Hawaii’s high cost of living keeps rising


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When it comes to living in Hawaii, Laura Dunn, an expert on Eastern religions who recently received her doctorate from the Theological Union of Graduates in Berkeley, epitomizes the situation many locals face: It’s just hard to find a good job with reasonable pay here, despite the notoriously high cost of living in the state.

So even though Dunn returned home to Hawaii after four years in the Bay Area, she continues to work remotely in California – as an administrator and assistant professor – while living in Honolulu.

“I have to work in California so I can stay in Hawaii,” Dunn said.

Unfortunately, things in Hawaii are only getting worse for people trying to make ends meet. As Hawaii emerges from the worst of the economic crisis caused by the Covid-19 pandemic, the prices of things like food, shelter and energy are rising, according to the Bureau of Labor Statistics at the US Department of Commerce.

And it is far from clear when the increases will end.

Fuel prices in Kaunakakai, Molokai.
Like the costs of food and shelter, gasoline prices in Oahu have skyrocketed in recent months, and the situation on neighboring islands is at times worse, as fuel prices in Kaunakakai, Molokai show. Cory Lum / Civil Beat / 2021

Specifically, the consumer price index rose 4.6% for July compared to the same month in 2020, according to the latest data available. This compares to an increase of 4.6% in June, 3.8% in May and 2.8% in April.

“There is definitely something out there,” said Carl Bonham, executive director of the University of Hawaii Economic Research Organization, when asked about the escalating cost of living. “The question is, what will happen next year and the year after.”

Gasoline prices are a “hidden tax” on the rise

It’s a question economists aren’t just asking in Hawaii. The US CPI for August increased by 5.3% compared to the same month in 2020. During the summer, the The Wall Street Journal cited economists predicting a long period of price hikes. This is in part because of the same factors that led to higher grocery prices in Hawaii: supply chain bottlenecks, higher prices for things like packaging, and demand. higher as more people choose to eat at home.

But the price increases go beyond food. Consider gasoline prices, for example. The price of gasoline statewide has risen 25% in the past year, to $ 4,071 from $ 3,248 a year ago, according to AAA. That’s still below the highest price Hawaii has faced, said Marie Montgomery, a spokesperson for AAA based in Costa Mesa, Calif. The record was just under $ 4.62 per gallon in April 2012.

Yet rising gasoline prices are swarming the economy, raising costs not only for commuters and people driving children to school, but also for commercial deliveries.

“It’s almost like a hidden tax,” she said.

The increase in Hawaii’s CPI also drives up housing costs. The IPC examines prices for a wide range of goods and services, including not only housing and gasoline, but also recreation, education, food and other living expenses.

In this large basket of goods and services, some things have risen in price much more than housing. Used cars, for example, jumped more than 40% in July 2021, the most recent month available, compared to the same month in 2020.

By comparison, housing costs in Honolulu in August were 3.9% higher than the same month a year ago.

The problem is, people here typically spend more of their monthly income on shelter than on anything else, so the Bureau of Labor Statistics gives more weight to shelter costs when calculating the CPI. said Matthew Insco, an economist in the office of the San Francisco office. .

As a result, Insco said: “A smaller increase in the cost of housing may have a larger impact on the total number.”

By some metrics, some segments of Hawaii’s housing market are growing faster than the 4% reported by the BLS overall. For example, in an economic forecast released today, the UH Economic Research Organization looked at apartment prices on Craigslist, and its conclusion is dramatic.

“The median asking rent in Oahu has climbed to $ 2,100 from $ 1,700 a year ago,” UHERO reports. “This comes at a time when the federal moratorium on evictions is a thing of the past, threatening some tenants with possible eviction.”

Council on Revenues member Carl Bonham asks state economist Eugene Tian about his presentation.
Carl Bonham, executive director of the University of Hawaii Research Organization, says the key question is how long prices will continue to rise. Cory Lum / Civil Beat / 2020

Even though they are not struggling to the point of being deported, many families are still going through difficult times.

According to UHERO, US census surveys indicate that at the beginning of each month, about 10% to 14% of households, or 18,000 to 24,000 in total, are in arrears with rent. At the end of the month, that figure is significantly lower – around 6% to 9%, or 11,000 to 16,000 households – as some tenants end up raising enough to cover the rent.

UHERO notes that such numbers may have wider implications for the housing market, especially if more tenants are in arrears.

“There is a clear incentive for owners of single-family properties and substantial unpaid rents to sell their homes on the resale market,” UHERO reports. “In a state where no new unsubsidized rental housing is being produced, this loss of inventory can exacerbate the housing affordability problem. “

Help is on the way, finally

Hawaii’s high cost of living, including housing costs, may have been exacerbated by the Covid-19 pandemic, but they are nothing new. The Hawaii Community Foundation has worked to address issues such as living wages, the cost of living, and housing.

Christine van Bergeijk, senior vice president and chief strategy officer of the foundation, describes them as “all the things that make Hawaii less possible, especially for the youngest”.

Among other things, the foundation is making a concerted effort to address housing with a pilot project aimed at Maui, where van Bergeijk said the housing crisis is particularly acute. More than 50% of Maui families are “overburdened with housing costs,” meaning they spend more than 30% of their monthly income on housing, she said.

One strategy is to help people get out of the volatile rental market and help them prepare with credit and personal finance advice, she said.

“We want people to be ready to go when an opportunity presents itself,” she said.

Micah Kane, CEO of the foundation, said the Maui House initiative includes more than helping families get ready to buy a home. It also means ensuring that investments in county infrastructure create opportunities for housing development, including market-priced housing, units built to sell below market rates, and affordable rents.

“We advocate a continuum of housing,” he said.

Kane acknowledged that the Maui housing initiative could take five to seven years to be very successful.

In the meantime, the people of Hawaii face a grim reality: People are actually starting to earn a little more, which sounds like a good sign, but the cost of living is starting to rise faster than wages, UHERO reports in its forecast for Hawaii’s economy.

“During the later stages of the pre-COVID-19 expansion, wages measured at current prices had exceeded inflation, the former increasing by about 3% per year, significantly higher than inflation, which was approaching 2% “, reports UHERO. . “The gains have been particularly large for working poor and actually accelerated in the first year of the pandemic. “

But that all changed as inflation skyrocketed, UHERO reports.

“It remains to be seen whether inflation will decline enough over the next year to bring real (inflation-adjusted) wages back to positive growth,” UHERO said.

A big question is whether the Federal Reserve will step in soon by raising interest rates, a move that would slow economic growth and curb inflation by making it harder for individuals and businesses to borrow money. So far, there is no sign that the Fed will act anytime soon, UHERO reports.

“The Federal Reserve is monitoring price movements closely and the Federal Open Market Committee reports that it believes prices are now more consistent with its goal of an average inflation rate of 2% over the long term,” he said. declared UHERO.

For people like Dunn, this is all somewhat academic.

Dunn said she and her partner had no trouble making ends meet, in part thanks to a dual income household. But she said she might need to look elsewhere to find opportunities for professional growth and development.

As for compensation, she says, her remote jobs “just blow up Hawaii.”

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