So this is odd. The vacancy rate is rising, the relative time a listing sites on the market is rising, the amount of inventory on the market is flat or rising… and yet local prices are rising.
Is AirBnB to blame for this? Well, AirBnB usage could explain a market with high vacancy and high prices, but it seems like smart AirBnB business owners would buy up more houses and list them too. But maybe most AirBnBs in Hawaii are operated by folks who don’t want to manage a large number of properties. Maybe.
This is not remotely odd or inexplicable. This is an obvious result of widening wealth inequality throughout the United States as a whole. Mark Zuckerberg famously has a 700 acre, $100 million compound in Hawaii, which is iconic of a much more widespread trend. But he doesn’t even live there. That’s not his home address. At his primary residence in Palo Alto, he bought up neighboring properties to get a little more privacy.
People with egregious amounts of money can and do buy up high value properties — mansions, luxury condominiums, vast tracts of land, and so on — and proceed to use it a few weeks out of the year. Some people took glee in hearing about Rupert Murdoch’s $10 million Bel-Air estate burning down in the Skirball Fire in 2017, but Murdoch has at least seven other luxury estates. In fact, his mansion in Bel-Air wasn’t even his largest, most expensive house in the Los Angeles area.
Of course, these properties all remain vacant most of the time. No matter how many billions of dollars you have, you can still only be in one house at a time (quantum mechanical nitpicking aside). With wealth inequality widening, it means that more properties can be bought by the increasingly rich, driving up real-estate prices in sought-after communities. Were Hawaii to loosen its land-use regulations, it would mean more properties for the Zuckerbergs and Murdochs, not a better housing market for everyday people, because rich people from all over the world enjoy having luxury properties in Hawaii.
This way of looking at vacancy is an extension of the mentality that leads to mansions in the first place. If you wanted to look at vacancy on a room-by-room basis, you need look no further than Pierre Omidyar’s sprawling 50,000 square foot residential compound in Nevada (side note, the enormous net negative Hawaiian migration with respect to Nevada is all about the jobs and cheap housing that has attracted thousands of Hawaiians there over the years). Omidyar’s compound has 33 bedrooms. What do you think the vacancy rate of those 33 bedrooms is at any given time? My guess is it’s pretty high. Who seriously needs 33 bedrooms in his house? The same type of person that needs 10 mansions, I guess.
In case it needs reiterating, this is also not limited to just the United States, but is also a result of foreign nationals buying up property for investment homes, money dumps, citizenship shortlisting, or just because why not. 432 Park Avenue was completed in 2015, and is the highest residential building in the world. The penthouse unit, with its 8,500 square feet and six bedrooms sold for $95 million to Fawaz Alhokair, a billionaire who resides in Riyadh.
And it’s not like Zuckerberg, Murdoch, Omidyar, Alhokair or any of the other elites who own a wildly disproportionate amount of the worlds property and wealth are subletting rooms or putting their vacation homes up on AirBnB. AirBnB doesn’t help, but it isn’t the culprit here. The question is whether Zuckerberg should even be allowed to buy a 700 acre, $100 million compound in Hawaii. Should this be a thing that happens at all?
When you have billionaires all over the world buying up all luxury property everywhere, unchecked, and when you have a place like Hawaii, whose natural beauty and climate make the entire state a vacation and tourist destination, you inevitably end up with a real-estate situation like you see there now.