Brett W. Schenk gets plenty of phone calls and e-mails from newly-arrived families looking for a nice home to rent for, say, $1,200 to $1,400 per month — and they're willing to "settle" for something two blocks from the beach.

And that's when Schenk has to transform from Realtor associate into his other, self-proclaimed persona of "The Prince of the Price of Paradise Reality Check."

"It's not fun," said Schenk, who specializes in finding rental homes and apartments through Woodstock Properties. "I have to pop their balloon.

"They're expecting a nice, three-bedroom home close to the beach that will allow their 60-pound dogs," Schenk said. "If they want Hawai'i Kai or Kailua, I say, 'Right now, you're talking $3,000 to $4,500.' For $1,200, they'd be lucky to find a one-bedroom, 500-square foot, walk-up apartment in Makiki with no air conditioning and maybe an uncovered parking stall."

Last week, the Washington, D.C.-based National Low Income Housing Coalition released a report that found Hawai'i is the most expensive state in the country for renters.

To pay the Islands' "fair market rent" price of $1,159 per month for a two-bedroom apartment, a renter who earns the estimated Hawai'i mean salary of $11.04 an hour would have to work 81 hours per week, according to the coalition's findings.

On O'ahu, the fair market rent on a two-bedroom apartment jumps to $1,205 per month. And while O'ahu's estimated mean salary for a renter rises slightly to $11.42 per hour, a worker would still have to put in 81 hours per week to afford the same apartment.

"It's insane," said Sarah Barnard, 29, who has been getting worried about her search for a place for herself and her two Labrador-mix dogs, Chita and Gordo.

Barnard wants to pay no more than $900 per month and hopes to share the rent on a house. She works as a sales coordinator for a real estate company, Captain Cooke & Associates, but her connections still haven't changed her luck.

Barnard has seen prices ranging from $425 to $1,300 to rent a room in a house, "but once you start talking pets, the price goes up from there," Barnard said. "It is absolutely impossible in Hawai'i to find (rental) housing with a dog, let alone two."

The rental woes of people like Barnard are even more exacerbated now, when soldiers, sailors and Marines are returning to the Islands from overseas postings, further driving up rental prices.

And in January, the majority of the 2,200 Hawai'i National Guard and Reserve soldiers who deployed with the 29th Brigade Combat Team will return home to find that Air Force, Navy and Army homes are temporarily coming out of commission on O'ahu to be rebuilt as part of the largest military housing project of its kind.

At the same time, the rise in sale prices for condominiums and single-family homes over the last two years means landlords who recently bought island property want to get the maximum return on their investments.

A typical new owner who buys a $500,000 condominium could end up with monthly costs of $3,600 to cover the mortgage, taxes, maintenance fees and property management expenses, Schenk said.

"But the most rent I can get for it is $2,500 tops," Schenk said. "It's a lose-lose — for both the renter and the landlord."

As Dusty Woodstock, the owner and principal broker of Woodstock Properties, put it, "Certainly all of our (rents) are way too high. But they're not too high for the investors. They think they're too low because all they're looking at is their rate of return."

Low-income renters who use federal Section 8 vouchers have an even tougher time with rising prices and say that landlords prefer other tenants over them.

"I've heard that some people have been told that," said Sandra Miyoshi, administrator for the homeless programs branch for the state Housing and Community Development Corporation of Hawai'i. "They often have difficulty getting together that first month's rent and deposit. So the landlord is taking a risk in renting to a person who does not have high credit ratings or a history of rental history."

State officials have set up a Housing Placement Service program to provide the first month of rent for Section 8 tenants and will loan them up to another month worth of rent for a deposit. The placement service also helps Section 8 tenants understand the rental process, Miyoshi said, because many of them "don't know the first thing about how to find a place to rent and what's involved in signing a lease."

The Housing Placement Service, administered through five different agencies on all islands, offers instructions to Section 8 tenants and even intervenes in disputes between them and landlords, Miyoshi said.

The amount of subsidies went up in October from $748 to $919 for utilities and rent for a studio; and from $1,657 to $2,275 for utilities and rent for a four-bedroom apartment.

For a studio apartment's total monthly cost of $919, including utilities, the average Section 8 renters contribute $336 — about 30 percent of their income.

But the overall amount still may not be enough in Hawai'i's tight rental market.

"They're competing with whoever else is looking," said Gary Iwai, the city's community assistance administrator. "In a landlord market, the rent's are probably higher and the competition would be stiffer for the prospective tenants. That would make it harder, just based on supply and demand."

In May, city officials found themselves with a 10-year waiting list of nearly 11,000 people and stopped accepting Section 8 applications.

Marine Lance Cpl. Steven Stone and his wife of less than a year, Lance Cpl. Nadine Stone, are in far better shape financially with their military basic housing allowances and military-backed, guaranteed rental payments.

But the Stones still haven't had any luck finding a new home to rent and were stunned at how prices had shot up during their recent seven-month deployment to Okinawa.

They were hoping to pay as little as $1,500 per month for a two-bedroom, one-bath apartment in Kailua or Lanikai when they returned to O'ahu.

They've since increased their budget to $2,200 per month but still haven't had any luck.

Their best possibility was a three-bedroom, two-bath condominium in Kane'ohe, where the rent was $100 more per month than what they want to pay.

"It's crazy," Steven Stone said. "It's just ridiculous."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com.