With the federal inflation rate at 8.5% in March, highest rate since 1981, the world is already getting a financially complex place to live in. The United States is at a modest 26th in most expensive countries to live in. The island state of Hawaii however, has been making inroads for gradually becoming unaffordable to both the general populace and tourists. It was ranked number one for the most expensive states in the US ahead of New York and California.
The cost of living takes into account all the basic necessities that are needed for a person to survive in each state, which are food, housing, healthcare, and transportation.
PayScale estimates that the cost of living in Hawaii is 88% higher than the national average. Further, transportation costs 65% more than the average for the rest of the country while utilities and groceries cost 89% and 62% respectively. The housing market seems one of the biggest culprits as for having a place to stay in Hawaii, you may need to pay more than 200% the national average.
The housing crisis in Hawaii is well documented. According to National Low Income Housing Coalition (NLIHC), the shortage of rental homes affordable and available for extremely low income renters amounts to 23492 while the annual household income needed to afford a two-bedroom rental home should be more than $78,000.
While housing is usually the most expensive cost, Hawaii has an unusual problem of being a highly populated archipelago almost 2,400 miles (3,800 km) away from the continental U.S. coast. This means that every product sold in its supermarkets, clothing, hardware stores, and so on, must travel all that distance with all its costs included, especially expansive for temperature sensitive goods such as meat and dairy.
In 2019, Honolulu city council passed the controversial Bill 89 which severely limited the amount of Airbnb’s allowed in the Oahu island, with a restriction of a minimum 30-day stay for rentals outside the designated “resort-areas”. This was one of the measures done in the past few years to curb down on the vacation home boom that was driving up further housing prices and making housing unaffordable to locals.
The number of rentals decreased greatly to accommodate the new lower demand. But with the remote working and digital nomad culture growing, some people are looking for longer, 30 days or more, stays in the island state.
If you are one of these, and you’re looking for season rentals, it’s better to book very much in advance. The high increase in inflation and growing cost of living are already driving up prices for short-term rentals in the whole archipelago. With the average Airbnb prices in 2021 already over 25% of the prices in 2020, when the inflation numbers hadn’t even hit yet.
It may be surprising though, that even though the cost of living in Hawaii is double that of the national average, the state has the fourth-lowest poverty rate in the country, and also the best healthcare. This is due to the very high average household income of $83,102 which makes Hawaii a traditionally expansive tourism destination, as a cost of living adjusted to the local wage means tourists with a lower income get quickly priced out, especially for longer stays.
Tourism in Hawaii amounts to 21% of the state’s GDP as most business infrastructures revolve around it. Though 2019 saw a record 10.4 million visitors, the effects of over tourism usually leaves a bitter taste in mouth for Hawaii residents with over exploitation of natural and cultural heritages, price hikes, rental shortages etc.
With high cost of living driving travel prices higher, bringing mostly high income tourists which drive prices up further, it seems like it’s currently an overall lose-lose situation for locals and tourists. It remains to see what the post pandemic economy and tourism will bring.
Hawaii may be going through the travel off season now but it is certainly bracing itself for another summer of hyper tourism as the pandemic seems to be witnessing its last days and the state which was one of the most cautious regarding COVID, completely dropped its mask mandate.
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