Forty-eight percent of homes purchased in Maui County during the last decade were sold to buyers outside the state, according to data from the Hawai‘i Department of Business, Economic Development, and Tourism. That’s twice the percentage of out-of-state homebuyers for Hawai‘i as a whole, which was 24 percent during the last decade according to DBEDT chief economist Eugene Tian. In the same period of time, the annual median sale price of a single-family home in the county rose from $460,000 to $741,355.
“Overall, I think the prevalence of out-of-state buyers is symptomatic of a larger issue, but not the root cause of the lack of affordability,” said Jason Economou, government affairs director of the Realtors Association of Maui, when asked if the prevalence of out-of-state homebuyers has an impact on the market for resident homebuyers.
“There are a lot of elements that affect housing affordability, but much of it can be attributed to regulatory requirements that increase the cost of producing homes, and the fact that wages have not kept pace with the increased cost of housing,” he added. “To tackle these challenges, Maui needs to develop higher paying job opportunities that would make owning a home more attainable for our residents, while also producing more inventory of homes at various price points to address the longstanding housing deficit that exists on Maui.”
Indeed, while the annual median sale price of a single family home in Maui County has risen from $460,000 in 2010 to $741,355 in 2019 – an increase of 61 percent – the county’s annual median household income has lagged behind, going from $60,617 in 2010 to $72,762 in 2017 (the latest year on record, according to the Maui County Data Book) – an increase of only 20 percent. (Using the same time period, from 2010 to 2017, the annual median sale price of a single-family home rose 51 percent.)
Council Chair Alice Lee agreed that excessive regulations are to blame for the shortage of affordable homes and prevalence of non-resident home ownership. She pointed to policies enacted in 2006 that were eventually changed in 2013, but not before having an impact. “The council at that time required a 50 percent affordable ratio in a housing project… That put us behind seven years at least,” she told me, referring to the housing supply shortage and infrastructure development that would have accompanied the build-out of new homes.
Lee added that when developers were required to provide housing for those earning less than 80 percent of the area median income, more high-priced homes were built to ensure projects “penciled out.” According to Lee, this led to an influx of expensive homes on the market which were out-of-reach for working local families and purchased by out-of-state buyers.
“We need to employ other strategies to solve this pervasive problem,” Lee said, identifying county subsidies for low-income housing and tax exemptions or deductions for those who use their units as long-term affordable rentals as possible solutions.
“In order to progress and maintain our taxpayer-funded attainable housing supply, government subsidized housing will need to be kept separate and insulated from the market-priced investment housing supply,” said Economic Development and Budget Committee Chair Councilmember Keani Rawlins-Fernandez. “Non-resident trends such as speculation buying, vacation rentals, and the lucrative business of ‘flipping homes,’ have inundated our fragile housing market and pushed our residents to the brink, often forcing relocation to the continental US for credible fear of becoming homeless.”
Rawlins-Fernandez was recently the chair of a Temporary Investigative Group (TIG) which included some of her fellow councilmembers and examined real property tax reform. One of the groupʻs recommendations, to create additional real property tax tiers based on owner occupancy and property value, passed at the end of last year and aims to encourage “homeownership that is occupied by homeowners,” she said.
But that’s just the beginning, with “the next step being second dwellings and accessory dwellings filled with long-term occupants,” KRF added.
“By increasing the highest tax tier and the rate for non-owner occupied dwellings, we hope the new tax structure will dissuade speculation buyers from the previous attraction of investing in second, third, and fourth homes here; or at the very least obligate investors to give back to our community via fair tax compensation for the impact that housing-hoarding has for our residents, and our very limited housing supply,” she responded when asked how the real property tax reform bill could address the trends of non-resident homeownership. “If a non-resident would like to use our housing as an investment, they should also invest in our community equitably.”
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