Owners of smaller properties who develop affordable units to receive big breaks under new Honolulu law

Bankers, builders and housing advocates flanked Mayor Kirk Caldwell as he signed the Affordable Rental Housing Bill into law Tuesday.

Bill 7 aims to give owners of lots 20,000 square feet in size or less enough incentives to develop affordable rental units in apartment, business and mixed-use areas.

Among those incentives are greater density, taller allowable heights, less setback, no required parking, waivers from building permit application and wastewater facilities charges, no park dedication fees and a 10-year tax waiver on property taxes.

In exchange, the property owner must agree to rent 80% of the new units to people making 100% of Oahu median income as defined by federal housing guidelines. In 2019 that means renting to a two­-income couple making a maximum of $93,300 annually a two-bedroom unit for $2,100 a month.

At the signing, Caldwell was joined by builders, bankers and Councilwoman Kymberly Pine, who shepherded the bill through the City Council.

The mayor singled out retired developer Marshall Hung, whom he credited with approaching city officials about the need to jump-start affordable rental development to meet a pent-up demand.

Hung presented city officials with a rendering of a five-story walk-up that he thought could be achievable if certain incentives were granted that would get units built for a maximum of $225 a square foot. The hope is that 500 units will be built annually.

“It’s not super-fancy,” Caldwell said, noting that it has no parking, less setback but greater density, “but it’s utilitarian. It gets to the goal.”

He acknowledged the bill could have an adverse effect on streets and neighborhoods. “It’s a pilot for five years. We’ll see what happens and what the impacts are,” he said.

Hung said the presence of executives from four major Hawaii banks, each of which “will be reaching out to their landowner customers,” showed the legislation’s significance. “It’s going to take a community effort to get 10-15 (projects) per annum.”

Peter Ho, Bank of Hawaii CEO and president, said the bill was thoughtfully crafted. “In our view, affordability is easily the biggest issue that our community faces, and housing is the biggest issue within affordability,” Ho said.

Ho, Central Pacific Bank Senior Vice President Todd Jackson, American Savings Bank Senior Vice President Dan Hirabayashi and First Hawaiian Bank Senior Vice President Dan Nishikawa said they are working on loan programs that would cater to those taking advantage of the new program.

A good bet to be among the first to approach the banks is Tim Johnsson and his firm, PhotonWorks Engineering.

Johnsson said his small general contracting company was already intending to submit plans to the Department of Planning and Permitting for a five-story, 50-unit affordable-housing complex on McCully Street in the next six weeks. “This bill allowed us to build more than double the number of units and also make them more affordable, so we’ve even managed to reduce the rent significantly for these units,” he said.

Part of the equation includes being allowed to create retail space on the ground level, Johnsson said. Not being required to build one parking stall per unit as usually required made a big difference as well, he said. Instead, the building will incorporate bike-sharing and car-­sharing areas, he said.

While not required to do so under the new law, the building will have an elevator, Johnsson said. “It’s good to have the option to not have to include the elevator, because it’s quite expensive.”