Kakaako affordable housing rule changes up for debate again

The state board regulating development in Kakaako will take another crack at amending its rules for producing affordable housing after Gov. David Ige objected to one piece of a comprehensive overall plan put forth in September.

Board members of the Hawaii Community Development Authority, which has spent close to four years on the rule revision effort, on Wednesday endorsed moving ahead with two public hearings to consider making a change Ige suggested in January that defines how long the agency retains rights to buy back an affordable home if the owner decides to sell.

The HCDA’s proposed buyback period was 30 years. That was approved by the agency’s board after numerous public hearings and a recommendation by the agency’s staff for a perpetual buyback period. The existing buyback period is five years.

Ige said 30 years was too long, and suggested 10 years. The HCDA board members approved holding public hearings, likely in May and June, to consider a 10-year term.

Board members also are mulling another change that would affect the price the HCDA pays when buying back affordable homes that under agency rules are reserved for households with moderate incomes.

The idea for buybacks is to allow the HCDA to resell a repurchased home to another moderate-income household, and to prevent original buyers, who often are selected by lottery, from cashing in on equity especially during hot housing markets — turning affordable homes into market-­priced homes that reduce the supply of affordable housing.

Existing HCDA rules set the buyback price at either the appraised fair market price minus a set share of equity for the HCDA or a price linked to Honolulu’s median household income, whichever is lower.

As part of the rule overhaul approved by the HCDA’s board in September, the buyback price was going to become the original purchase price adjusted by the percent change for Oahu’s median home sale price during the period of ownership.

HCDA staff now recommends that the buyback price be amended to an appraised price minus the HCDA’s share of equity.

But board member Beau Bassett asked whether it would be better to instead link the buyback price to Hono­lulu’s median household income. The income link is derived from federal Department of Housing and Urban Development calculations on what households of certain incomes can reasonably afford to pay for a home, which varies with incomes and interest rates.

Bassett said a buyback price tied to incomes would ensure that the home could be resold to another household with the same income without further subsidy from HCDA. But if incomes rise less than housing prices, as they often do in Hawaii, a homeowner’s equity for such an affordable home could be depressed and make such homes less desirable.

Linking buyback prices to incomes would, however, create an extra incentive for a buyer to keep an affordable home for at least 10 years, after which there would be no HCDA buyback right, though the agency would still be owed a share of equity in a sale beyond the buyback period.