5/24/2017 Mayor unveiling affordable-housing strategy overhaul

May 24, 2017 | 76° |  Check Tra c

Hawaii News

Mayor unveiling a ordable-
housing strategy overhaul
By Gordon Y.K. Pang
Posted May 24, 2017
May 24, 2017

CRAIG T. KOJIMA / MAY 8

“Among developers there’s a lot of pushback about changing the regulations because they’ve gotten comfortable with what
we have today, and I understand that. Change is di cult,” Honolulu Mayor Kirk Caldwell said Tuesday.

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5/24/2017 Mayor unveiling affordable-housing strategy overhaul

After more than two years of analysis, number-crunching and talks with developers
and housing advocates, the details of Mayor Kirk Caldwell’s a ordable-housing
strategy package is expected to go public today.

The package being sent out to the Honolulu City Council calls for:

>> A regulation bill overhauling the city’s current a ordable-housing policy by
requiring developers to make units available to those making less money, and to keep
those units a ordable for a longer period of time, in exchange for building fewer
a ordable units than the current requirement.

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>> An incentives bill o ering a slew of breaks for homebuilders, including waivers from
various city fees, charges and even park requirements, as well as property tax breaks
during construction and, for rental projects, for the duration of the a ordable phase.

The plan is certain to generate both supporters and detractors. Traditionally, housing
advocates applaud the idea of government requiring developers to set aside a chunk
of their units for lower-income families. Developers, however, worry that forcing them
to provide lower-priced homes will mean more higher-priced market homes to
subsidize them.

Caldwell acknowledges that at least some developers don’t want to see a change in
a ordable-housing requirements.

“Among developers there’s a lot of pushback about changing the regulations because
they’ve gotten comfortable with what we have today, and I understand that,” he said in
an interview Tuesday. “Change is di cult.”

On the other hand, he said, housing advocates feel the proposal gives away too many
incentives.

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5/24/2017 Mayor unveiling affordable-housing strategy overhaul

“We’ve tried to strike a balance,” Caldwell said. “We didn’t want to over-regulate an
industry and then have nothing built. We’d just shut down development.”

Some have criticized the administration for foot-dragging in rolling out the bills.
Caldwell rst publicly announced that he was working on an a ordable-housing
initiative in September 2014.

“I think we want to get it right, we want to make sure we get a lot of input,” the mayor
said, noting a large string of meetings with developers and housing advocates for
what’s to be the rst major revamping of the city’s a ordable-housing requirements in
three or four decades.

The regulation bill tweaks the current a ordable-housing policy, which requires large-
scale developers seeking a zone change to set aside 30 percent of its units to those
prospective homebuyers or renters making 140 percent of Honolulu’s area median
income (AMI) or less, for a minimum of 10 years.

The bill allows developers to set aside fewer units as a ordable provided they be
aimed at those making 120 percent or less of AMI, and increases to 30 years the time
units need to be designated as a ordable. In Honolulu the 2017 median income for a
family of four is $86,600.

In transit-oriented development (TOD) zones, developers have four options:

>> Provide 15 percent of the units as rentals for households making up to 80 percent
of AMI. These units can be in the TOD development or o -site.

>> Provide 20 percent of sales units for those making up to 120 percent of AMI, half of
which must be for those making up to 100 percent of AMI.

>> Provide 25 percent of units o -site for those making up to 120 percent of AMI, half
of which must be for those making 100 percent of AMI.

>> Make a cash contribution of $45 per square foot of improved land.

Those outside the transit zones would pay less, again with four options:

>> O er 5 percent of the units as rentals for those making up to 80 percent of AMI.

>> O er 10 percent of the sales units on-site for those making up to 120 percent of
AMI, half of which must be for those making up to 100 percent of AMI.

>> O er 15 percent of sales units on-site for those making up to 120 percent of AMI,
half for those making up to 100 percent AMI.

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5/24/2017 Mayor unveiling affordable-housing strategy overhaul

>> Pay a cash fee of $27 per square foot of improved land.

Harrison Rue, the city’s community building and TOD administrator, said those in TOD
areas pay more because they are in higher-demand and more highly tra cked areas
along the rail line.

To address concerns that projects may not be able to pencil out in less bustling TOD
areas, the bill is proposing a phase-in plan: The new requirement would kick in
immediately for properties in “hot spot” TOD zones at Ala Moana, downtown and
Chinatown, and would take e ect one year after the bill is passed for all non-TOD
areas. TOD properties outside of the hot spots would be required to provide the same
as non-TOD zones one year after the bill is signed, and then the same as hot-spot TOD
zones three years after adoption.

“There are di erent markets on Oahu, so rather than a one-size- ts-all, we determined
that we needed to phase it in in di erent geographical areas, and TOD and non-TOD,”
Rue said.

