Seek compromise on HCDA proposal

Hawaii’s shortage of housing at all price points, but especially for families earning below the area median income, has become part of the seemingly permanent backdrop to life in the islands.

It should not have to be this way, and government leaders have to make the hard commitment to a plan that can help whittle back this shortage, delivering affordable homes that can remain in the inventory for the long haul.

Gov. David Ige last week signaled his opposition to a provision in proposed new rules meant to govern affordability in future condominiums built within the Hawaii Community Development Authority’s Kakaako district. One aspect, he said, could stifle housing development that the state needs so badly because developers are likely to balk.

This element is a requirement to give HCDA first right of refusal to buy back the home at a higher, but limited, price for a much longer period. Current rules set the buy-back period at five years, but the rules proposed by the agency in September would extend that to 30 years.

It’s understandable that Ige is wary that Hawaii will miss a narrowing window of opportunity to lay the policy groundwork for housing development, missing the current construction boom and the low-interest-rate financial environment. Economic conditions are changing, so the urgency is real.

However, the affordable housing crisis is just as real, so spurring a great deal of development that is not aimed at a price point the workforce population could buy is not much of a solution.

Ultimately it makes little sense to invest taxpayer dollars into the financing of affordable housing that will become unaffordable within a very few short years.

HCDA will meet with Ige to hash over its next step. John Whalen, HCDA’s board chairman, said he hopes some middle ground can be found to advance the rules. The agency spent two years on its development, and should be loath to see the process start back at Square One.

For his part, Ige said in a Jan. 24 letter to the board that he favors measures aimed at stabilizing the rise in prices upon resale of condos, including an equity-sharing program for workforce housing.

And, he said, he would be willing to support a buyback period of 10 years rather than the proposed 30, which he called “too extreme” and liable to inhibit developers in financing new projects.

It’s a bit of a gamble, there’s no question. Developers have been known to table their plans for years if the conditions aren’t right and if they believe the opportunity to lock down terms more to their liking will reappear in the future.

However, Ige also should consider whether he is acknowledging the enhanced value of real estate in the urban core, and whether the comparisons he makes with restrictive rules on the neighbor islands are valid.

A 25-year buyback policy for Maui County affordable units from 2006 to 2014 yielded three home sales, said Cindy McMillan, a spokeswoman for the governor; a 20-year buyback term still in effect on Kauai has resulted in no affordable housing developed.

This is a factor to consider, of course, but the urban Honolulu housing market conditions are different, said Whalen.

Further, HCDA did look afield to bolster its argument that restrictive sales could be viable. Whalen cited a September 2017 working paper by the Lincoln Institute of Land Policy, which asserted that “of 238 programs with rental projects and 239 programs with homeownership projects that reported affordability terms, only a very minor proportion of programs reported affordability periods shorter than 30 years.”

This surely suggests the HCDA proposal is no pipe dream. Some room for compromise is available here, and both sides should seize it. But it’s critical that the affordability protections not be curbed too much.