A new state program to help middle-income Hawaii households buy their first home is being used to subsidize sales of already subsidized affordable condominiums in a planned Honolulu high-rise.
The board of a state agency that helps finance affordable housing on Thursday approved using $2.4 million to help the developer of Kuilei Place in Moiliili sell 23 affordable condo units that were already reserved for middle-income buyers at below-market prices but have gone unsold since a lottery in July.
Thursday’s approval represents the first use of a $10 million pilot program created by the state Legislature in 2023 after House Bill 677 became Act 92 and appropriated the taxpayer funding to the Hawaii Housing Finance and Development Corp.
Under the program, HHFDC can pass along subsidy funding for households that earn 80% to 120% of a county’s median income to help them buy their first home.
This subsidy, plus 1% annual interest and a share of appreciation on the home, must be paid back to HHFDC by the participating buyer within 30 years or under other conditions that include selling or renting the home.
Kuilei Place is a planned 43-story tower complex with 1,005 condo units being developed by a partnership between local firms BlackSand Capital and Kobayashi Group called 2599 Kapiolani LLC.
In return for making 603 units, 60% of the total, affordable to households with moderate and high- moderate incomes, the developer received benefits that included about $12 million in city fee exemptions plus building height and density beyond what zoning permits in the area.
Prices for the affordable units with one to three bedrooms ranged from $370,600 to $813,300.
Income limits for buyers of the affordable units range from 80% to 140% of the median household income on Oahu. At the low end this equates to $73,200 for a single person and $104,480 for a family of four. At the high end it equates to $128,100 for a single person and $182,840 for a family of four.
By comparison, the project’s 402 market-rate units with one to three bedrooms were priced from $661,500 to $1.2 million.
Lorna Kometani, head of HHFDC’s real estate services section, told the agency’s board Thursday that staff recommended approving the new subsidy program for Kuilei Place even though it wasn’t an ideal use.
“Ideally, this program is best applied to the start of a new housing development project so HHFDC can pick and choose the units in which to apply this program,” she said.
The developer of Kuilei Place will essentially be able to use the subsidy to make 23 units affordable to households earning up to the median income instead of up to 120% of the median income.
Subsidies under the program go to the developer of an approved condo unit upon the sale of the unit, and HHFDC receives an equity ownership stake in the subsidized unit that gets paid back later by the initial participating buyer.
Initially, the developer of Kuilei Place approached HHFDC in October, a few days after the agency’s board approved draft subsidy program rules, expressing interest in tapping the program to effectively lower the price for buyers on 26 unsold condo units.
Prices for the initially targeted units with two or three bedrooms ranged from $627,100 to $810,600, and the developer was seeking per-unit buyer subsidies ranging from $75,400 to $104,100 for a total subsidy cost of $2.5 million.
After program rules were finalized in January, the developer revised its request to instead subsidize 23 units among 54 unsold two-bedroom units. Under this plan, which HHFDC’s board approved, buyer subsidies would be $103,000 on units priced from $626,700 to $627,700 for a total subsidy cost of about $2.4 million.
Kometani told the board that the revision was made to limit the subsidies to “starter units” at Kuilei Place with two bedrooms and one bathroom as opposed to bigger units at higher prices.
Alana Kobayashi Pakkala, a Kobayashi Group partner, told the board that there were more qualified applicants for Kuilei Place units priced for households earning up the median income than the number of units available at a corresponding price level.
“There was a large group of interested buyers, but we couldn’t meet all of their needs,” she said. “We ran out of the units that they could afford.”
The $10 million subsidy program, called the Dwelling Unit Revolving Fund Equity Pilot Program, is authorized to provide initial subsidies until June 30, 2028. Repayment of subsidies would allow HHFDC to subsidize more units in the future.
Building Kuilei Place is expected to start later this year and finish in 2026.
