Two thousand homes a year.
That’s roughly how much Oahu’s housing market is losing ground each year as the growth in population outstrips the production of new homes.
"We are not building enough," said Eugene Tian, the state’s top economist. "Housing development is behind population growth."
Tian calculates that 3,525 new homes need to be added on Oahu annually to match the anticipated 1 percent population growth, assuming 2.8 people per household. Over the last three years, there were 1,612 residential units approved for construction per year on average. That leaves a deficit of 1,913 homes.
"We are behind," Tian said.
Demand is outstripping supply to a point where median prices for single-family homes are projected by economists to reach about $800,000 next year after hitting a record $650,000 last year.
The gap between population growth and authorized new homes over the last three years is at its widest in at least five decades, said Tian, chief economist for the Department of Business, Economic Development and Tourism.
Even the planned addition of 5,000 condominiums in Kakaako won’t cover the deficit because their construction will take years.
This wasn’t the case during the 1960s when Oahu’s population grew by about 12,000 people annually and about 7,000 homes were built each year. During the 1990s the figures were about even. During the 2000s the population grew by about 7,500 annually, and the number of homes added was about 2,000 per year.
The short supply is unique to Oahu, according to Tian, who said the housing supply on the neighbor islands is fine, in part due to a slower economic recovery and overbuilding during the last real estate market boom that covered much of the prior decade.
On Oahu, Tian noted that much of new housing development is concentrated in Kakaako, where about 5,000 condominium units are under construction, approved for construction or in the permitting process. However, new homes in Kakaako aren’t expected to fill a large portion of the supply gap, given that it takes two years to build towers.
Tian’s comments echo what private economic consultant Paul Brewbaker of TZ Economics has been calling attention to in recent presentations.
"People seem to have lost all context for what constitutes ‘a lot’ of home-building," Brewbaker said in January. "Kakaako condos totaling 5,500 units this decade sounds pathetic."
Tian said he’s not worried about the number of homes on Oahu dropping below the number of households. "The market will react," he said, speaking at a forum of the Honolulu Board of Realtors on Friday. "The developers see the opportunities."
There are about 340,000 homes and 308,000 households on Oahu, though about 9 percent of the inventory is vacant due in part to people shifting residences, Tian said.
Two other presenters at the Board of Realtors forum, Karen Nakamura of the Building Industry Association of Hawaii and John White of construction industry organization Pacific Resource Partnership, suggested that land around the city’s planned rail line can be a key to where much of Oahu’s future housing can be built.
"The transit project allows us to be proactive by providing more land for development and redevelopment," Nakamura said, adding that there could be opposition to development in some areas from people who don’t want more housing next to where they live.
Nakamura cited the Live Work Play ‘Aiea project that was recently approved by the City Council as an example of such development. The project would add up to 1,500 homes mainly in three towers on the former Kam Drive-In site across from Pearlridge Center near a planned rail station.
White said there are suitable sites along the 20-mile rail line to add more than 100,000 new homes that Pacific Resource Partnership projects will be needed by 2050 to accommodate population growth.
ENLARGE CHART
