HCDA should raise bar on rentals

Howard Hughes Corp., in pursuing a permit amendment for its 988 Halekauwila project to allow construction of rental units in lieu of condos, created an opening for state authorities to seek a final product that would better meet the community’s housing requirements. Specifically, the state hopes rentals can remain affordable for much longer, 30 years instead of the 15-year term the current rules require.

Raising the bar is what the Hawaii Community Development Authority, the state agency overseeing Kakaako redevelopment, should be doing. And now, although the developer is calling foul on the extended term of affordability, the state agency needs to stick with that instinct to elevate the standard.

Hughes Corp. has a permit for a planned development comprising a mix of residential, commercial and recreation space. There are 424 housing units included in that permit, and under HCDA rules that means the developer needs to produce 125 "reserve" units for purchase by residents earning no more than 140 percent of Honolulu’s area median income (AMI).

The developer first approached the agency last summer to request a clarification on whether rentals could fulfill the requirement for reserve housing. The rents would be set to be affordable to those earning no more than 100 percent of AMI.

Ironically, it was Hughes Corp. that in August first asked whether fewer units could be built if affordability was extended to 30 years. Later, however, when the company submitted a formal request for a permit amendment, executives pressed instead for a plan to deliver more rental units than required — 375 — but for the 15-year term.

Hughes Corp. can be lauded for increasing the number of units — much needed, as they are — but the term length invites scrutiny.

David Striph, the developer’s Hawaii senior vice president, said its proposal would save renters about $1,000 a month over market rents, money that could be set aside for a future purchase. That savings amounts to a subsidy of some $3.3 million a year, or $54 million over 15 years, he said, adding that requiring a double subsidy isn’t fair.

Hughes Corp. is free to return to its original, permitted building plan of 125 condominium units, of course. But the developer has cited studies showing that the market of residents who earn enough to rent a unit is far larger than the number of prospective buyers who could meet condo purchasing qualifications.

That’s why it opened the door to an amendment in the first place. And now that it has, HCDA should base its decision on a realistic assessment of Oahu’s current and future housing needs.

The affordable housing deficit — the shortage of housing units of all kinds, actually — has worsened, if anything, over the years since HCDA set the rules for rental affordability at 15 years. Housing advocates have pointed out correctly that 15 years was probably insufficient to start with. It’s too short a duration to make a real dent in the housing demand before the unit rents are allowed to shoot up to market levels.

Others have emphasized that many families will never manage a down payment to buy while children are growing up.

On the whole, Hawaii’s authorities, at county and state levels, have awarded lucrative development permits over the years without securing enough community benefit, in the form of greater capacity to house the population.

There’s unmet demand all along the income scale, but the need is really at the lower end, for rental units. The proposed Halekauwila rentals would accommodate qualifying families — and would expand and keep stable longer the overall inventory for the community good.

HCDA decisionmakers should send the right message now, and strengthen the affordable-housing policy going forward. Hawaii development can enrich the tax base and yield great profits for the private sector, but government’s duty is also to look out for the needs of the people who live here.