Mayor Kirk Caldwell’s fifth State of the City address tonight will focus on a revamped plan to give incentives to housing developers in exchange for providing more affordable rentals to those most in need — and keeping them affordable longer.
Caldwell, who outlined the plan to the Honolulu Star-Advertiser editorial board Tuesday, said he believes the updated “inclusionary housing” strategy could add up to 800 affordable rental units annually to housing-starved Oahu in each of the next four years.
The speech takes place at 6:30 p.m. today in the Honolulu Hale courtyard.
Bills to bring about the plan are expected to get their first hearings before the City Council in March.
The mayor said he expects many landowners and developers to be unhappy with the proposal, and will try to lobby Council members to make it more favorable to them.
The plan:
>> Requires property owners and developers to set aside a greater percentage of their affordable units to families in lower income brackets than they now do, and to keep renting at the lower rates for a longer time than required under existing affordable housing guidelines. In exchange, the developers and landowners would be allowed to designate fewer overall affordable units than now required, and be given a number of waivers and other incentives.
>> Offers up at least eight city-owned land parcels at nominal lease prices to developers who promise to develop affordable housing on the land.
>> Creates a rental housing financing program with more than $100 million annually in private activity bonds for developers to borrow money at reduced interest rates.
10-unit threshold
At the heart of the plan is a significant change in the formulas that dictate what developers and property owners are required to provide in affordable housing.
Those seeking building permits or land-use approvals to erect 10 or more housing units would be subject to the new policy, Caldwell said. Currently, affordable housing percentages are negotiated when developers seek rezoning approvals from the Council.
Existing housing guidelines call for a minimum of 30 percent of all units to be aimed at those making 140 percent or less of the federally set area median income, or AMI. Of those, 20 percent must be affordable to those earning 120 percent of AMI or less. And 10 percent of those units need to be affordable to those in the 80-percent-of-AMI-or-less category.
Currently, 140 percent of AMI for a family of four is $140,730, and for a single person $98,620. That amounts to home prices of $600,000 for an individual, or $833,000 for a family of four, Caldwell said. Critics historically have complained that the existing formula puts most of the affordable units out of the reach of most families.
Most opt to build at 140 percent AMI because they can make more money, he said. “The lower you build to, the margin of profit diminishes.”
The plan lessens the percentage of total units that developers need to set aside for affordable housing, but requires that they be targeted for those at the lower end of the affordable housing spectrum. The plan would require only 10 percent of for-sale units to be be priced for those making 120 percent of AMI or less, and that half of those units be aimed at those making 100 percent of AMI or less.
No property tax
The developers would get a slew of other incentives, including waivers from paying sewer hookup, building permit and plan review fees. They would also not need to pay property taxes as long as their units stay affordable.
Those developing rentals, which are in greater demand, would be required to set aside only 5 percent of their units for those making 80 percent of AMI or less. The units would need to stay affordable for at least 30 years instead of the current 10 years.
Housing developers near Honolulu’s new rail line would need to set aside a larger percentage of affordable units in exchange for additional incentives such as greater height and density than normally allowed, and waivers from parking or park requirements. Such exchanges are already taking place between several Kakaako developers and the city under an interim policy.
Administration officials said the planned changes would not apply to several major projects that recently received rezoning.
Caldwell said the city has identified eight parcels that could be used for affordable housing in projects done jointly with the private sector. They include 17 acres in downtown Kapolei, 11 acres in West Loch, 18 acres between Leeward Community College and the city’s rail maintenance center, 10 acres in Kalaheo, 7 acres at the former Aiea Sugar Mill site, and properties surrounding the upcoming rail stations near Pearlridge Center and Ala Moana Center.
Converting privately owned office properties in downtown Honolulu to residential use is another proposal Caldwell is considering. He noted that the city owns the ground under Alii Plaza and owns a percentage of the building now used for office space by the city Prosecutor’s Office, the Honolulu Authority for Rail Transportation and the Honolulu Police Commission.
City Council Chairman Ron Menor and Council Zoning and Housing Chairwoman Kymberly Pine said they applaud Caldwell for devising an affordable housing plan, but stressed that it needs to be carefully vetted by both Council members and the public.
