What Is The Cost Of Living In Hawaii Vs. Texas?

Cost of living is used to determine how expensive it is to live in one place compared to another. As such, it is often one of the main factors that people use to decide where they want to settle down. While island life in Hawaii comes with a number of perks – such as breathtaking beaches, year-round sunshine, tons of outdoor recreation, and an overall laidback vibe, it’s known for being rather expensive. Over the last couple of years, Hawaii has experienced a net migration loss, meaning more people are leaving the island than moving there.

According to the IRS, Texas is one of the most popular destinations for those leaving Hawaii. With its lack of personal income tax, lower housing costs, diverse job opportunities, and central location, many view Texas as a more advantageous place to live than Hawaii. But, how do these two states stack up in terms of cost of living?

The cost of living index in Hawaii is 170, meaning it is about 70% more expensive to live in Hawaii than the national average (100). Texas, on the other hand, has a cost of living index of 93.9, so it is slightly less expensive than the national average but considerably more affordable than Hawaii. The median price of a home in Hawaii is $732,000, which is about 151% higher than the national average. Meanwhile, the median home price in Texas is $243,600 – under the national average and about 67% less than Hawaii.

Aside from median housing prices, let’s take a look at how the cost of living compares in Hawaii vs. Texas

When you consider the fact that the median home price in the state of Hawaii is around $732,000, it is substantially more expensive to purchase a home here than in Texas. With Texas’ median home price of 243,600, you’d end up spending over three times that amount on a home in Hawaii.

In Hawaii, the interest rates are lower than they’ve ever been. This has caused more people than ever to search for a new home. Though, with an increase in demand, there are simply not enough properties to go around. Over the last couple years, Hawaii has become a very desirable remote working location and this has resulted in an increasingly competitive housing market. In most cases, homes are selling far above the original asking price.

This seems to be the case for much of the U.S., including Texas. Over the past year, home values in Texas have gone up about 8.5 percent. A major contributing factor to this is the limited inventory, as there are fewer homes for sale in Texas than at any point over the last two decades. It is a classic case of simply and demand imbalance. Homes put up for sale are receiving multiple offers, with many of them being above asking price.

While it may be a great time to sell a home in both Hawaii and Texas, it is very competitive and more expensive than normal for buyers in both states. Regardless, even with the higher prices in Texas, it is still much cheaper to purchase a home in Texas than Hawaii.

Since there is a finite amount of space in Hawaii, homes are often very expensive – especially if you want an oceanfront property. Though, one important thing to understand about purchasing a home in Hawaii vs. Texas is the difference between fee simple and leasehold property.

Fee simple is characteristic of owning a home on the mainland (Texas included), which involves owning the entire property and includes the land the home sits on. However, in Hawaii, the U.S. government and the state own the majority of the land. For this reason, most properties available for purchase are known as leaseholds.

With a leasehold, you own the structure but not the actual land that surrounds your home. It essentially gives you the right to lease the land that your home sits on for a specified period of time. Oftentimes, if a deal on a home in Hawaii seems like it’s too good to be true, it’s most likely a leasehold

Between 2019 and 2020, average rent dropped in 12 states across the country, and Texas was one of them. With an average statewide rental price of $1,045, rates in Texas cities are generally below the national average. Though, like Hawaii, rental prices vary quite a bit based on where you live in Texas. For example, apartments in Flower Mound are the most expensive in the state at $1,685, while the city of Brownsville has the cheapest rents at $730 per month.

The table below provides a more detailed look at the average rent in some of the major cities across Texas:

If you’re considering a move to the Aloha State, it’s important to know how living here will impact your finances. The personal income tax is the most significant tax in Hawaii. Here there is a progressive state income tax, with twelve income tax brackets in total. Earners on the Hawaiian Islands pay between as little as 1.40% and as much as 11%, depending on their income level.

Texas, on the other hand, is one of the few states in the nation that does not any sort of income tax. This means that whether you’re a doctor, real estate agent, teacher, or dog-walker, you won’t have to pay any income tax on your earnings in Texas. Of course, you’ll still have to file a federal income tax return and be required to pay federal income taxes – but nothing at the state level.

Technically speaking, Hawaii does not have a sales tax. However, the state has what is known as a general excise tax (GET) that businesses must be pay on all business activities. These businesses are permitted to, and typically do, pass this tax onto their patrons. As such, Hawaiians pay an additional 4% for goods and services statewide. To support the county transportation system, Honolulu County imposes an additional 0.50% excise tax. The County of Hawaii and the County of Kauai also impose an additional 0.50%.

Texas has a relatively modest statewide sales tax rate, at just 6.25%. When city and county taxes are factored in, the highest sales tax rate you could pay in Texas is 8.25%. Though, rates in most major cities, such as San Antonio, Dallas, and Houston, hit this limit.

While income taxes are rather high in Hawaii, the state has the lowest effective property tax rate in the country at just 0.28%. This refers to the annual taxes paid as a percentage of assessed home value. However, because of the high home values in Hawaii, the average annual property tax payments are $1,871.

Dissimilarly, the property taxes in Texas are among the highest in the nation. The average effective property tax rate is 1.69%, meaning Texans pay an average of $3,390 in property taxes ever year. Property taxes in Texas have long been an issue between the state and local government. While some representatives want to cap rates, cities and counties contest this measure. This has to do with the fact that, in most locations, property taxes are the main source of local income.