Measuring the Burden of Housing Regulation in Hawaii


By Rachel Inafuku, Justin Tyndall, and Carl Bonham

Home prices in Hawaii are among the highest in the nation: in 2021 the median single-family home resale price was about two and a half times the national median. One of the factors that may explain Hawaii’s high home prices are government regulations that limit the ability of the housing market to create the units necessary to meet demand.
While clearly important to the production of new housing, regulatory barriers are difficult to measure. To study the impact of regulation on housing markets across the country, researchers have often relied on the Wharton Residential Land Use Regulatory Index (Wharton Index). The methodology relies on surveying public officials to quantify the stringency of local regulation surrounding new home production. Unfortunately, the Wharton Index excludes the state’s housing markets, resulting in the elimination of Hawaii from many national studies on the burden of housing regulation. To fill this gap, UHERO administered the Wharton Index survey across Hawaii counties in 2021. This brief presents the first results from the survey findings.

Executive Director Carl Bonham explains in the first episode of our new video series “UHERO Focus”


2 thoughts on “Measuring the Burden of Housing Regulation in Hawaii”

  1. I’m working with the Hawaii County Mayor to improve the island’s building permit process. I’m wondering, have you every attempted to quantify the economic impact of building permit delays? My simple (hopefully not simple minded) question is: what does a day’s delay cost the local economy?

    We know that the local permit management system is badly broken, with an average 90 day permit processing time, when verifiable research indicates that, given a complete application for a New Residential project, it only takes less that 4 hours to do a plan review that satisfies building code requirements.

  2. Paul Brewbaker

    When Larry Johnson’s (former CEO of Bank of Hawaii) son Mark was an intern or young hire at Castle & Cooke about thirty years ago, he estimated the all-in cost of the county and state’s regulatory loading at approximately one-quarter to one-third of a newly-delivered housing unit. Mark’s methodology was to integrate estimates the time-cost of waiting (foregone interest on financial capital commitments, basically, if you use a risk-free benchmark like a Treasury Note yield at, say, a 7-year (constant) maturity), with certain other process and compliance costs, jumping through hoops chewing gum while playing a ukulele, stuff the government thinks is obligatory. The process, as we used to say of printers in the 1980s, was serial, not parallel. Unlike the housing regulatory environment o’ the day, even dot-matrix printers o’ the day were switching to parallel processing cables from serial processing cables. Dave Callies at UH Law School (“Regulating Paradise”) and others estimated at the time that 7 years was not an atypical wait for regulatory approvals. Castle & Cooke will gladly relate to you how long they waited for final approvals at Koa Ridge, more than twenty years with two trips to the Hawaii Supreme Court, “because once is never enough.” John DeFries, lately CEO of the Hawaii Tourism Authority, personally can relate to you how even after a developer acquires entitlement you don’t have entitlement (at Hokulia, after DeFries built Hawaii County a brand-new road from Keauhou to Captain Cook; you buggahs owe that guy a housing development, BTW). The estimate of one-quarter of the cost loading, at least, on newly-built homes being attributable to regulatory process costs has remained remarkably durable. For decades I have gotten knowing nods of heads in affirmation from contractors and developers when I mention Mark’s estimate. I don’t know what Mark Johnson is doing these days, but after thirty years I imagine it’s something significant. He got a head start making a significant contribution to this economist’s anecdotal patchwork quilt of local knowledge about construction and homebuilding in Hawaii, on that occasion, thirty years ago. Oh, and be sure to put the Costco steaks in the freezer in the carport of the building inspector: don’t knock on the door and pass them in-person. Make A. Most other estimates of housing regulatory loading simply add up the costs of exactions–such as sticking the cost of new schools on the marginal (new) homebuyer, so that existing homeowners can free-ride, etc. Such naive methods ignore the time value of money, often because the analyst never learned economics. Time is the enemy: that’s why the Sierra Club, Maui Yesterday, Earth Injustice, and the Center for Fake Science are dedicated to litigation, because it takes so long. Their strategy is to bankrupt developers and make lawyers’ livings, not to “protect the environment” from houses which otherwise would have been built sooner and in greater numbers than otherwise, if the boundaries and guardrails were transparent and credible, and the bandwidth for housing capital formation wider. They meant to do that. Dragging it out is the point: ti-i-i-ime is on their side.

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