Reduction of troops in isles might ease demand for homes

As the Army considers downsizing on Oahu, a theory making the rounds is that if Schofield Barracks and Wheeler Army Airfield close, the state would inherit lots of family housing and barracks for the public that could offset a housing crunch.

"There would be plenty of housing for years to come," wrote retired educator Kioni Dudley in a recent editorial. "Home prices and rent prices would ease."

Dudley echoed the thoughts of retired Army Col. Al Frenzel, director of the Oahu Council for Army Downsizing.

"Imagine the positive impact on affordable housing if recently built homes and recently renovated military facilities" became available for use by the state of Hawaii, the group said on its website.

The Chamber of Commerce Hawaii spearheaded an effort that garnered in excess of 40,000 signatures in support of keeping the troops.

Standing between whatever Army decision may come and any affordable-housing hopes, however, is a 50-year, more than $7.8 billion Army Hawaii housing deal, according to mega-developer Lend Lease.

Lend Lease also runs Air Force housing in Hawaii and eight other military housing communities across the country.

"That’s simply not the case — the (Schofield and Wheeler) housing would not revert back to the state in any way. That’s not what the project is set up to do," said Pete Sims, project director for Island Palm Communities, the name of Lend Lease’s Army family housing in Hawaii.

Since 2005 Island Palm has built 4,460 new Army homes with just under 1,000 more to go at installations including Schofield, Wheeler, Alia­manu Military Reservation, Fort Shafter, Tripler Army Medical Center and Hele­mano, Sims said.

An additional 2,535 homes are being renovated, according to Island Palm.

"In order to construct all the new homes, tear down all the old homes that were not up to Army standards and then renovate thousands of others, we borrowed $1.6 billion," Sims said. "So we went and sold bonds. There are bondholders out there who have legal rights to these homes. So they simply could not be turned over to the state. There’s no mechanism for that."

What could happen if the Army downsizes significantly on Oahu — and what has happened at other bases on the mainland — is that Island Palm could cast a wider net for renters beyond active-duty families.

In an extreme scenario, Island Palm could expand its clientele to the general public, officials said.

"We have pockets of harder-to-rent neighborhoods within our nearly 8,000-home inventory," Sims said. "We have rented to (defense) civilians and retirees in these areas since the beginning of the project nearly a decade ago."

But those residents so far account for less than 1 percent of all Island Palm residents, he said.

A different military branch is another possibility. The Marines, for example, are looking to increase their numbers by 2,700 on Oahu in coming years.

With the soldier population at Fort Bragg, N.C., declining, its housing contractor recently opened on-base housing to military retirees, civilian Defense Department employees and the families of slain soldiers, the Associated Press reported.

Army headquarters is considering a postwar reduction in its active-duty strength from a current 495,000 to 510,000 soldiers to 440,000 or 450,000 — or an even lower 420,000, if sequestration budget cuts remain in effect in fiscal 2016.

The biggest possible cut set out by the Army for Hawaii would be the loss of 16,000 soldiers and civilian workers from Schofield Barracks and about 3,800 from Fort Shafter.

Island Palm says it runs about 4,000 family homes on Schofield and 600 on Wheeler. U.S. Army Garrison Hawaii housing could accommodate about 40 percent of its soldier families on base in 2013, with others living off base, the service said.

The Army ultimately could decide to cut the nearly 20,000 soldiers, or the Stryker Brigade and its more than 4,800 soldiers, or some other number — or no soldiers at all.

Even with a large exodus and lots of newly empty family homes, Island Palm says it remains viable. Occupancy is at 97 percent, the company said.

"Our ability to pay our mortgage is very, very strong," Sims said. "So I would believe that we would be able to continue to operate and pay our mortgage and continue to support those military families that still remain — and then look to other opportunities to rent other homes to, again, pay our operating expenses and our mortgage."

The Defense Department, realizing it couldn’t build or renovate military housing to decent standards fast enough, in 1996 turned to the private sector to build, operate and maintain housing through the Military Housing Privatization Initiative.

In October 2005 the military entered into 53 privatization projects nationwide involving more than 111,000 family housing units.

The Island Palm partnership with the Army represents the military’s largest family housing privatization project. Island Palm collects housing allowances as rent for 50 years as part of the deal.

Frenzel and the Oahu Council for Army Downsizing advocate not just the elimination of 16,000 soldiers at Schofield, but the complete closure of that base and Wheeler and the turnover to the state of all their facilities, including barracks that could be used for the homeless.

The Army said it runs 5,591 barracks spaces on Schofield and 469 on Wheeler.

The Army downsizing group said it believes that the bulk of Army forces on Oahu are not strategically located, the Marines can do the job and taxpayers can’t afford to pay for redundant forces.

"The military leaving not only opens up new (housing) inventory; it takes away all the off-post soldiers getting the lucrative housing allowances that drive up rents in the Central Oahu area," Frenzel said.

Members of the business community, however, have raised alarm at the prospect of the loss of up to $1.35 billion in annual military-related sales and impacts to Oahu’s economy and jobs with the possible downsizing.

Island Palm’s Sims says he sees Frenzel’s Schofield and Wheeler closure scenario as a "very, very remote possibility."

The notion that the state of Hawaii could turn the military dwellings into affordable housing with a big Army drawdown is "somebody’s dream of what might happen," Sims said.

"We would continue and try and rent our homes for market value if that happened," he said. "Obviously, there would be some negative downward pressure on rents."

Real estate market researcher Ricky Cassiday, who just did an affordable rental housing study for the state, said one of the major housing issues facing Hawaii is that "it’s such a great place to live that there is overwhelming demand" for rentals, including by outsiders. Among those seeking rentals are short- and long-term visitors and U.S. and foreign families wanting to relocate here.

Even if the 4,600 homes at Schofield and Wheeler opened up and were filled with just local families who wanted to live in Central Oahu, an additional 12,000 homes still would be needed to fulfill the pent-up demand from local families needing rental housing, Cassiday said.

Local economist Paul Brewbaker of TZ Economics said he could see Schofield and Wheeler going to the state many years from now with a big Army downsizing, but the mauka area of Schofield with its firing ranges "is probably one big gigantic environmental risk problem."