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Just six months ago, Mayor Kirk Caldwell signed the Affordable Rental Housing Bill into law, launching a promising five-year pilot program that offers property owners a bunch of carrots in exchange for reserving the bulk of their rental units at affordable rates set by federal guidelines.
However, the law’s potential to help ease pent-up demand for affordable housing could be altogether dashed by a proposal that would allow participating property owners to snap up the incentive carrots but charge rents of whatever the marketplace will bear.
Consideration of this part of Bill 60 should be shelved, to give the fledgling law more time to take hold.
Tailored to encourage a recasting of aging low-rise walk-up apartment buildings into stable affordable-housing inventory, the law allows some buildings to grow vertically — up to six stories high — and allots a tighter floor-area ratio to make room for more units.
In addition, participating property owners get: a reduced setback requirement; waivers from building permit application and wastewater facilities charges; no park dedication fees and no required parking; and a 10-year tax waiver on property taxes.
In return, 80% of units must be rented to people making up to 100% of Oahu median income as defined by the U.S. Department of Housing and Urban Development (HUD). 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.
During a City Council Zoning, Planning and Housing Committee meeting last week, Kevin Carney, vice president of affordable housing specialist EAH Housing, rightly pointed out that lifting rent caps set for moderate- and low-income households is counterproductive to the aim of expanding much-needed affordable housing inventory.
“Elimination of the HUD rental maximums allows the property owner to charge rents that have no relationship to the income level that they are mandated to serve,” Carney said. Once a household is deemed eligible for HUD assistance, the rent paid is generally based on 30% of adjusted income.
The upshot of the proposal could be that already cash-strapped households must pitch in a larger percentage. That’s a strong possibility, given that rent in high-cost-of-living Hawaii is higher than most other states — and that slightly more than 42% of Hawaii’s residents are renters.
Businessmen Marshall Hung and Mel Kaneshige, who lobbied for the original rental housing law, countered that due to competition from rentals in more desirable neighborhoods, rents at sites participating in the pilot program would likely not exceed HUD caps.
Even so, they maintained that doing away with the caps would likely prompt more “mom and pop” property owners to take part in the program, which so far has resulted in two applications – one for a 25-unit apartment building in Liliha, the other for a 20-unit apartment space on South King Street.
Dean Hirabayashi, an American Savings Bank vice president, told the Council committee he’s heard from about 60 property owners, many of who expressed interest in the pilot program but were wary of rent caps.
But remember: Property owners can get a variety of land-use exemptions. Further, the city’s waiving of property taxes for a decade also poses a great risk due to lost revenue that could be applied to building more affordable housing. Honolulu Hale has estimated in recent years that upwards of 20,000 affordable housing units are needed to meet demand.
It’s unfair — and unwise — for the city to dole out incentives without insisting upon a guaranteed return. The city’s Affordable Rental Housing pilot has only just begun, with some 4-1/2 years remaining. Rather than diluting it, give it time to grow.
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