Honolulu City Council leaders say they now want to seriously consider scrapping plans to sell off the city’s rental housing stock and instead resurrecting a full-fledged housing department that would oversee buildings and programs that assist the homeless and others who need affordable housing.
Council Chairman Ernie Martin and Budget Chairwoman Ann Kobayashi made the remarks at Wednesday’s Council meeting. At the time, they were discussing reasons why Council leadership decided to hold up final votes on measures giving the Caldwell administration the go-ahead to move forward with a new request for proposals for the purchase of long-term leases for up to 12 affordable rental housing properties.
Martin announced late Tuesday that Bill 6 and Resolution 14-121 were being "canceled" from Wednesday’s agenda "in order to ensure public participation." Tenants of downtown complexes had complained they would not be able to make the trip to Windward Community College, where the meeting was held.
But Kobayashi said there were additional reasons why the final votes were held up. "The Council is very concerned about the affordability question, as it comes to rentals, and where we have a lack of affordable rentals, and the only way I feel that we can have an adequate supply of affordable rentals is to have government handle this matter," Kobayashi said.
"There are some reservations as to whether we should proceed on (this) particular sale," Martin said.
If the Council ultimately rejects the sale, it would mark a 180-degree turn from a decision by city leaders in the late 1990s — backed by a Honolulu City Charter amendment approved by Oahu voters in 1998 — to dismantle the city’s housing agency largely as a result of the Ewa Villages scandal. Former city housing official Michael Kahapea was imprisoned after being found guilty of stealing $5.8 million from a relocation fund designed to help residents in the historic plantation neighborhood.
The city administration has pushed for the sale, noting that the city incurs an annual deficit of $8 million to maintain and pay the debt on the properties.
But already frustrated with the inability of the city to close a sales agreement with a housing developer on the housing complexes, Martin and Kobayashi told the Honolulu Star-Advertiser on Wednesday that other recent information suggests to them that it is time to rethink selling the buildings and to instead look at ways the city can retain them and manage them better.
A plan to lease Honolulu Affordable Housing Preservation Initiative units for $142 million, in the works for 18 months, collapsed in January due to financing problems of the prospective buyer.
Martin said it may be time to re-evaluate the entire strategy, especially after learning in recent months that many residents are paying rents far lower than the minimum required by federal housing guidelines.
"It’s quite evident that (the complexes) have been seriously mismanaged," Martin said. City leaders have been unwilling to raise rents for both those eligible for breaks based on federal income guidelines and those paying market rates. As a result, not enough revenue has been generated to keep the buildings properly maintained, he said.
The U.S. Department of Housing and Urban Development requires that those in affordable units pay no more than 30 percent of their income to rent. Some tenants are paying less than 10 percent, Martin said.
Keeping the properties may also allow them to be part of the strategy to tackle homelessness, he said, noting that the city recently budgeted $50 million to provide permanent housing for the homeless and those in low-income categories.
The secret may be in finding ways to more efficiently manage the inventory, he said.
Kobayashi said she’s bothered that selling the leases doesn’t lock in affordable rentals for the life of the building because potential buyers need more incentive to purchase the leases.
The HAHPI proposal, for instance, capped the amount rents could be raised to 10 percent annually over 10 years, and to be kept affordable to those making 60 percent of the median income for the rest of the proposed 65-year lease. "Government is probably the only entity that could really do affordable rentals in perpetuity," Kobayashi said.
The city could also raise more revenue by getting HUD to allow for commercial use at all the properties, she said.
Mayor Kirk Caldwell has previously expressed an unwillingness to retain the complexes or expand the city’s housing management duties. But the administration, asked to respond, issued a statement that neither supports nor rejects holding onto the properties.
The statement said that using HUD rent guidelines, the city could be making $8.3 million more annually from rents.
"The administration is encouraged by the Council’s willingness to revisit the rent structures within the city’s rental properties," the statement said.
Administration officials told Council members in June "that lack of political will has resulted in rents below the HUD standards for each income group and substantially below-market rent for the group without income restrictions," the statement said. "At this point, given the uncertainty of the Council’s action, the administration intends to move forward with appropriate rental increases in order to reduce the city’s subsidies of these properties."
While the administration ultimately decides how much to charge tenants, the Council sets guidance via policy resolutions.
Other Council members who spoke to the Star-Advertiser expressed mixed views about possibly canceling the sale.
Members Ikaika Anderson and Carol Fukunaga said they would consider retaining the properties if it means a guarantee that rents will be kept low in perpetuity. Fukunaga’s district includes the Downtown-Chinatown properties.
Members Stanley Chang, Breene Harimoto and Kymberly Pine said they want to look at all the facts before deciding to cancel the sale. Harimoto said he’s worried the city would incur more debt if its housing program is expanded. Pine said she’s skeptical the city should continue and expand its rental management program.
