Hawaii’s building regulations drive the cost of condominium development up 58%, the highest in the nation, according to a report released Monday by the University of Hawaii Economic Research Organization.

Regulatory costs account for $387,000 of the price of a new two-bedroom condo that sells for about $670,000 in Hawaii — which represents twice the sales price in an “average state,” according to UHERO.

Along with the price of land, materials and labor in Hawaii — also the highest in the nation — UHERO said developers are required to help pay for infrastructure including upgrading roads, sewers or electrical in order to get permits approved.

Developers pay the majority of infrastructure costs in Hawaii, which are then “passed on to buyers,” according to UHERO assistant professor Justin Tyndall, who wrote the report.

But land, materials and labor costs “are not the biggest factor” in driving up condo sales prices in Hawaii; regulations are, Tyndall said.

“We build very few new condominiums because of government regulations,” Tyndall told reporters after releasing the report.

The UHERO study’s details on how building regulations help drive condo costs add to the ongoing discussion at the state Legislature over how to address the backlog of an estimated 50,000 affordable homes across the islands — and likely how Maui will rebuild after the Aug. 8 wildfires destroyed nearly 4,000 structures, most of them homes.

UHERO said in a statement accompanying the report, “This portion of regulatory costs is not entirely wasteful, because it generates needed infrastructure. However, putting the cost burden of infrastructure on developers, rather than funding infrastructure through general property taxes, significantly inflates the cost of housing production and effectively asks new homebuyers to bear the full costs of new infrastructure.”

Tyndall told reporters Monday that Hawaii has the country’s “most stringent rules” to build new housing.

“Regulations can create important community benefits such as environmental preservation and affordable housing units,” according to the UHERO report. “However, it is worth weighing these benefits against the huge burden of high housing costs. In a market with lower regulatory costs, developers would have strong financial incentives to provide much more multifamily housing than they currently do. More housing production would lower housing costs, which could have significant benefits for overall housing affordability in the state.”

Other factors include requirements to build affordable housing, accommodate parking, and delays of over a year getting building permits approved, Tyndall said.

Over the past five years, according to UHERO, the median wait time for a permit was more than 400 days — about 14 months in Hawaii County and 18 months on Kauai.

Tyndall called Hawaii’s permitting delays “extremely costly” and “way out of whack with the rest of the country.”

Long delays in getting permits approved, he said, create “extreme uncertainty,” putting smaller developers at a disadvantage and making construction condo projects less competitive.

Hawaii’s has “strict zoning and building codes compared to other states, and the complexity of regulation means that few firms are large enough and have the needed influence to successfully complete large multifamily projects,” according to UHERO. “This may lead to an uncompetitive market.”

Compared with single-family homes, condo projects maximize available land and often represent “the first rung on the housing ladder for a lot of people,” Tyndall said.

Buyers priced out of the condo market increasingly have to consider moving somewhere else or even face the possibility of becoming homeless in Hawaii, he said.

“Condominiums can provide a point of entry into the housing market for new households,” Tyndall wrote. “Without a flow of condominiums, households compete for what scarce housing is available, pushing up prices in the condominium and single- family markets alike. Meeting Hawai‘i’s housing needs requires a significant amount of new housing supply, which could be realistically provided through multifamily housing development.”

So Tydall called the economics of condo development in Hawaii “an important market to study.”

“Regulations can create important community benefits such as environmental preservation and affordable housing units,” according to the report. “However, it is worth weighing these benefits against the huge burden of high housing costs. In a market with lower regulatory costs, developers would have strong financial incentives to provide much more multifamily housing than they currently do. More housing production would lower housing costs, which could have significant benefits for overall housing affordability in the state.”

UHERO concluded that “Reforming or removing regulatory barriers to new housing production could significantly contribute to new housing production and ultimately reduce the burden that high housing costs place on local households and improve affordability in the state.”