Realigning Future Real Estate Development Priorities with Resident Needs
Housing Now! Coalition: Empty Homes Tax Whitepaper
Introduction
In May 2025, the HHFDC released its five-year report on the 2024 Hawai‘i Housing Plan Study (“2024 HHPS”). As an update to the previous 2019 HHPS, which estimated that Hawai‘i had a five-year housing need of over 50,000 units (or 10,000 per year), the 2024 HHPS projected a five-year housing need of over 64,000 units, revealing that in the context of our long-standing housing crisis, conditions are worsening for residents across the entire state.(FN1)
Future Real Estate Development: The Need to Focus on Affordability
The 2024 HHPS notes that the vast majority of these needed units must be tailored to serve Hawai‘i’s affordability crisis.(FN2)
However, in contrast to the dire affordability need, a key observation from the 2024 HHPS is that new construction often feeds the luxury vacation/speculative market. In response, the 2024 HHPS calls for a critical realignment of future development priorities to serve our residents.(FN3)
As the free market will naturally prioritize higher-end, market-rate projects, we believe that government action/intervention will be needed to shift future real estate development priorities toward the critical affordability tiers.
In the context of current state and county government proposals, we believe an Empty Homes Tax (EHT) *could* help to shift Honolulu’s limited construction resources toward future housing projects that are affordable for local residents (and away from higher-end, market-rate projects).
Current Real Estate Development Does NOT Focus on Affordability
Historically, UHERO has noted that Hawai‘i has been adding almost 5,000 new housing units per year.(FN4) Only approximately 20% of those units (or 1,000 per year) can be considered affordable.(FN5)
This misalignment of our historical real estate development priorities can be attributed to our high housing production costs which are driven by (1) geographic factors, (2) shortages in public infrastructure, (3) comparatively higher materials costs (which may further increase due to persisting inflation, global tariffs, etc.), (4) higher wage/labor costs (exacerbated by a shortage of construction labor(FN6)), and (5) overburdensome regulations.
The 2024 HHPS acknowledges Hawai‘i’s rising construction costs will significantly impede future production, especially for affordable units, and states the following:(FN7)
This can also mean that luxury and median-income housing projects can come at the expense of affordable housing projects. When labor, construction materials, and other inputs are in limited supply, the development of non-affordable projects often takes precedence—leaving affordable projects delayed until the next market downturn. This creates a troubling paradox: affordable housing is often only built during economic downturns—precisely when the people who need it most are struggling the most themselves, and functionally puts a priority on luxury developments, despite affordable developments being in greatest demand.
Conclusion
Given the limitations in Honolulu’s construction resources, tradeoffs must be evaluated and policy decisions must be made regarding what type of development projects our housing market should prioritize.
Honolulu’s construction pipeline has ample affordable housing projects awaiting commencement.(FN8) But if no action is taken by the government to help realign future real estate development priorities with resident affordability needs, the existing market may continue to channel our limited construction resources to the higher-end, market-rate projects.
In theory, the Empty Homes Tax is one possible government policy that *could* help to shift our future housing production toward direly-needed affordable units.
Organization details
Prepared by: Housing Now! Coalition (https://www.hihousing.org/)
Date: June 2025
Contact: Ross Isokane, isokane@gmail.com
Footnotes:
FN1: 2024 HHPS Executive Summary: “...despite the eager efforts of many, the housing gap is widening, the barriers are deepening, and the impacts are becoming more dire.”
FN2: 2024 HHPS Executive Summary: “Of these needed units, 42,100 or 65% of the total needed through 2027 are at levels affordable for households earning 80% AMI and below.”
FN3: 2024 HHPS Executive Summary: “This mismatch between housing production and actual market needs suggests that addressing Hawai‘i’s housing crisis requires not just increasing overall supply, but fundamentally realigning development priorities with resident needs.
FN4: The UHERO 2025 Hawai‘i Housing Factbook cites on page 27 and 29 that over the past five years, 25,852 new housing units were added in the state of Hawai‘i (with 23,832 of those units being added in Honolulu County).
FN5: Based on the Executive Director’s Message at the front of Annual Reports from HHFDC, affordable housing units completed over a five-year period were only 5,428 state-wide (from FY20 of 772; FY21 of 1,513; FY22 of 1,531; FY23 of 527; FY24 of 1,085).
FN6: The C&C of Honolulu Strategic Housing Plan 2025-2028, in its “Barriers to housing production in Honolulu” section, advises we have too few construction workers to meet future demand. Local news publications have confirmed this (Civil Beat: Hawaii Construction Boom Will Require Workers from the Mainland) with economic scholars suggesting the state will need to import workers (at higher costs) for our existing construction projects in the pipeline.
FN7: 2024 HHPS page 64
FN8: The Hawai‘i Public Housing Authority is moving forward with Ka Lei Momi to dramatically expand the stock of housing by over 10,000 units over a ten-year period. The C&C of Honolulu’s newly formed Department of Housing and Land Management has its own strategic plans to increase the availability of affordable housing on O‘ahu.