Editorial: Drastic fees skew housing promise in Hawaii

The stated aim of the Hawaii Community Development Authority is to work in tandem with private enterprise and local, state and federal government to forge community development plans and districts that result in economic and social opportunities meeting the “highest needs of Hawaii’s people.”

In the case of Ke Kilohana, a 424-unit tower developed by Howard Hughes Corp. in the Kakaako district, HCDA is clearly falling short of that aim — and the state agency and its board should take swift action to better guarantee their vision of affordability as presented in the Reserved Housing Program.

Affordable housing has long ranked among Hawaii’s most pressing needs, so the HCDA program requires that 20% of homes in Kakaako’s new high-density projects be affordable to “gap group” residents who often can’t afford market-priced homes but don’t qualify for other programs tailored to lower-income households.

The Reserved Housing Program rules specify that monthly ownership cost, including mortgage and maintenance costs, cannot exceed one-third of a buyer’s gross monthly income. But for many Ke Kilohana residents, the promise of long-term affordability quickly evaporated when monthly maintenance fees soared by more than 50% less than a year after the tower opened in 2019, adding roughly $150 to $300 to owners’ monthly payments.

The HCDA board last week rejected a petition from Ke Kilohana’s homeowners association to hold Hughes Corp. accountable for underestimated fees. The association should now pursue a provision in the agency’s rules that allows HCDA’s executive director to address the claim.

The Texas-based developer has pointed to a disclaimer in its sales documents that says maintenance fee estimates “do not constitute any representation or warranty by the developer” in part because insurance, energy and labor costs could substantially increase over a short time.

Even so, Ke Kilohana’s board last year sued Hughes Corp. in state court over the maintenance fees, suggesting that the developer low-balled the fee estimate so it could sell units at higher prices. Hughes Corp., meanwhile, has called that take baseless and said some factors for costs were outside its control. The dispute underscores a glaring need for HCDA to explore setting a ceiling for maintenance fee increases.

Reserved Housing sets the affordability bar at between 80% and 140% of Honolulu’s area median income (AMI). For Ke Kilohana, that topped out at about $97,300 for a couple or $121,650 for a family of four. The program makes a small dent in the state’s longstanding affordable housing problem.

On Oahu, it’s expected that upwards of 20,000 more housing units will be needed by the decade’s end, with two-thirds of the homes needed for households earning less than 100% of AMI. Given the high demand and Kakaako’s prime urban location for local families seeking a live-work-play community, it’s painfully apparent that HCDA has missed opportunity to make a much larger dent.

Hughes Corp. is nearing the halfway point in construction of its masterplanned Ward Village community in Kakaako — about 4,500 residential units in 16 towers along with retail space on 60 acres it owns, with most of its luxury offerings situated east of Ward Avenue.

With one tower in the works, Ulana Ward Village, the developer is on track to satisfy all remaining requirements to designate 20% of housing at Ward Village as reserved housing. Given that all of Ulana’s nearly 700 units will be reserved housing, HCDA and its board must step up its overall price-tag vigilance. Without set regulatory guardrails and enforceable rules, affordability is little more than a flimsy concept.