If Hawaii were to spur the development of 33,000 additional new homes between now and 2025 to address the state’s housing shortage, that extra economic activity would increase the number of construction jobs by
13 percent and boost the gross state product by more than 0.5 percent, according to a University of Hawaii economist.
Carl Bonham, executive director of the University of Hawaii Economic Research Organization, said the housing shortage in Hawaii can be seen as an “opportunity” rather than a “crisis,” but cautioned that building so many more homes will require the state and counties to rethink the ways they regulate development.
“If you built as much housing as we need, it would have a positive impact on the economy,” Bonham said. “It would create more jobs, it would raise incomes and it would help to stabilize home values and rents to keep them from rising as fast as they will otherwise.”
He added, “We probably ought to behave like it’s a crisis, and then it becomes an opportunity.”
In a briefing for lawmakers at the state Capitol on Tuesday, Bonham warned that developing new
housing on the scale he is suggesting would also attract an estimated 5,000 additional residents to the state “because anything you do to make housing cheaper will also make it possible for more people to move here.”
In an overall assessment of the Hawaii economy for lawmakers, Bonham predicted 3 percent growth in visitor arrivals this year for another record year, and
1 percent growth in visitor spending. He predicted job growth of about 1 percent but said construction has been weakening to the point that “construction actually became a drag on the economy in 2017,” he said.
The national outlook is also positive at the start of the ninth year of a long-running economic expansion, with consumer confidence running high, he said. The U.S. is now at near-full employment, and the Republicans’ tax cut for businesses and individuals is expected to generate additional economic activity, although economists disagree about how much.
If President Donald Trump and the Republican Congress now follow up with an infrastructure spending package that accelerates the rate of inflation, that could cause the Federal Reserve board to raise interest rates, which would slow economic growth.
Meanwhile, Hawaii residential construction is at a plateau, and “basically we’re not expecting enough construction to really change the situation” of the housing shortage, Bonham said. “We’re building 3,000 or 4,000 units a year, and we need to build way more than that; we need to build double that.”
Building an extra 33,000 units by 2025 to catch up with housing demand would result in an extra 0.5 percent of economic growth per year during the construction period and would increase total employment by about 1 percent, he said.
Large-scale developments could take decades to come to fruition, and “as a society, as state voters and legislators, (we) have to decide, do we want to keep taking 10 or 20 years to put a housing development in play?” Bonham said. “Do we want to continue years and years and years of permitting process to build housing, or do we want to do something about it?”
Senate Ways and Means Chairman Donovan Dela Cruz described Bonham’s presentation as “another plea” to cope with the housing crisis, saying, “We’ve heard it year after year, and we know we gotta do it.”
Dela Cruz said the state has done a poor job of investing in about 2,000 acres it owns along the Honolulu rail line that could begin to cope with the problem.
House Finance Chairwoman Sylvia Luke said the discussion about transit-oriented development along the rail line needs to include the city, but not much seems to be happening at the city level.
“What is happening in Kalihi, what is happening in West Oahu? Nothing really is happening, and the rail is already moving; it is coming into Iwilei and downtown next. What is the status of construction along the TOD line?” she said.
“We’re just very pessimistic about that because there’s no movement,” she added. “Where is the movement? We should have started five years ago on some kind of a plan on what to do, and they’re still talking about identifying land and working with landowners, but what are they doing about it?”
