After more than two years of analysis, number-crunching and talks with developers and housing advocates, the details of Mayor Kirk Caldwell’s affordable-housing strategy package is expected to go public today.
The package being sent out to the Honolulu City Council calls for:
>> A regulation bill overhauling the city’s current affordable-housing policy by requiring developers to make units available to those making less money, and to keep those units affordable for a longer period of time, in exchange for building fewer affordable units than the current requirement.
>> An incentives bill offering a slew of breaks for homebuilders, including waivers from various city fees, charges and even park requirements, as well as property tax breaks during construction and, for rental projects, for the duration of the affordable phase.
The plan is certain to generate both supporters and detractors. Traditionally, housing advocates applaud the idea of government requiring developers to set aside a chunk of their units for lower-income families. Developers, however, worry that forcing them to provide lower-priced homes will mean more higher-priced market homes to subsidize them.
Caldwell acknowledges that at least some developers don’t want to see a change in affordable-housing requirements.
“Among developers there’s a lot of pushback about changing the regulations because they’ve gotten comfortable with what we have today, and I understand that,” he said in an interview Tuesday. “Change is difficult.”
On the other hand, he said, housing advocates feel the proposal gives away too many incentives.
“We’ve tried to strike a balance,” Caldwell said. “We didn’t want to over-regulate an industry and then have nothing built. We’d just shut down development.”
Some have criticized the administration for foot-dragging in rolling out the bills. Caldwell first publicly announced that he was working on an affordable-housing initiative in September 2014.
“I think we want to get it right, we want to make sure we get a lot of input,” the mayor said, noting a large string of meetings with developers and housing advocates for what’s to be the first major revamping of the city’s affordable-housing requirements in three or four decades.
The regulation bill tweaks the current affordable-housing policy, which requires large-scale developers seeking a zone change to set aside 30 percent of its units to those prospective homebuyers or renters making 140 percent of Honolulu’s area median income (AMI) or less, for a minimum of 10 years.
The bill allows developers to set aside fewer units as affordable provided they be aimed at those making 120 percent or less of AMI, and increases to 30 years the time units need to be designated as affordable. In Honolulu the 2017 median income for a family of four is $86,600.
In transit-oriented development (TOD) zones, developers have four options:
>> Provide 15 percent of the units as rentals for households making up to 80 percent of AMI. These units can be in the TOD development or off-site.
>> Provide 20 percent of sales units for those making up to 120 percent of AMI, half of which must be for those making up to 100 percent of AMI.
>> Provide 25 percent of units off-site for those making up to 120 percent of AMI, half of which must be for those making 100 percent of AMI.
>> Make a cash contribution of $45 per square foot of finished floor area.
Those outside the transit zones would pay less, again with four options:
>> Offer 5 percent of the units as rentals for those making up to 80 percent of AMI.
>> Offer 10 percent of the sales units on-site for those making up to 120 percent of AMI, half of which must be for those making up to 100 percent of AMI.
>> Offer 15 percent of sales units on-site for those making up to 120 percent of AMI, half for those making up to 100 percent AMI.
>> Pay a cash fee of $27 per square foot of finished floor area.
Harrison Rue, the city’s community building and TOD administrator, said those in TOD areas pay more because they are in higher-demand and more highly trafficked areas along the rail line.
To address concerns that projects may not be able to pencil out in less bustling TOD areas, the bill is proposing a phase-in plan: The new requirement would kick in immediately for properties in “hot spot” TOD zones at Ala Moana, downtown and Chinatown, and would take effect one year after the bill is passed for all non-TOD areas. TOD properties outside of the hot spots would be required to provide the same as non-TOD zones one year after the bill is signed, and then the same as hot-spot TOD zones three years after adoption.
“There are different markets on Oahu, so rather than a one-size-fits-all, we determined that we needed to phase it in in different geographical areas, and TOD and non-TOD,” Rue said.
The incentives bill offers one-time breaks, specifically waivers from building permit and plan review fees, wastewater system facility charges and park dedication requirements. The administration projects such incentives could cut the per-unit cost for home developers by between $23,000 and $64,000, depending on unit size, location and type.
Additionally, the bill provides a property tax exemption on improvements during construction of all affordable housing projects, as well as an annual tax exemption for affordable rental units for as long as they remain affordable.
Besides the two bills, Caldwell said his administration will offer a number of city-owned properties for affordable-housing development, including land in Kapolei and West Loch, the Aiea Sugar Mill and a portion of Aala Park. The Department of Planning and Permitting is now formulating requests for proposals for those sites, he said.
Additionally, Caldwell said, the new Department of Land Management will make available $100 million in proceeds from private activity bonds — tax-exempt bonds issued by a government for qualified projects — for those who construct affordable housing.
Initial reaction to the plan was mixed.
Economist Paul Brewbaker, who has been working with local developers concerned about new affordable-housing requirements, said anytime the government requires affordable units, someone needs to pay for subsidizing those units, be it the developers, the market-rate buyers or taxpayers. Typically, Brewbaker said, the cost is passed on to the price of market units, driving prices beyond the reach of middle-income families.
Gavin Thornton, deputy director of the Hawaii Appleseed Center for Law and Economic Justice, said the new requirements are necessary if the city wants to take advantage of the financial value added to private properties along the publicly funded rail line to provide badly needed affordable housing.
Councilman Brandon Elefante said the package is a good first step, but stressed that he does not like the idea of allowing developers to pay in-lieu cash fees instead of put up affordable housing.
Council Zoning Chairwoman Kymberly Pine said she’s looking forward to the discussion on the bills. “It is my hope that what we decide in the end actually builds more affordable units instead of making policy that just sounds good on paper.”
Affordable housing plan summary by Honolulu Star-Advertiser on Scribd