State Economic Report Identifies Need for More Housing in Hawaii

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HONOLULU — The Department of Business, Economic Development and Tourism’s (DBEDT) Research and Economic Analysis Division (READ) today released a comprehensive economic report on the Construction Industry in Hawaii. The first report of its scope in nearly 14 years, it examines the past performance of Hawaii’s construction industry and forecasts future growth.

“Under the Abercrombie Administration, DBEDT staff have worked to improve timely reporting of data to inform planning for the future; the last DBEDT construction industry report was issued in May of 2000,” said DBEDT Director Richard Lim. “This report underscores the importance of the construction industry in Hawaii’s economy, especially as a growth segment in an otherwise stable economy.


“The report identifies a clear demand for more housing,” Lim said. “The shortage is pushing up prices and limiting accessibility.  As construction rises to meet this demand, we can expect increased jobs, revenue and economic growth. ”

Other highlights of the report include:

·        The construction sector is expected to be one of the main engines for economic growth in 2014 and 2015.

·        Currently, Hawaii’s population is growth is 1 percent per year, which represents about 14,000 new residents on the islands annually. For an average household size of 2.9 and vacancy rate of 12.4 percent (as reflected in the U.S. Census Bureau data for Hawaii), Hawaii’s current housing need is about 5,500 new units per year. However, during the last 5 years, the average authorized units was only 3,400 per year. This has resulted in a housing shortage.

·        The shortage in housing supply contributes to the high housing price in Hawaii.

·        In 2013, the construction industry added 2,500 jobs, the largest among all industries. It is expected to add another 2,500 jobs in 2014. For construction in 2014, each million dollars spent would support 10 jobs, including half of them directly in the construction industry and others elsewhere in the economy.

·        The report predicts that the construction industry will grow by 12.4 percent in 2014 and 8.3 percent in 2015. With the projected population growth at 0.85 percent per year from 2013 to 2020, annual “residential housing unit” need is about 5,200 additional units annually.

·        For each million dollars of construction (there is a total of $2.08 million of sales generated in the state), households will see a total of $600,000 increase in their income and state government will collect $110,000 taxes from the contractors, the suppliers, and the construction workers on their payroll.

·        Tourism industry has been slowing down since the second half of 2013 and the total scheduled air seats is expected to grow a modest 1.9 percent in 2014. Therefore, the main economic driver for the next few years is the construction industry.

·        The construction industry differs from other industries in that, not only does it add economic value to the current year, but it also contributes to the capital stock to be used in future years. This is significant because capital stock is one of the main factors determining long term economic growth.

·        In 2013, Hawaii’s private building permits increased 3 percent over the previous year.  Growth was strongest for the residential construction category as supply continued to chase demand. The value of residential construction permits increased 22.4 percent in 2013.

·        The commercial and industrial sector also had strong growth in 2013, with an increase of 9.4 percent over the previous year. The one category that was a lag on growth was the additions and alterations category, which declined 8.9 percent in 2013.

·        In looking at the counties, three of the four counties had an increase in 2013 permit values, with Honolulu County up 5.5 percent, Hawaii County up 3.8 percent, and Kauai County up 8 percent. The one county that showed a decrease was Maui County, which decreased 11.4 percent in 2013.

The full report can be found on the READ website at: