Hawaii’s turquoise waters, fine grains of sand, verdant mountains, luminous rainbows and stunning waterfalls are key components of the islands’ affordable housing crisis.

Housing markets with the potential to draw a virtually endless supply of well-off outsiders into their communities, it turns out, endure an almost inexorable increase in rent and real estate prices, according to a recently published policy brief from Todd Sinai, a real estate economist at the University of Pennsylvania.

Sinai wrote that a key driver of housing costs in such places “is not how many people actually live in a city, but how many people want to live there.”

To state the obvious: a lot of people are angling to live on these islands.

Add to that residential construction that is far from keeping up with local housing needs, and it is no surprise that fair-market rents and mortgage payments are too high for so many middle-class locals.

Another indicator came with the recent publication of a study by the National Low Income Housing Coalition. It found that people in the islands need to earn more — far more — than other Americans to afford a basic two-bedroom apartment.

Cory Lum/Civil Beat

Renters who work 40 hours per week should earn an hourly wage of $31.61 to afford such a home without putting their financial well being at risk.

That’s $5 per hour more than a similar person needs to earn in California, which is the next most expensive state, and $12 more than the national average.

A knot of complex factors help to explain why — including topography, regulations, migration, immigration and the nation’s highest cost of goods. But at its core, Hawaii’s higher costs are about too many people competing for the housing that exists in the islands. So prices rise — even when local salaries don’t.

A Tale of Two Kinds of Cities

There are two main types of housing markets.

In most places the pool of people who want to live somewhere is made up largely of people who already live there. Kids move out of their parents’ homes and eventually want to get their own place. Some move away for employment, and others arrive because of jobs.

Contrast that with cities and towns with a particularly strong magnetic pull for people who don’t live there — whether for economic, lifestyle or other reasons. Think: San Francisco, Vancouver, much of New York City and Los Angeles and, yes, Honolulu.

Hawaii’s success in drawing so many outsiders acts in almost direct opposition to the desire for more affordable housing.

In cities without any special allure, rents and real estate generally remain connected to the salaries of people who live there, with some obvious elasticity due to things like the cost of borrowing, taxes and neighborhood desirability. So when a shortage of affordable housing starts to drive up rents and property values, if there is no corresponding increase in salaries, the prices will eventually hit a ceiling and, maybe, even come back down.

In the other category, which Sinai refers to as “broadly appealing cities,” local real estate becomes untethered from local salaries.

In the policy brief entitled, The Rental Affordability Crisis, he explains how prices are no longer about how much locals earn because they must compete in the rental- and buyer-market with outside buyers who enjoy outside incomes and savings that are almost invariably greater.

Real estate markets in “superstar cities” can draw from an almost limitless pool of people who are interested in moving there, Sinai writes. Hawaii might be deemed something of a superstar state, given the number of people who would move here if they could.

That self-selected outside group’s salaries and savings also tend to have greater growth potential than local incomes, according to the brief.

PF Bentley/Civil Beat

Barring policy intervention, like rent control, or some other transformational factor like a natural catastrophe, “the gap between the number of households that want to live in the top cities and the available housing is ever-increasing.”

So Hawaii’s success in drawing so many outsiders acts in almost direct opposition to the desire for more affordable housing.

Vulnerable Renters

At a time when investment money flows across much of the globe with remarkable ease, real estate investors — whether on the mainland or abroad — are on the lookout for smart investments.

Some people want to buy in a city or town with a great quality of life, perhaps to move there at some point.

Others aim to own homes in places where they can earn a big income — particularly if they are in one of the relatively few fields that pay top-notch salaries in the islands.

Many people buy homes they believe will increase in value over time.

In such cases, topographical and regulatory limitations on construction that help to cap the supply of residential real estate can be interpreted as a good thing because such factors often contribute to rising real estate values.

Hawaii further entices outside real estate investors with the lowest property taxes in the nation, according to the data analysis site WalletHub.

All of this makes many parts of Hawaii particularly appealing to people who are looking to cash in, both through short-term vacation rentals and, in the longer term, through appreciating real estate values; both factors can effectively remove housing from local real estate and rental markets.

And essentially, the more people who arrive in the islands with mainland or foreign money to invest in property here, the more home values and rents are likely to increase.

