A UH graduate student with no experience in development simply bought land and began the work
POSTED: 1:30 a.m. HST, Mar 6, 2011
Building affordable housing in Hawaii is an immense challenge. So what chance could a graduate student studying history at the University of Hawaii possibly have at developing homes for low- to moderate-income residents?
R.J. Martin is confident his chance at success is excellent.
Martin began taking reservations for 25 single-family homes near Maili Beach Park about two weeks ago. He anticipates holding a lottery to pick buyers in April. He needs enough buyer demand to secure financing for the estimated $6 million to $7 million project named Green Homes at Lualualei.
Home prices range from about $250,000 to $328,000 for base models with three bedrooms, two bathrooms and 1,000 square feet of living space, though bigger models are an option and top out at $455,950 for a 2,304-square-foot home with five bedrooms.
Prices are well below the $570,000 median price for all single-family home resales on Oahu last year but are comparable with previously owned homes in the Makaha-Nanakuli area that sold for a median $287,000 last year.
Veteran Hawaii real estate developers said Martin's project aims to deliver new homes at prices that are challenging even for the biggest, most experienced developers, which makes the effort by the 31-year-old even more extraordinary.
Though Martin isn't an experienced developer, he is working with experienced partners. The homes are from Honsador Lumber's prepackaged line. Seasoned developer Gil Barden of Pacific Island Investments LLC teamed up with Martin to produce the subdivision. DaKine Homes, an affiliate of another Barden company, is the project broker. Wells Fargo is providing mortgage financing for buyers.
Still, Martin has done much of the work himself. "I had the crazy idea," he said.
A one-time beach lifeguard from San Diego, Richard John Martin moved to Hawaii in 2003 and has since been pursuing a doctorate in American history at UH-Manoa. He expects to earn his degree next spring and possibly pursue a teaching career. But he was curious why more affordable work-force housing wasn't being built. That led the history student to become an unlikely developer.
A parcel of vacant land covered with kiawe had been for sale in Nanakuli several years ago, and Martin decided he would buy it. Having built up equity in the Ewa Beach home he bought in 2004, Martin sold his house and used the proceeds along with help from family to buy the nearly 3-acre Nanakuli property for $1 million in early 2008.
Since then, Martin has worked on permitting and design issues largely from a one-bedroom apartment he now rents in Makiki.
In July 2008, Martin and a project consultant completed an environmental assessment. A month later, Martin presented his plan to the Nanakuli-Maili Neighborhood Board, which voted 7-1 to support the project.
Last year the Hawaii Housing Finance and Development Corp., a state agency, qualified Green Homes at Lualualei as an affordable housing project under state rules.
Martin said a few investors have helped him cover project costs to this point, including mortgage payments on the property for the last three years. "I've basically been living on student loans so I can do this full time," he said.
Initially, Martin planned to put a big emphasis on making the subdivision environmentally friendly with elements qualifying the project for LEED certification. But constraints on time and money forced Martin to concentrate more on home quality and affordability, though some environmentally beneficial elements remain.
To help keep prices affordable, lot sizes range from 2,845 square feet to 4,496 square feet and are divided as condominium property instead of the typical subdivision with lots of 5,000 square feet or larger. The condo system means homeowners will share costs for water as well as maintenance of an internal road and a 2,750-square-foot minipark fronting Farrington Highway. The monthly fee is estimated at $224.
Under state rules, buyers are limited to earning no more than 140 percent of Honolulu's median annual income, which equates to a limit of $111,020 for a family of four. The Hawaii Housing Finance and Development Corp. requires that preference to buy homes be given to larger families, starting with families with five members.
Other state affordable housing rules also apply, such as a provision for buyers to share any appreciation with the state if they sell their home, and a provision giving the state the first option to buy the home if sold within 10 years. Buyers also may not rent out their homes.
To finance construction, Martin is seeking a $2 million loan from HHFDC and another $4 million or so from a local bank.
Martin said clearing the lot is scheduled to begin next month. Provided construction financing comes through, home construction should begin in May or June, with all homes completed about six months after that.