The surprising housing market impacts of a new Honolulu condo

Housing policy discussions in Hawaiʻi often focus on how we can make newly built homes affordable. Yet new construction represents only a small share of the housing market. Most of the state's housing stock was built in the 1970s or earlier, and only about 3% of homes have been built since 2020. Because new homes are typically more expensive than older ones, they remain out of reach for most households, and most families in Hawaiʻi will never live in a newly-built home. But focusing only on the price of new homes overlooks the main way that new construction improves affordability: through a process known as housing filtering.

Housing filtering occurs when new housing kicks off a chain of local moves and vacancies. When a local family moves into a newly constructed unit, they typically vacate their old home, freeing it up for someone else. When a new family moves into that vacancy, they in turn vacate their prior home, and so on. Through these vacancy chains, new construction can expand housing opportunities across the market, including for older and lower-priced homes.

A recent UHERO working paper examines this process in detail by tracing the market effects of a single condominium tower in Honolulu. The project, The Central, is a 512-unit mixed-income condominium completed in 2021, next to the Ala Moana Center mall. Developed under Hawaiʻi's state-level 201H program, the building includes 202 market-rate units and 310 income-restricted units reserved for low- or middle-income families.

The paper describes who moved into this new building, what homes they left behind, and whether these homes provided a housing opportunity for other local residents. To answer this, we combined several sources of data, including address-history records from a private data provider and public records on property sales and assessments. These data make it possible to identify who moved into the building, where those households previously lived, and whether their moves created vacancies in the local housing stock.

Consider the impacts of a single condo unit in The Central. After construction was completed, we observed a local resident moving into the unit. This person was living in a single-family home in Kuliouou, but after moving, their home became available for another local family. That family left behind a single-family home in Hawaiʻi Kai. We then observed another family moving into this home, freeing up their home in Mililani for yet another family, and so on. In all, we identified five local homes that were freed up in response to a single new condo, and identified six local families that were able to find a new home.

Example of a movement chain

We investigated these chains of moves for every unit in The Central. Our data covers roughly half of local households, preventing us from precisely calculating the total number of new vacancies. However, the analysis directly identifies 180 homes that were vacated because of moves kicked off by The Central. After accounting for incomplete data coverage, we estimate that The Central generated more than 500 local vacancies across Oʻahu within just the first three years after construction.

Local moves induced by the central

The homes freed up through these moves are significantly more affordable than the new units themselves. The homes vacated by households relocating to The Central were approximately 40% less expensive per square foot than the units in The Central itself. These results illustrate an important feature of filtering: newly constructed housing does not need to be inexpensive in order to contribute to broader affordability improvements. The new supply expands housing opportunities throughout the market.

The characteristics of the homes vacated through filtering also differ from the condo units. Many households moving into The Central appear to have downsized relative to their previous residences. As a result, the homes vacated by movers were often larger and older than the units in the new building. For example, while only 10% of units in The Central contain three or more bedrooms, 25% of units freed up through filtering contain three or more bedrooms, including many single-family homes. This pattern suggests that even when new developments primarily contain smaller units, they indirectly increase the availability of larger homes elsewhere in the housing market.

The study also identifies important differences between market-rate and income-restricted units within the building. Market-rate units tend to generate more downstream vacancies per unit, largely because households moving into market-rate units are more likely to vacate an entire previous residence.

By contrast, movers into income-restricted units more frequently originate from multigenerational or shared living arrangements, meaning that a previous dwelling is not always fully vacated. However, the vacancies that do result from moves into income-restricted units tend to occur in lower-priced segments of the housing market. In this way, the two types of units contribute differently to housing availability: market-rate units generate more total vacancies, while income-restricted units channel vacancies more directly toward lower-cost housing.

The large majority of housing vacancies occurred locally. For cases where we can identify a prior US address, 88% were located within the state, while the remaining 12% moved from the continental US. The local housing vacancies associated with The Central extend well beyond the Ala Moana neighborhood and are distributed across much of Oʻahu. The households moving into the building also tended to come from neighborhoods with lower median incomes and lower educational attainment, suggesting that the development improved locals' ability to access neighborhoods with better socioeconomic conditions.

Taken together, these findings provide direct evidence that new multifamily construction can influence housing affordability through mechanisms that extend beyond the immediate occupants of new units. While the direct beneficiaries of new housing are those who move into newly constructed homes, the resulting movement chains can create housing opportunities throughout the broader market.

For policymakers and planners, the results highlight the importance of considering these broader market dynamics when evaluating housing policy. Expanding housing supply in high-demand areas can improve affordability not only through income-restricted units, but also through the filtering process that returns older housing stock to the market. Policies that block market-rate housing construction, because new units are expensive, can be largely counterproductive. The production of all types of housing pushes up the overall supply of homes and can contribute to greater affordability across all segments of the market.

More information:
Limin Fang et al, The Downmarket Impact of New Multifamily Housing: Evidence from a Honolulu Condo Tower (2025)

Provided by University of Hawaii at Manoa