The incentives bill o ers one-time breaks, speci cally waivers from building permit and
plan review fees, wastewater system facility charges and park dedication
requirements. The administration projects such incentives could cut the per-unit cost
for home developers by between $23,000 and $64,000, depending on unit size,
location and type.

Additionally, the bill provides a property tax exemption on improvements during
construction of all a ordable housing projects, as well as an annual tax exemption for
a ordable rental units for as long as they remain a ordable.

Besides the two bills, Caldwell said his administration will o er a number of city-owned
properties for a ordable-housing development, including land in Kapolei and West
Loch, the Aiea Sugar Mill and a portion of Aala Park. The Department of Planning and
Permitting is now formulating requests for proposals for those sites, he said.

Additionally, Caldwell said, the new Department of Land Management will make
available $100 million in proceeds from private activity bonds — tax-exempt bonds
issued by a government for quali ed projects — for those who construct a ordable
housing.

Initial reaction to the plan was mixed.

Economist Paul Brewbaker, who has been working with local developers concerned
about new a ordable-housing requirements, said anytime the government requires

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5/24/2017 Mayor unveiling affordable-housing strategy overhaul

a ordable units, someone needs to pay for subsidizing those units, be it the
developers, the market-rate buyers or taxpayers. Typically, Brewbaker said, the cost is
passed on to the price of market units, driving prices beyond the reach of middle-
income families.

Gavin Thornton, deputy director of the Hawaii Appleseed Center for Law and Economic
Justice, said the new requirements are necessary if the city wants to take advantage of
the nancial value added to private properties along the publicly funded rail line to
provide badly needed a ordable housing.

Councilman Brandon Elefante said the package is a good rst step, but stressed that
he does not like the idea of allowing developers to pay in-lieu cash fees instead of put
up a ordable housing.

Council Zoning Chairwoman Kymberly Pine said she’s looking forward to the
discussion on the bills. “It is my hope that what we decide in the end actually builds
more a ordable units instead of making policy that just sounds good on paper.”

For a two-page summary of the a ordable-housing plan, go to staradvertiser.com.

Affordable housing summary by Honolulu Star-Advertiser on Scribd

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5/24/2017 Mayor unveiling affordable-housing strategy overhaul
 

Implementing an Affordable Housing Requirement

More than 50 years after the post-statehood construction boom that transformed Hawaii, the island of Oahu
finds itself in a housing crisis and needs to build more than 24,000 housing units to meet current demand.
Over three quarters of the demand is for households earning less than 80% of the area median income (AMI),
or $83,700 for a family of four. The Mayor’s Affordable Housing Strategy addresses these needs with new and
revised policies, incentives, regulations, and investments in partnership with developers, builders, and other
stakeholders. Key priorities include the use of city lands for affordable housing, rental housing funding, the
accessory dwelling unit program, transit-oriented development (TOD) infrastructure investments, and new
TOD zoning around the future rail transit stations.
Two related bills are being introduced to the City Council. Both bills, director’s reports, and extensive
background research and analysis are available on the Mayor’s Office of Housing website at:
www.honolulu.gov/housing/resources-on-affordable-housing
 Affo rdable Housing Requir ement (AHR).   This bill establishes an affordable housing requirement on
most new private residential development and substantial rehabilitation projects to help address the critical
shortage of affordable housing units on Oahu.
  The AHR applies to projects of 10 or more dwelling units, including subdivisions (hotels, timeshares,
and several project types that already include affordable units are exempted).
  Units are required to stay affordable for 30 years to build up and maintain the affordable housing
supply. This period resets when a for-sale unit transfers ownership.
  The levels of affordability focus on homebuyers earning at or below 120% of the AMI and renters
earning at or below 80% of the AMI. The required number of affordable units may be adjusted for
varying unit sizes and lower income ranges, and may be different for rehab projects.
  The AHR will apply first to the Ala Moana, Downtown, and Chinatown TOD areas, and it will then be
phased in islandwide over a three-year period.
  The TOD areas will offer new mixed-use zoning with the potential for additional height and density, so
the AHR is higher in TOD areas than the rest of the island.
Development types and circumstances vary, so the AHR includes several options for compliance. These
include for-sale or for-rental dwelling units, production on-site or off-site, payment of a fee in lieu of
construction (set at an amount to encourage developers to actually build affordable units), and/or
conveyance of improved land.
 Affo rdable Housing Incentiv es.   This bill provides one-time incentives for creating affordable units
and annual property tax waivers for affordable rental units (for as long as the units remain affordable). The
incentives will apply to AHR projects, some TOD permits, and to all units in qualifying affordable rental
projects built in compliance with new state legislation for affordable rental projects where all units are at or

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