Written by: Dennis O'Donnell

Paul H. Brewbaker of TZ Economics is considered one of the top economists in the State of Hawaii. His analysis concludes that Maui is underbuilt, and demand is high.

His Prediction: home prices in Hawaii will remain consistent.

Hoku’ula Community New Construction in Hali’imaile | Dennis O'Donnell photo

Hawaii is facing a significant shortage of new construction.

Currently, housing construction is not keeping up with demand. Only 1,000 to 2,000 new housing units are being built in Hawaii each year. Those numbers are dwarfed by the 50,000 new units a 2019 state-commissioned study estimated would be needed by 2025.

Source: TZ Economics  Paul H. Brewbaker, Ph.D., CBE

And Maui is certainly feeling the same pinch locally. The island's limited land availability, strict zoning regulations, and high construction costs are all contributing to this shortage, making it increasingly challenging for developers to create new housing.

Source: TZ Economics  Paul H. Brewbaker, Ph.D., CBE

One of the primary reasons for the insufficiency of new construction on Maui is the island's limited land availability. Maui is a relatively small island with a land area of only 727 square miles. A significant portion of this land is protected by state and federal regulations, including national parks, wildlife preserves, and conservation areas. As a result, the amount of land available for development is deficient, and contractors must compete for the available land, driving up prices and making it difficult for many developers to afford.

Another contributing factor to the shortage of new construction on Maui is the island's strict zoning regulations. The Maui County Code regulates land use and development on the island, specifying the types of buildings that can be constructed, the height of buildings, and the required setbacks from property lines. These regulations help to preserve the natural beauty of the island, but they can also make it difficult for developers to find suitable land for development. The County is looking into ways to streamline the permitting process for new development, making it easier and more cost-effective for developers to build new housing properties.

In addition to limited land availability and strict zoning regulations, high construction costs are also a significant factor contributing to the shortage of new building on Maui. The cost of materials, labor, and transportation on the island is significantly higher than on the mainland, driving up the cost of construction.

One potential solution is to encourage the development of affordable housing through the use of tax incentives and other financial incentives.

And the County Council is also becoming more aggressive in approving proposed developments, as in the case of The Kuikahi Village project in Wailuku, which will consist of 202 workforce housing units on 14.5 acre

The goal of the Maui County Comprehensive Affordable Housing Plan is to provide a roadmap to create 5,000 affordable homes for local residents below 120% AMI over the next five years.

But a new affordable housing system must also invest in off-site infrastructure which stands a key impediment to affordable housing development in the county with costs of water, wastewater, and road improvements estimated at $380 million for priority projects in Central, South, and West Maui alone. Without adequate investments in planning, managing, and developing this community serving infrastructure, the county will be unable to unlock the 5,000 affordable homes proposed in this plan.

This all comes down to Econ 101 and the Laws of Supply and Demand. Until a consistent, economic, and reliable stream of new housing inventory comes onto the market, prices will not be dropping significantly, if at all, in the foreseeable future.

To view TZ Economics Paul H. Brewbaker’s presentation "Our Homes: Ending the Housing Crisis", Feb 17, 2023, with Senator Chang CLICK HERE

Mahalo and Aloha!

Dennis O’Donnell
Romvari Realty
808-280-6596