Is Affordable Housing Out of Reach?

By Karen Nakamura Posted in: BIA

This is the third in a three-part series.

The barriers that we covered last week impact the square-foot cost of land only. That plot of land upon which your home sits includes all the project costs. These extractions are called “impact fees” and they drive up the lot cost. We are now paying around $65,000 to $100,000 per 5,000-square-foot lot. Is there a better way? Is there the will to change this process? We are becoming a community of haves and have nots.

Today we’ll talk about the barriers that drive the cost of building homes on prepared lots:

Building codes. Building codes are mandates that drive up the cost of construction. This is a vehicle that can make it impossible for selective sectors of our population to be able to afford a home.

Cost of labor. The prevailing wages, plus FICA, SUTA, FUTA, TDI, medical and vacation benefits drive the average cost per man hour to between $50 and $77 per hour.

Cost of goods. Our cost of materials is the highest in the nation. The Rider Levett Bucknall Materials Price Index tracks the cost of lumber, structural block, sand/gravel, cement, concrete ready-mix, iron and steel and gypsum wall board in the nation’s 12 largest cities. Hawaii ranks at the top with New York and San Francisco.

Building codes, labor and materials are the cost drivers of construction. The cost of residential construction ranges from $200 to $500 per square foot, according to Rider Levett Bucknall’s Construction Cost Index.

Building codes are the minimum standards for providing safe and affordable shelter. In 2007, our state created a State Building Codes Council to develop a State Building Code. The intent is to standardize how buildings are constructed throughout the state. The one-code goal makes it easier for architects, engineers and contractors to build on any island. The cost impact to the owner is an unintended consequence and major barrier to home ownership.

Cost of labor is a major barrier. Why is our underground economy in construction so high if we are providing competitive labor costs? Why are there so many construction workers not working? Have we surpassed the threshold of what the market can afford? Do we wait for the economy to turn around or do we move to where there is work? We experienced an exodus of skilled labor in the 1990s and lost an entire generation of contractors and entrepreneurs.

Cost of building materials will always be high because we import everything. This is the status quo and how it has been since we were shipping out pineapple and sugar.

Unless we, the silent majority, care enough to engage in the process, we will continue to be victims of our complacency and see housing affordability out of reach for our middle class.

Karen Nakamura is executive vice president/CEO of the Building Industry Association of Hawaii.