A developer selling new homes in urban Honolulu wants every buyer to know they are paying to help the state expand public school capacity in an area of high residential growth.
Howard Hughes Corp., which is developing the Ward Village high-rise condominium community in Kakaako, is charging buyers of units in one recently completed tower and four planned towers $3,864 on top of the condo purchase price to recoup what it previously paid to the state as a school impact fee.
The developer first added this fee to closing costs paid by condo buyers at Ko‘ula, a 565-unit tower where initial residents who completed their purchases were welcomed Sept. 14.
Adding such fees to closing costs, which largely comprise title and mortgage fees to complete a home purchase, is unusual among Hawaii housing developers. It has also generated complaints from some Ko‘ula buyers, even though the fee is disclosed in sales contracts and in a lengthy disclosure document provided to prospective buyers.
“Some buyers are surprised,” said Jaymes Song, an agent with Better Homes and Gardens Real Estate Advantage Realty. “It’s new.”
Most, if not all, other residential developers in Hawaii subject to school impact exactions have accounted for the fee like other development expenses that get factored into home prices.
Texas-based Hughes Corp., which has a master plan to produce around 4,500 homes in 16 towers at Ward Village, would not say why it has taken the unusual track but said in a statement that it supports the state fee and believes education is a “shared expense” that will directly benefit residents and the community.
“We look forward to welcoming more families in the Ward Village neighborhood and more children into the school system, creating a vibrant and thriving community,” the company said.
Kakaako is part of a school impact fee district established in 2018 that stretches from Kalihi to Ala Moana near planned city rail stations to accommodate an estimated 10,000 students expected to enroll in urban Honolulu schools as development swells along much of the rail route with an expected 39,000 new homes.
Production of 39,000 new homes would generate about $150 million for the state Department of Education and a new School Facilities Authority in charge of school development.
The district is one of five with such fees across the state. The first was established in 2010 covering western parts of Hawaii island, followed by Central Maui and West Maui the same year and Leeward Oahu areas of Aiea, Pearl City, Waipahu, Ewa and Kapolei in 2013.
Fee amounts vary by district. For instance, the Leeward Oahu fee is $5,504 for every single-family home and $4,334 for every townhome.
Prior to 2010, land for new schools was typically provided by developers of master-planned communities in suburban growth areas through negotiation with DOE. But in 2007, state lawmakers passed a law enabling DOE to establish school impact districts with a set fee for every new home in areas where the need for new or expanded schools is anticipated due to residential growth.
There was much concern from affordable-housing advocates prior to the program’s establishment that such fees would reduce the ability of many prospective buyers to purchase homes because of the added cost.
Urban Honolulu’s district fee was set at $3,864 after much debate and proposed higher amounts of $5,858 and $9,374 per unit.
DOE’s fee applies to every new home built in the district, and the fee gets paid by developers before they can begin construction. Developers of projects with more than 50 units can seek to contribute land and/or cash.
Through April, DOE reported having $14.3 million in impact fee payments statewide, mainly from the Leeward Oahu, Maui and Hawaii island districts. The urban Honolulu district fee balance was about $630,000.
Because application of the fee is timed to certain government entitlements, several towers in the urban Honolulu district built after 2018 weren’t subject to the fee, including ‘A‘ali‘i, which was the fifth tower completed at Ward Village when it opened last year.
Representatives of several condo towers currently under construction or planned in the urban Honolulu district said they don’t plan to charge buyers the state’s school impact fee on top of condo purchase prices.
Prices at Ko‘ula range from from the mid-$500,000s to $2 million.
Hughes Corp. plans to add the fee to closing costs at its next four towers in development where sale efforts have commenced: Victoria Place, The Park at Ward Village, Ulana Ward Village and Kalae, for which a sales gallery opened Saturday.
However, because Ulana is reserved for buyers with moderate incomes as part of a state affordable- housing production requirement, Hughes Corp. will provide those buyers a credit for the fee at closing.
