Affordability

Average rental rates in Honolulu are over $2,000 per month, according to RentCafe, and on O‘ahu, median sales prices for single-family homes are well over $1 million with condominium prices hovering around $500,000, according to data from the Honolulu Board of REALTORS®.

How can a real estate market like this possibly be affordable? For most Hawai‘i residents, with median household income hovering around $92,000 if living Honolulu (around $40,000 per capita), according to the U.S. Census from 2017-2021, the idea of affordability is elusive.

What is considered ‘affordable housing’ for Hawai‘i residents?

One way that affordability is measured is through The NATIONAL ASSOCIATION OF REALTORS® (NAR) affordability index, which measures whether or not a “typical family” could qualify for a mortgage loan on a “typical home” at nationwide and metropolitan (such as Honolulu) levels. Here are the important components of the housing affordability index measurements:

• A “typical home” is calculated through single-family median prices, as computed by NAR.
• A “typical family” is calculated through median family income, as reported by the U.S. Bureau of the Census.
• Qualifying for a mortgage loan assumes a down payment of 20% of the home price and assumes the monthly mortgage payment cannot exceed 25% of the median family income. Federal Housing Finance Board data is used for the mortgage interest rates.
• A value of 100 means that a family with the median income has exactly enough income to qualify for a median-priced home (if they also have the 20% down payment). A value of 120 means that a family earning median income has 120% of the income necessary to qualify for a conventional loan in that metropolitan area, meaning their income would cover 80% of a median-priced single-family home.

How does Urban Honolulu rank on the NAR Affordability Index? In 2020, Honolulu received a score of 76.3, and the projected score for 2021 was 66.9; this means that if a “typical family” was making the median family income, they would only be able to have enough to pay for 66.9% of a typical median home mortgage on a single-family home.

Another place to look for affordable housing measurements is the University of Hawai‘i Economic Research Organization (UHERO), which uses a similar methodology as NAR but calculates data from all four Hawai‘i counties. According to UHERO calculations, all of Hawai'i had a single-family home affordability level of 82.3 at the end of 2021 – a 15.1% decrease in affordability as compared to the previous year.

It is important to note that single-family housing is comparatively expensive in Urban Honolulu and throughout Hawai‘i due to a limited land mass. UHERO offers data on condominium affordability as well. In 2021, the level was 147 – a 7.3% decrease from the year before. Is this a positive indicator that affordable housing is more feasible in Hawai‘i when considering a condominium?

Do I qualify to purchase affordable housing in Hawai‘i?

In Hawai‘i, a number of properties are designated as ‘affordable housing;’ these properties (full Hawai‘i affordable housing inventory here) are generally condominiums and have restricted income limits for families who would like to purchase or rent.

Would you like to purchase a home – perhaps in the one of the new condominiums in Kakaako or Ala Moana neighborhoods? The State of Hawaii’s Affordable Housing program is run by the Hawaii Housing Finance and Development Corporation (HHFDC), and the City and County of Honolulu’s affordable housing program is coordinated through the Department of Planning & Permitting (DPP); both of these programs use the U.S. Department of Housing and Urban Development (HUD) guidelines to determine income limits that qualify to purchase or rent a property. Statewide (and especially in the neighborhood of Kaka‘ako) the Hawaii Community Development Authority (HCDA) also qualifies residents for affordable housing through its Reserved Housing program, which has income limits similar to HUD.

Looking at Honolulu County, the following are the HUD limits for affordable housing for 80% and 120% income for various family sizes in 2022:

Some condominiums will offer a certain amount of housing units for families at 80% area median income (AMI) while others will use other ranges. However, if a family is earning less than 120% area median income, affordable housing units have historically become available – and some have even become available for families in the 140% range.

If a family meets the income limits, they typically also need to meet other requirements, which are defined according to the entity managing the housing project. Some additional general requirements include being over 18 years of age, a Hawai‘i resident and U.S. citizen, and not owning a residence or purchasing reserved or workforce housing before.

Since median household income in Honolulu hovers around $90,000, many Hawai‘i residents might qualify for affordable housing based on the income limits. However, qualifying for affordable housing is only the first step.

How can affordability in housing be obtainable for more families?

After qualifying to purchase or rent affordable housing, the next step is to purchase or rent a property – a difficult endeavor. Like many parts of the United States, affordable housing is in short supply in Hawai‘i.

According to a 2016 report by the state Department of Business, Economic Development and Tourism, Hawai‘i needs 64,700 affordable housing units to meet the demand by 2025. O‘ahu alone would need about 21,000 additional housing units between 2020 and 2030, according to the department’s 2019 report.

And despite many new buildings gracing the Honolulu horizon and adding to the Hawai‘i affordable housing inventory, it does not seem new construction will meet the demand for affordable housing. For example, since construction in Kaka‘ako began by HCDA, 4,249 affordable housing units have been completed, are under construction or are pending.

“…thousands of people are competing for hundreds of slots,” Hawaii Zoning Atlas Project Director Trey Gordner said. “It doesn’t matter how we divvy up the tiny pie. There’s just not enough housing to go around.”