Honolulu More Expensive Than Many U.S. Cities, But Not All

September 3, 2002

ACCRA Cost of Living estimates released August 28 confirm that Honolulu is among the nation’s most expensive areas, though considerably cheaper now than the priciest cities such as New York, San Francisco and Chicago.  According to the ACCRA Cost of Living Index, Honolulu was the 9^th most expensive place to live among 307 urban areas surveyed during the second quarter of 2002.

The ACCRA survey is intended to measure regional cost differentials faced by professional and executive households in the top income quintile, as reflected in prices of a fixed “market basket” of goods and services.  It may not reflect the relative costs faced by individuals with different consumption patterns. The effect of state and local taxes on living costs is also excluded.

ACCRA (www.accra.org), a national association of community and economic development research professionals, compiles and publishes the Cost of Living Index on a quarterly basis.  UHERO conducts the Honolulu price survey for ACCRA.

Honolulu’s cost for a professional/managerial standard of living is 39.5 percent above the national average, making it comparable to Long Beach, Boston and Washington DC.  According to the ACCRA figures, Honolulu is now 10 percent cheaper than Chicago and 35 percent cheaper than San Francisco (Table 1).

Table 1.  ACCRA Composite Index for selected US urban areas, 2002, second quarter

(National average = 100)

Among expenditure components, Honolulu has the highest prices of cities surveyed for the standard basket of grocery items, topping the national average by 55 percent. Electricity and gasoline are also relatively pricey.  Housing in Hawaii remains expensive, but it is far from the national high-flyers.  Health care and prices for miscellaneous goods and services (fast food, clothing, recreational activities, and other items) are not far above the national average.

The last time that Honolulu was included in the ACCRA survey, was the first quarter of 1996. In that survey, Honolulu’s professional/executive market basket cost 74 percent more than the national average, higher than the 67.5 percent gap of San Francisco. The usefulness of comparisons between a given metropolitan area and the U.S. average over time are affected by changing city coverage. 

The ACCRA results are consistent with other evidence that Honolulu’s price premium has dwindled in recent years.  The consumer price index from the US Bureau of Labor Statistics, for example, shows that Honolulu’s annual price inflation has averaged about 1 percent over the past six years, significantly lower than the national inflation rate of 2.5 percent over the same period. 

While the ACCRA Cost of Living Index provides one measure of relative costs, it has its limitations. First, the ACCRA index is not representative of the entire population, because its “basket” of surveyed items is designed to reflect buying habits of professional and executive households in the top income quintile.  For example, housing costs are given a relatively heavy weight in the ACCRA index because high-income households tend to spend more on housing than the average family.  Second, because the ACCRA index uses a fixed market basket of nationally available goods and services, it does not reflect regional differences in consumption patterns.  People in Honolulu, for instance, may consume relatively fewer cereals than other breakfast products because of the high relative prices of cereals and milk.  If so, then the ACCRA index may overestimate their actual costs.  Culturally based differences in consumption patterns are also ignored. 

The ACCRA survey is conducted on a quarterly basis.  Figures for the third quarter are expected in late November.