Proposed housing trade-off could trim unit requirements

Mayor Kirk Caldwell recently pledged to increase affordable housing on Oahu, but one major new piece of his plan actually would compel some developers to build fewer affordable homes than required now.

Caldwell proposed a trade-off that would impose an affordable requirement on more residential projects and keep these homes affordable for longer, though the number of homes per project would be less and prices wouldn’t have to be as low as they are now.

Specific numbers in the mayor’s plan can be dizzying, and thus concluding whether it would produce a net benefit to Honolulu’s affordable housing supply is hard to judge. Some local housing developers would not comment on the plan.

Even Caldwell tripped up explaining key details of his plan during his State of the City address last month.

The mayor’s plan would have new residential projects with at least 10 homes anywhere on Oahu (except for sites near rail stations) make 5 percent or 10 percent of all units affordable to residents who earn close to Honolulu’s median income. The 5 percent requirement would apply if the homes are rentals, and the 10 percent would apply if the homes are sold.

In his speech, Caldwell mistakenly stated higher requirements — 15 percent for rentals or 20 percent for sale — that were in a September draft of his plan.

Numbers lowered

Currently, developers must make 30 percent of residential projects affordable to moderate-income residents, but only on projects that need a zoning change.

Caldwell noted during his speech that a “kicker” in his plan would require lower prices or rents for the affordable units. “A much lower affordability level,” he said.

But that’s not correct.

Affordability tied to the current requirement is broken down in thirds by prices and resident income, so that 10 percent of units must be affordable for households earning no more than 80 percent of the median income, 10 percent for those earning up to 120 percent of the median income and 10 percent for people earning as much as 140 percent of the median income.

Under Caldwell’s plan, if the homes are for sale then 5 percent must be for residents earning up to the median income and 5 percent must be for buyers earning up to 120 percent of the median income. If units are rentals, then only 5 percent would have to be affordable to residents earning no more than 80 percent of the median income.

Harrison Rue, an official in Caldwell’s administration overseeing community building and development around rail stations, said one major reason for the proposed change is that developers had trouble selling homes at the 80 percent median income level because of mortgage lending standards. He also said fewer rentals at this level are being proposed because they are financially harder for developers to produce.

For areas around the city’s 21 planned rail stations where developers are allowed to exceed standard density and height limits, Caldwell proposes a higher requirement — 15 percent for rentals, with rents affordable to households earning no more than 80 percent of the median income, or 20 percent if for sale, with half of these being affordable to households earning no more than the median income and half for households earning up to 120 percent of the median income.

Negotiable standard

Estimating a difference between the number of affordable homes that would be produced under the mayor’s plan, if adopted, and the current requirement isn’t straightforward. That’s because the current requirement is a general standard subject to negotiation with the City Council as part of the zoning approval process.

For example, the largest housing project underway on Oahu, Ho‘opili with 11,750 homes, agreed to provide more homes at lower prices than the standard. At least 20 percent will be affordable to households earning no more than 120 percent of the median income, and another 10 percent will be for those earning no more than 80 percent of the median income.

At another project, a 499-unit rental complex called Kapolei Lofts completed last year, 20 percent of units must be for households earning no more than 80 percent of the median income and 60 percent must be affordable to households earning up to 140 percent of the median income.

Caldwell’s proposal would apply to any project that needs a building permit and includes at least 10 homes, regardless of whether a zoning change is needed. So more projects will be affected.

Caldwell’s plan also will affect how long affordable housing lasts. This provision keeps affordability restrictions tied to prices and occupants in place for 30 years. In the case of for-sale homes, the requirement would allow a little price appreciation but require that an owner sell to another income-qualified buyer.

Currently, the restriction is 10 years and allows the city to buy back a home. Caldwell said this leads to a relatively quick loss of affordable homes.

‘Working together’

Harry Saunders, president of homebuilder Castle & Cooke Hawaii, said he likes the 30-year term for rentals. But he said imposing the restriction on fee-simple homes could discourage buyers who would be limited from earning equity and could face constraints if they got married, divorced or got a higher-paying job.

“They should have an opportunity to get ahead,” he said.

Saunders said it wasn’t possible for him to conclude whether the mayor’s proposed rules are more or less attractive to Castle & Cooke. “The devil’s in the details,” he said. But he added that the proposal prompts more conversation on what is unquestionably a problem.

“I’m glad that the mayor took this opportunity to put a focus on housing,” he said. “There is a dire shortfall of housing in total, and that leads to housing that’s not affordable. The only way we’re going to solve this is if the private sector and government work together. The shortfall is too big.”