Home Ownership,” “Reforming the Forest Service” and “Romancing the Rails: Why the Passenger Trains We Love Are Not the Transportation We Need.”