What Is The Cost Of Living In Hawaii Vs. California? (Taxes, Housing & More)

Cost of living is used to describe how expensive it is to live in one location versus another. As such, it is one of the major factors that people use to determine where they want to live, in addition to other considerations. While island living in Hawaii offers many perks – including a laidback lifestyle, year-round sunshine, gorgeous beaches, and tons of outdoor recreational opportunities – California delivers much of the same.

When compared to national averages, both states are considered expensive, but how do they stack up when you compare them to one another?

The cost of living index in Hawaii is 170, meaning it’s about 70% more expensive to live in Hawaii than the national average (100). California, on the other hand, has a cost of living index of 149.9, so it’s slightly less expensive than Hawaii but still considerably more expensive than the national average. The median price of a home in Hawaii is $732,000, which 151% higher than the national average. Meanwhile, the median home price in California is $684,800 – relatively on par with Hawaii.

Aside from median housing prices, let’s examine how the cost of living compares in Hawaii vs. California.

When you consider the fact the median home price in the state of Hawaii is around $732,000, it is more expensive to purchase a home here than in California. In California, the median home price is nearly $700,000.

In May of 2021, the median home price in California hit an all-time high and the state remains in an affordable housing crisis. In fact, many California residents, especially young families with kids, are leaving major metropolitan areas in search of cheaper homes in more rural areas.

People are still buying houses in California and properties continue to see multiple bids, but bidding wars aren’t quite the frenzy they used to be. This has to do with the inflated asking prices, caused by increased demand, rock-bottom mortgage rates, and a record-low supply of homes.

In Hawaii, interest rates are as low as they’ve ever been, causing many to search for a new home. Though, with such a high demand, there aren’t enough properties to go around. Within the last couple years, Hawaii has become an incredibly popular remote working destination which has created an increasingly competitive housing market. In some cases, homes are selling far above the asking price.

As there is a finite amount of space in both Hawaii and California, homes can be rather pricey – especially if you’re interested in oceanfront property. However, an important thing to note about buying a home in Hawaii or California is the difference between fee simple and leasehold property.

Fee simple is typical of owning a home on the mainland (California included), which involves ownership of the entire property and includes the land. However, in Hawaii, the state and United States government own most of the land. For this reason, most properties are known as leaseholds.

With a leasehold, you own the building but do not actually own the land surrounding your home. It basically gives you the right to lease the land that your home sits on for an indicated period of time. Oftentimes, if a deal seems too good to be true, it’s probably a leasehold.

Another factor that determines cost of living is the food and grocery price indexes. Due to Hawaii’s remote location, most living expenses are rather high. Aside from rent and housing, you can expect to pay more for groceries and food in Hawaii than in California.

California’s grocery cost index is 105.1, only slightly higher than the national average of 100. Hawaii, on the other hand, has a staggering 150.7 for a grocery cost index. This means that you’ll likely spend almost 50% more on groceries in Hawaii than California. Refer to the following table for a more comprehensive comparison of the average prices for a variety of food items:

While most states charge a sales tax for goods and services, California is a whole other ballgame. The minimum sales tax in California is one of the highest in the country, at 7.25%. However, some counties and cities across the state charge even higher rates. In fact, only about a quarter of the cities in California actually stick to the 7.25% sales tax. For example, Los Angeles County has a sales tax of 9.5%, but nearby Culver City’s sales tax is 10.25%.

Whereas, Hawaii has one of the lowest state sales taxes (also known as the General Excise Tax) in the nation – approximately 4%. Though, depending on the municipality, the total tax ray may be as high as 4.5%.

In terms of transportation, California is known for traffic and congestion. While Hawaii is spacious and calm in many parts of the island, metropolitan areas – like Kapolei and Honolulu – do experience traffic issues. In either state, you’ll likely want to have a car. Since everything is so spread out, it can be difficult to rely solely on public transportation.

The transportation cost index in California is only slightly higher than Hawaii. Though, you’ll spend about 4% more on transportation costs living in Hawaii than California. The following table outlines why this is the case:

At the start of 2020, the unemployment rate in Hawaii was 2.3% and the unemployment rate in California was almost double that – at 4.2%. The median household income in Hawaii is about $68,201, compared to California’s median income of less than $62,000. However, the important thing to keep in mind here is the job market.

Some of the biggest employers in Hawaii include Hawaiian Airlines, the State of Hawaii, Hawaiian Electric Industries, the University of Hawaii, and Hawaii Health Systems. Depending on where you live on the islands, it can be difficult to find employment. The same is the case for California, as both states have incredibly competitive markets.

With the nationwide cost of living index at 100, living in either Hawaii or California is comparatively much more expensive. Though, when you compare the two states, Hawaii is considered to be about 13% more expensive than California. It’s important to keep in mind that, given Hawaii’s remote location, you can expect to pay more on pretty much everything – including food, utilities, groceries, and housing.

While the cost of living in both California and Hawaii is high, the beauty and opportunity found in these states is often what keeps people from leaving.