City, developers must add affordable homes

How city leaders handle immediate hard choices about Oahu’s housing crisis will significantly shape the island’s future.

Oahu needs some 24,000 affordable housing units to meet pent-up demand, but the marketplace is adding only 2,000 to 3,000 units to the supply annually, with most priced in the luxury bracket. Most of the demand — 75 percent — is for households earning less than 80 percent of area median income (AMI). That translates to $80,450 for a family of four, according to data calculated by the U.S. Department of Housing and Urban Development.

Mayor Kirk Caldwell will soon be asking the City Council, housing developers and others to make moment-of-truth decisions that will affect future generations. Several decades in the making, there is no painless fix for our affordable housing problem — but remedies need to start now. On Thursday, in his fifth State of the City address, Caldwell outlined an attack strategy that will likely be slammed by many developers as too tough, and by housing advocates as too lax.

At the very least, the mayor wants to commit the city to facilitating approval of 800 affordable units every year over the next four years. That adds up to a small dent in demand, but could help Oahu pivot away from a future in which the island morphs into a sort of gated community, affordable only to the wealthy.

Key to the mayor’s latest affordable housing pitch is a mix of revised city regulations and commitments paired with a fresh stack of incentives for the development community.

The administration and the Council must now work in tandem, pushing aside any impulse for political in-fighting as the need for a much larger inventory of reasonably priced homes is urgent, reflected, in part, by our ongoing problems related to homelessness.

Currently, Oahu’s affordable housing requirements come into play only through requests for zoning changes linked to building heights and density. Caldwell wants changes so that at the building-permit stage every green-lighted large housing project — regardless of zoning status — will be on the hook to build a certain number of for-sale homes or rentals reserved for moderate- and low-income households. Developers would build affordable housing on-site, off-site or opt for an in-lieu payment or land dedication.

The in-lieu option should be limited to rare cases, however. If not, many developers motivated by possible quick profit would simply pay a fee based on $45 per square-foot of would-be affordable housing and continue to build only for the high-income bracket. That, in turn, could wedge city government into the business of constructing affordable housing, a pursuit it’s ill-equipped to take on.

Among the incentives tailored to entice private-sector developers to actually build affordable housing: waivers for fees ranging from sewer hookup to park dedication; launch of “concierge assignments” to fast-track applications through the permit process; and various other tax waivers tied to construction and rental properties. The riskiest lure may be a plan to create a financing program with more than $100 million annually in private activity bonds for developers to borrow money at reduced interest rates. Should a developer fail, the city could be left picking up payment.

Also, the Caldwell administration wants to lease various chunks of city-owned land to developers who agree to build affordable housing on them. Some of the sites are already slated for transit-oriented development (TOD) linked to the city’s multibillion-dollar rail project. Rail-side development presents a golden opportunity for the city to insist upon affordable housing near some transit stations along the proposed 20-mile line.

City leaders need to scrutinize each element of the mayor’s proposed strategy and hammer out an action plan balancing calculated risk with safeguards. Risk is unavoidable as most developers cannot be counted on to voluntarily help the city solve this problem. But it will take incentives and shared risks to change the alarming trajectories of housing demand and homelessness. With costs steadily rising and lifting homes out of reach for a large swath of the island’s people, time is of the essence.