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Calling Hawaii a “salad bowl” where people of different ethnic and economic backgrounds can co-exist and prosper is a familiar trope. The ethnic diversity part is largely accurate, at least compared with most other states.

And Hawaii replenishes its population constantly, attracting a higher share of new arrivals from both elsewhere in the nation and the world than is the case nationally.

How readily residents, new and old alike, can prosper here is a different and more difficult discussion. Spurred by higher prices at the supermarket and at the pump, concerns about inflation were dominating 2022 even before we began to consider the spillover effects of Russia’s Ukrainian incursion.

In reality, inflation has been undermining the lives of many in Hawaii since the pandemic began. Unfortunately, overcoming the impacts of the pandemic will do little to offset an impossibly problematic housing environment.

Because the local real estate industry dutifully reports sales data for each county, we’ve become accustomed to monthly reminders of Hawaii housing costs. Median price figures have value, often to reinforce how expensive housing is.

For homeowners, escalating prices may provide a source of satisfaction. Yet the data masks a harsher inflationary reality.

In December of 2019, the median listing price of a Honolulu home was $557 per square foot. Two years later, as the Covid-19 omicron variant threatened to further prolong the pandemic, that price had reached $672, according to data assembled by the Federal Reserve Bank of St. Louis.

The 21% increase over two years was the lowest among Hawaii’s four counties; the Maui level increased by 39%, to $998. These levels don’t reflect the willingness of sufficiently resourced buyers to bid over list price.

During the same period, the national figure rose from $148 to $196, an indication that housing market inflation has been a problem across the U.S. There is regional variation, but no state approaches Hawaii — the December 2021 levels for two favorite destinations of Hawaii residents, California and Nevada, were $403 and $243.

Income Inequality

The U.S. Census Bureau measures economic inequality by comparing mean income for the highest quintile of households ($252,492 for Hawaii in 2019) and for the lowest ($18,445), with the ratio (13.7) indicating an income inequality score.

Nationally the level is 16.4, meaning Hawaii faced less income inequality in 2019 than did much of America, though sharp differences become obvious when one looks in more detail.

Hawaii County has the state’s greatest inequality: 17.1. Bigger, more successful cities generally see great income disparity: San Francisco (26.2), Washington, D.C. (30.2), and Manhattan (43.8) are prime examples.

The pandemic has proven to be dislocating in numerous ways, with remote work a prime and important example. The ability to work from a distance has made Hawaii a possibility for many, tech workers formerly employed around the West Coast among them. Recognizing the huge economic impact resulting from declining tourism, the state wasn’t shy about encouraging people to relocate here.

How carefully the impact on Hawaii’s fragile housing market was considered is less clear.

After five years in which the market was relatively stable (annual turnover ranging between $13 billion and $14.6 billion), the value of residential property sales (single-family homes and condominiums combined) surged by 66% statewide in 2021, surpassing $22 billion. Honolulu accounted for 58% of turnover value but saw its market grow by the smallest (but still startling) margin, 56%, well behind Kauai’s 126% and Maui’s 84%.

The median price surge has generated headlines. Less obvious is the shift in market participation. Local buyers accounted for 65.8% of sales value in 2021, down from 73.8% in 2020. Together, they accounted for only 43.5% of turnover value on the Neighbor Islands in 2021.

No vaccine exists for the housing shortage that Hawaii faces.

Unsurprisingly, median prices jumped significantly across the state, with single-family home prices finishing the year higher in both Kauai and Maui Counties than in Honolulu.

Remote workers keep their wages when they relocate to Hawaii, and most of them are significantly higher than what local employers pay. Hawaii’s median family income, as reported by the Census Bureau, fell by 16.3% in 2020, to $80,700, hardly sufficient to buy homes selling for well over three times the national level on a per square foot basis.

Amidst this appreciation come louder calls for “affordable housing.” Rental housing prices, long in short supply, are also surging. What gets termed “market rate” housing has moved well beyond the reach of far too many local buyers.

We can’t co-exist successfully when so many can’t afford to live here. Unless Hawaii can turn down the heat on the housing market, the result threatens to be catastrophic.

Vaccines helped us survive the pandemic. No vaccine exists for the housing shortage that Hawaii faces. Our housing crisis has become endemic and promises to become far more disruptive than the pandemic was. Supply is clearly the problem.