“Many long-time home-owning households could not afford to purchase their own houses at their current incomes if they did not already own them.” — Todd Sinai, real estate economist

All of this is key to explaining why local salaries have been unable to keep up with fair-market rents. It also goes to the core of the troubling economic vulnerability many Hawaii renters endure.

Statewide, 46 percent of renters spend more than 35 percent of their income on rent. People who put out more than 30 percent of their income for housing are more prone to accumulate debt, suffer from insufficient or no health insurance, and are more likely to face eviction and even homelessness. Above the 35 percent bar, they are particularly vulnerable to economic shocks, like a health emergency or a job loss. So it is no coincidence that a Financial Industry Regulatory Authority study released in 2014 found that 45 percent of renters in Hawaii are “financially fragile.”

The situation is similar for homeowners. State numbers indicate that nearly two in five owner-occupied homeowners spend at least 35 percent of their income on their mortgage each month.

For renters, the problem is clear. The fair-market rent for a basic two-bedroom home in the islands is $1,644 (including utilities). To comfortably handle such a monthly payout, a renter or a small family needs to earn $5,479 per month, or $65,746 per year, according to the low-income coalition’s Out of Reach 2015 report. (Most individuals in Hawaii earn less than half that much.)

Rents and incomes vary around the islands, so it is worth looking at county breakdowns. In the counties of Maui, Kauai and Hawaii, the necessary hourly wage necessary to comfortably cover a market rent is in the $22 to $24-per-hour range, which is substantially more than most people earn on those islands.

The standout, though, is Oahu where fair-market rents are around $1,800, requiring market-rate renters to earn an eye-popping $34.81 per hour — about $72,000 a year — to comfortably afford their housing, according to the study.

Insecurity Isn’t Just for the Poor

For the working poor, housing is so unaffordable that four full-time workers earning the minimum wage of $7.75 couldn’t collectively afford to share a basic two-bedroom apartment on Oahu without putting themselves into the economic danger zone.

But when housing demand perpetually exceeds housing supply, it doesn’t just place pressure on the lowest-income households, it begins to affect people higher up the economic food chain. “Concerns with housing affordability are no longer the sole province of low-income households,” writes Sinai.

Many long-time renters and home-owning households could not afford to rent or purchase their current homes at market prices. This has vast implications for their children’s prospects for living in the islands as adults, as well as on renters’ chances of staying in Hawaii if their landlords evict them.

Kakaako continues to grow, but some of the new residential units are not affordable to many people on the island. PF Bentley/Civil Beat

Losing Our Appeal?

There are a number of ways for Hawaii to re-balance the affordable-housing equation. One way would involve generating more well-paid jobs suitable for locals in the islands. Unfortunately there are few signs that is happening.

The state, and its capital, may enjoy remarkably low unemployment numbers that hover around 4 percent, but when it comes to creating new jobs that pay a livable wage, Honolulu is a laggard.

A recently released analysis by the website CareerBuilder examined the nation’s 150 largest urban areas to assess which ones have generated new jobs since 2010 that pay a “living wage.” That terms defines what is necessary to pay for basic and household expenses for a family of three, and integrates taxes for people who work full-time. Just 22 percent of newly created jobs in urban Honolulu pay the local living wage of $23.48. The city is 142nd on the list — just nine slots from the bottom.

Such a ranking is a sign that Honolulu — and indeed, the state as a whole — might benefit from diversifying its economy to include more fields that offer good enough salaries for employees to reasonably afford local housing.

On the other side of the equation, Sinai notes that one common policy-driven solution — a one-time surge in the creation of new housing — isn’t effective in broadly appealing cities. It is, he write, “unlikely to be more effective than sticking a finger in one hole of many in a leaky dike.”

While such an effort can lead prices to plateau or even decrease in the short term, the enduring appeal of such places means that, after a lull, “housing costs will revert to their relentless climb.”

The real solution, he says, requires a long-term commitment to generating more low-income housing, even if he notes that it has historically been challenging. This is, he clarifies, “neither an easy, nor cheap, task.”

The alternative, though, is more of the middle class getting priced out. Or waiting for Hawaii to lose its appeal.

Do you have a story about the human impact of the cost of living in the islands, whether about you or someone you know? If so, click on the red button with the pencil and share it through Connections, or drop me a note at epape@civilbeat.com.

You can also continue the broader conversation and discuss practical and political solutions by joining Civil Beat’s Facebook group on the cost of living in Hawaii.