Hawaii’s long-standing affordable housing shortage is notorious. Discussions at the state and county levels about how to actually produce more housing have spanned many years and produced a variety of policies intended to increase production.

Despite the best of intentions, we continue to fall further and further behind.

The rules relating to reserved housing proposed by the Hawaii Community Development Authority (HCDA) would not have helped the situation, and I applaud Gov. David Ige for sending them back to the board.

There are several reasons I believe this well-intentioned effort would have failed to produce more affordable housing. First, the proposed revision called for the buyback price of reserved and workforce housing units to be calculated using the Index for Median Annual Percentage Price Change for Condominiums as published by the Honolulu Board of Realtors (HBR). The proposed HBR index is derived from annual condominiums sales throughout the island, including neighborhoods such as Hawaii Kai, Kailua and Kapolei to Waianae. The inclusion of such disparate neighborhoods would skew the index and is not a true barometer of condominium prices in the Kakaako area.

The use of such an index to calculate buyback prices of the workforce units would have impaired the marketability of such units as qualifying homebuyers would be reluctant to purchase a workforce unit subject to an artificial appreciation index. This would have served as a deterrent to prospective purchasers, and is contrary to HCDA’s intent for households who purchase a first-time-buyer unit to move up the “housing ladder.”

Second, the proposed rule changes called for a regulatory period for rental units to be increased from the existing rule of 15 years to 30 years. Although this sounds attractive to many, it fails to take into account the financing mechanisms for rental housing projects, specifically those projects that are privately funded as compared to those using federal and state financing programs. Rental projects employing federal and state funding such as low-income housing tax credits are already required to enter into regulatory agreements lasting a minimum of 30 years as a condition of receiving such subsidies. This is not true for privately funded rental housing projects.

The fact that production of privately funded rental housing is minimal or non-existent can be attributed in part to the underlying economics of developing such units. Increasing the regulatory period to 30 years would impede rather than encourage and incentivize the production of such rental housing. I would like to suggest the public and private sectors, including HCDA and Hawaii Housing Finance and Development Corp., collaborate to create incentives in order to encourage the development of rental housing as opposed to requiring additional regulatory rules.

Finally, the proposed rule changes would have been inequitable. They would have excluded landowners of parcels 20,000 square feet or less and the large landowners such as Kamehameha Schools and Howard Hughes’ Victoria Ward project, causing an undue burden to fall on those in between.

We all want more affordable housing. To be successful, developers must get financing, and the product must meet market demands. Ignoring financing and market realities is not the way to move forward.

Stanford S. Carr is president of Stanford Carr Development, LLC.