Thursday, July 12, 2007

Honolulu Ranks Number 3 as the Least Affordable Housing Market

UPDATE/01-28-2015:  Things have not changed much in the recent 2015 survey.  Honolulu is still in the top 10 least affordable markets compared to 378 locations in the U.S. and worldwide.  The survey continues to find that the above policies and constraints contribute significantly to the problem.

The 3rd Annual Demographia International Housing Affordability Survey was recently released by Pavletich Properties Ltd, a commercial property development and investment company, based at Christchurch, South Island, New Zealand.

The study covers 159 major markets in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States using the “Median House Price to Median Household Income Multiple” to rate housing affordability.

It may be no surprise that Honolulu ranks number 3 as the least affordable market. And, according to the survey and the studies it relies upon, Hawaii’s compulsory affordable housing policies, state land use policy, and layers of regulation may be the culprit. Below are salient points of the report.

What makes housing unaffordable:

  • A shortage of land
  • Restrictive land use regulations under the terms “smart growth” (a term used principally in the United States and Canada) “urban consolidation” (used principally in Australia) and the more generally used “compact city” policies
  • Land rationing including urban growth boundaries, insufficient “land release” rates by planning authorities, construction and development moratoria and large lot zoning.
  • Infrastructure financing shift from the general tax or rate base to buyers of new homes.
  • Unnecessarily complicated and lengthy approval processes, even for standardized construction.
Policies that lead to affordable housing:

  • Require land use authorities to make enough land available to maintain housing affordability.
  • Liberalization of land use process which would involve a presumption favoring development, except where reasonable environmental standards would be contravened, rather than a presumption that new housing for people can only be built when government “land releases” occur.
  • Community infrastructure could be financed by the tax or rate base rather than being inequitably imposed in the form of fees and taxes on purchasers of new houses.
  • “Economic Impact Statements” could be used to project future housing affordability (Median Multiples), including their impact on the regional economy, households and competitiveness.
  • Planning school curricula and economics based continuing education for government staff.

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