Although luxury residential builds are still moving forward, the focus on affordable housing continues to take precedence across the state.
Pacific Resource Partnership’s Winter 2025 edition of Hawai‘i Perspectives, a scientifically conducted survey, reports that Hawai‘i is about 64,000 homes short of meeting the current demands.
“Many are frustrated by delays due to government red tape, lengthy permitting and environmental or cultural reviews,” the survey stated. “Sentiment is strong for setting statutory limits on review timelines and a notable number support using government condemnation powers to enable affordable housing, infrastructure and transit-oriented communities.”
Local residents generally support rent-to-own programs, transit-oriented developments that place homes and jobs near rail lines, workforce housing funds financed by a nominal tax on commercial and resort properties and suspending slow permitting laws, Hawai‘i Perspectives reported, but industry experts say there are more challenges to alleviating the housing crisis.
The Law of the Land
Land acquisition remains one of Hawai‘i’s biggest challenges, developers say.
“Most of the large pieces of land have cost-prohibitive features that make it very difficult to commit,” says Rick Hobson, Gentry Homes vice president of sales and marketing. “The next problem is how much will it cost to improve the land and how long will it take to get all the approvals necessary to build a home.
“Time is the number-one cost in new home development and the wild card in projecting delivery dates,” Hobson continues. “It typically takes two years from land purchase to completed home. This could increase the price of a home 10 to 20 percent per year just waiting for approvals.”
Many affordable projects require government-owned lands that have their own approval procedures, which local developers say are making project development even more challenging.
Kaua‘i County Mayor Derek Kawakami also concurs, stating that administrations have put down an “extra layer of bureaucratic red tape” that projects have to break through in order to break ground.
Building Bridges
However, Kawakami is making it possible for preexisting buildings on county- and state-owned land on the island to be used to refit into affordable housing, which lessens costs and new infrastructure needs while also reducing approval time. Getting projects off the ground from there lies in partnerships, he says.
“[W]hat we feel is going to be able to sort of bend or change the trajectory of the cost of housing is when government comes to the table with assets such as land and infrastructure, we’re able to meet the developers halfway and tell them, ‘Look, we’re taking the cost of goods sold, we’re decreasing them by providing land, infrastructure and entitlements, which means we’ll go out there, get the entitlements, do all the rezoning — we just need you folks to build these units and try to hit this price point,’” Kawakami says. “And I gotta say, we have some good contractors and development partners that have met us halfway.”
And this method is proving to be effective, with many notable projects underway or completed on Kaua‘i such as Kealaula on Pua Loke, Hā‘upu View and Lima Ola, among others.
County of Hawai‘i Mayor Kimo Alameda agrees on the importance of partnerships, saying “targeted policies and partnerships can accelerate production where there is community and agency alignment,” while also leaning towards using preexisting builds for new affordable housing.
“The County just purchased Dolphin Bay Hotel, which consists of 18 units,” he says. “This is the first time in the County’s history that we purchased a hotel for affordable housing.”
Delays and Demand
Despite numerous efforts to offset the housing crisis, developments are still not matching the rate at which the community needs them and, at least for O‘ahu, Hobson says the island may never reach those rates.
Kyle Watase, Mark Development president, also notes the disproportionate nature of affordable housing costs for residents, saying current income criteria excludes a large part of the population.
“There are no development solutions for the ‘gap group’ (households above 60 percent and below 140 percent of the area median income [AMI]),” says Watase. “A household of four needs to be making over 180 percent of the AMI to be able to buy a median-priced home on O‘ahu.
“If household formation grows by 2 percent, each year the building industry needs to produce 10,000 housing units per year,” he continues. “I believe data shows Honolulu is producing about 2,000 units per year since 2020. A lot of those units are not built for local middle-class families. That’s why we’ve seen so much out-migration.”
Kawakami says it is up to lawmakers to come together and find ways to expedite project approvals to meet demand, but until then, “it is going to be extremely hard for any developer or body of government to get supply to meet demand, which is how restrictive we are.”
An Ongoing Effort
Lawmakers and construction professionals both agree that Hawai‘i is headed for a continuous ramp-up of affordable housing, but policy and funding strategies need to accelerate, too.
“Expanding options for building and renovating — such as allowing greater flexibility in density and use — will be essential,” says Laurel Swan, WhiteSpace Architects principal. “We are already seeing promising changes, including new rules that allow older office buildings to be converted to residential use and expanded allowances for ADUs (accessory dwelling units). These types of adjustments will need to continue if we are to make substantial progress in balancing housing supply with demand and provide more housing for Hawai‘i’s people.”
Watase says that the increased emphasis on affordable housing development might even cause a sort of a “glut,” specifically for senior rentals, as companies vie to maximize rent income while using the Low-Income Housing Tax Credit program to get projects off the ground.
“The Low-Income Housing Tax Credit program run by the HHFDC (Hawaii Housing Finance and Development Corporation) is competitive and rewards proposals using the least amount of subsidy, so developers program senior units at 60-percent AMI rent levels to maximize rent income. Mark Development’s experience as a property manager tells us that there are not enough 60-percent AMI seniors,” he says. “I think you may see some projects fail unless HHFDC recognizes they need to award Tax Credits and Revolving Funds for senior citizen projects at the 50-percent or 40-percent AMI rents.”
Not all projections for the future are bleak, however, as Kawakami feels his administration has sufficiently set up the next administration to continue the work on reducing immediate housing needs.
He shares that Kaua‘i County “went from a budget of zero in our housing agency to develop affordable housing to afford about $20 million” in development funds raised from vacation rental taxes alone.
But the crisis still looms, as “density will continue to increase as [the] cost of everything goes up and time goes on,” says Hobson.
