New research from the University of Hawai‘i Economic Research Organization, or UHERO, looks at the ripple effect caused by new housing constructed in Hawai‘i.
The study looks at a concept called “housing filtering,” which UHERO says is “a process in which new construction sets off a chain of moves that frees up existing homes across the market. When a household moves into a newly built unit, it leaves behind a previous home, creating and opportunity for another household, and so on.”
UHERO Associate Professor Justin Tyndall traced the market effects of The Central, a 512-unit condo near Ala Moana Center that includes 202 market-rate units and 310 affordable, or income-restricted, units.
Tyndall writes in a working paper that 180 specific addresses became vacant because of moves into The Central. However, accounting for incomplete data, he estimates that the new tower created more than 500 local housing vacancies islandwide within three years of its 2021 completion by setting off chains of moves.
Additionally, he writes that while units in The Central were “expensive on a per-square-foot basis,” homes vacated by those moving into the condominium were about 40% less expensive.
“New housing tends to be very expensive and this creates some animosity from some people about whether or not we should be building new condos at all, for example, because they tend to be quite expensive, a lot of people will never be able to afford them, so to what extent do they improve people’s lives through helping affordability?” Tyndall told reporters earlier this week. “The argument in this paper is that the way that new housing improves affordability is largely through this housing filtering process.
“When we build new housing, it typically contributes new housing because people will move into it from older, cheaper housing, freeing [those units] up for other local residents.”
Tyndall says too, that there’s evidence of downsizing, which means people often leave behind much larger units when they move into The Central — properties with more bedrooms, single-family homes in a variety of neighborhoods, “freeing up an array of housing stock” for other households locally.
“We also find that people tend to move into socio-economically better neighborhoods,” he continued. “The neighborhoods people typically left behind when they moved to The Central tended to have lower median income, lower average home prices, lower education rates, things like this,” and that’s replicated across these other moves.
And while both the market-rate and income-restricted units both added to local housing supply, Tyndall says market-rate units created more local vacancies.
“Income-restricted units also created local vacancies, but it was much more likely that the person moving into those income-restricted units were moving out of their parents’ house or a roommate situation, so that didn’t create necessarily a previous address vacancy because Mom and Dad stayed behind and didn't leave the home,” Tyndall says.
Market-rate units, however, “tended to be the entire family vacating a prior address and moving into The Central,” he continued. “Having said that, the income-restricted units did tend to reach further down into the distribution of prices, so we find very-low-priced units are often involved in the movement chains that involve the income-restricted units that did create vacancies.”
Together, Tyndall concludes in the report that the findings provide “direct evidence that new multifamily construction can influence housing affordability through mechanisms that extend beyond the immediate occupants of new units. While the direct beneficiaries of new housing are those who move into newly constructed homes, the resulting movement chains can create housing opportunities throughout the broader market.
“For policymakers and planners, the results highlight the importance of considering these broader market dynamics when evaluating housing policy,” he continues. “Expanding housing supply in high-demand areas can improve affordability not only through income-restricted units, but also through the filtering process that returns older housing stock to the market. Policies that block market-rate housing construction, because new units are expensive, can be largely counterproductive. The production of all types of housing pushes up the overall supply of homes and can contribute to greater affordability across all segments of the market.”
When asked by Aloha State Daily during a press conference Monday if there was anything particularly surprising in the findings, Tyndall said the magnitude of the price effect was larger than he expected.
“I think one narrative around building new condominiums [is] it’s a lot of rich folks moving between luxury housing, but here we find this is 40% drop in the value of units between these rounds, suggesting that pretty quickly these quote, unquote luxury units are helping relieve housing stresses in other parts of [the] market … .”
Read more about the findings here and here.
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Stephanie Salmons can be reached at stephanie@alohastatedaily.com.
