Dire need to keep, add affordable units

The governor’s balk at a Kakaako affordable-housing rule amendment indicates a lack of understanding by the Governor’s Office of theneed for, and the nuance of, the affordable housing sales market (“Housing rule not approved,” Star-Advertiser, Feb. 2).

The governor’s preference for reducing the buyback time period for affordable sales units — to about 10 years, instead of the 30 years proposed by Kakaako’s Hawaii Community Development Authority — will not increase the production of affordable units, but in the long run, will reduce the supply of affordable units.

For affordable sales units, the issue for developers is not the length of the buyback period, but the number and sales price of affordable units required by the governing agency. Simply, an increase requirement of affordable units reduces on a one-for-one basis the sale of a market-priced unit.

Once an affordable unit is sold and all affordability requirements are removed, in effect, an affordable unit is lost. This policy in the long run will result in an endless chase for affordable units. Why do we keep shooting ourselves in the foot?

A policy of maintaining or increasing the supply of affordable units is required. A recommended policy could read as follows:

“A seller of an affordable unit must resell to the regulating public agency or share its profits from a sale with the regulating agency by pre-established equity- sharing formula. (The sharing formula is well utilized in many current affordable housing developments.) The regulating agency in turn must resell to another qualified affordable home buyer or maintain an affordable housing loan fund with its share of the shared equity proceeds.”

The above policy should be recommended in perpetuity, and would result in a continuous supply of affordable units while allowing homebuyers a chance to move up the housing market. It would be equitable to the homebuyer and maintain the supply of affordable units.

Lack of a perpetual buyback or shared-equity policy will simply result in a massive lottery whose monetary winners are the selected original buyers, and in a perpetual loss of affordable units after the buyback period has expired.

We need to learn from the lack of long-term success of maintaining and creating a supply of affordable units with current policies.

Further, the policy of eligible buyers earning up to 140 percent of area median income (AMI) does not meet the needs of moderate-income households. The need for affordable sales units lies primarily with those households earning between 80-100 percent of median income.

Incomes at 140 percent of AMI calculate to be $84,900 for one per person, $97,000 for two people, and $121,250 for a family of four. Maximum home prices for such buyer are estimated at $500,000 for an individual, $580,000 for a couple and $720,000 for a family of four. Very few households in Hawaii earn incomes at these levels. The true moderate- income families are those earning between 80-100 percent of median income.

If public policy is to produce affordable-sales housing, the distribution of such units should be for households earning between 80-100 percent of AMI. Households earning below 80 percent of median should be assisted through rental subsidy programs.

Developers faced with an affordable-sales housing requirement will likely produce for the highest-eligible income groups, i.e., for those at the upper-end of the cost range. Thus, as evident by historic and current data, the need for “true” affordable housing for people earning between 80-100 percent of AMI is always increasing because these units are not being built in sufficient quantities under current housing policies.

Ronald S. Lim, now retired, served as city housing and community development director, and as the governor’s special assistant for housing.