Bills call for building condos on state land

State leaders this year proposed meeting one of Hawaii’s biggest and most intractable challenges with a big and unconventional idea.

The challenge is producing a lot more affordable housing. The proposed solution is building and selling leasehold condominiums on state land.

But what is the best way to do this? Should it be done at all?

Hawaii lawmakers introduced at least eight bills at the Legislature this session, including two at the request of Gov. David Ige, offering variations on the leasehold condo idea.

Some proposals have been described as game-changing, ambitious, bold and outside the box based on strategies to remove the biggest cost of housing in Hawaii — land — from homeownership.

The median price for condos resold on Oahu last year was $420,000. This price is deemed affordable for a household earning just about $90,000 a year.

“We can take a no-win situation and turn it into a win-win situation,” Ige said in his State of the State speech last month. “We need to use public resources and public authority to break the cycle of speculation and profit-taking that has turned affordable housing into an unreachable goal for our people.”

Yet the bills also have raised concerns, including among some holders or beneficiaries of state land not wanting to have their assets used for leasehold condos.

So far, two bills have advanced through their first committee hearings — one in the House and one in the Senate.

House Bill 817 is a copy of the two Ige bills and was introduced by Reps. Tom Brower, Mark Hashem and Roy Takumi. This two-page bill simply authorizes the Hawaii Housing Finance and Development Corp., a state agency, to lease state land for 99 years for condos sold to buyers under existing agency rules aimed at increasing affordable-housing production.

HHFDC primarily helps private developers produce affordable housing by providing low-cost financing and sometimes land. Such for-sale projects typically must provide only half of all units at prices affordable to households with moderate incomes.

The other bill, Senate Bill 1, is a more elaborate measure introduced by Sen. Stanley Chang. This 31-page bill also would apply HHFDC affordable-housing rules, such as buyer qualifications and resale restrictions, to leasehold condos on state land under 99-year leases. But SB 1 would have HHFDC act as the developer that contracts for construction and recoups its expenses from unit sales. Theoretically, bonds or other financing would be repaid from condo sales at no long-term cost to the state.

Chang’s bill intends to produce high-density housing where three-bedroom units would cost no more than $300,000 initially and then rise with inflation.

SB 1 also introduces new rules for HHFDC to either buy back the condos in some circumstances or collect most of the profit if the owner elects to sell.

One other distinction is that Chang’s proposal, which he refers to as the Aloha homes program, would apply only to state land within a half-mile of planned rail stations.

The House bill mirrored on Ige’s version received relatively few, but wholly positive, written comments. The feedback included support from HHFDC, the Building Industry Association of Hawaii and the Chamber of Commerce Hawaii. HB 817 was passed by the House Committee on Housing, chaired by Brower.

SB 1 was advanced by a joint housing/government operations/water and land committee chaired by Sens. Chang, Laura Thielen and Kai Kahele.

This bill elicited much more written testimony with a mix of support and criticism.

Ellen Godbey Carson, an attorney and former president of the Institute for Human Services, called SB 1 a game changer. “We need a way to create affordable housing that will be sustainable and budget neutral, with nonprofit approaches to building tens of thousands of affordable units quickly,” she said in written testimony. “SB 1 is designed to do just that.”

Jennifer Shishido, also in written comments supporting the bill, added, “Private development has not risen to the challenge so government must take action.”

Despite the bill not applying to Maui, William Spence, director of Maui County’s Department of Housing and Human Concerns, offered his support. “Solving our housing problems is going to take innovation and going outside the box,” he said in written testimony. “While this bill will not affect Maui County, it definitely steps outside of our normal thought processes and has the potential to bring much needed housing to Oahu’s residents.”

One touted benefit from SB 1 is that the state would recoup its cost to build the homes, and then buyers would be responsible for maintenance. This would avoid a problem the state has had with rental housing that it owns where deferred maintenance has been a chronic issue.

Still, SB 1 also has detractors.

The city Department of Planning and Permitting said it applauds the bill’s intent but that density limits the city established around rail station sites with state agency input shouldn’t be overridden by SB 1, which would allow HHFDC to determine density.

The University of Hawaii expressed concern that land it owns near rail station sites could be appropriated for Aloha homes and take away land UH envisions using for student and faculty housing as well as to generate income that can reduce the need to rely on tuition and taxpayer money for operations.

The Office of Hawaiian Affairs opposes SB 1. OHA said the bill’s intent is good, but it raised concerns over not receiving income from use of ceded lands as required under state law and possibly seeing lands left in private hands after leases expire.

OHA said in written testimony that 99-year leases could foster a sense of entitlement to the land by condo buyers and result in the loss of public lands. The agency also expressed concern about not being paid its share of any proceeds from condo sales or rents from leasing commercial space in residential buildings on ceded lands, which the agency said it is entitled to.