Affordable Housing Development Must Remain A Mandate

Making it easier for developers and landowners to make more money, by eliminating their requirement to provide affordable housing, is in my opinion bad public policy. The recent doubling (and more) of allowable density in the Lihue town core without obtaining any commitment to build any affordable housing whatsoever, was a huge financial gift to those landowners. To grant these same landowners (and others) still yet another gift by eliminating the 30% workforce housing requirement now on the books, would be a huge mistake and arguably, a betrayal of the public trust.

Landowners and developers will design, build, and sell their projects targeting the highest market price they can get in order to maximize profits. This is totally understandable and to be expected.

However, it’s not in the publics’ best interest to eliminate existing affordable housing requirements in order to maximize a project’s profit potential. This is especially true in situations where the landowner/developer is offering nothing tangible in return.

There is nothing on the table, and consequently, the County is essentially “negotiating with themselves.” The discussion by some on the Council that making it easier for landowners/developers to make more money would result in the building of more “market” inventory, and that additional inventory will thus create more affordable inventory “downstream” – is all just speculation (pun is most definitely intended).

If a landowner/developer was actually proposing to develop something and needed support to “make the numbers work” in order to comply with the affordable housing requirement, then yes the County should absolutely look at how they can assist in achieving that goal. But removing the requirement to build affordable housing and expecting to achieve more affordable housing, is a foolish negotiating position at best.

Keep the affordable housing requirement and incentivize as needed but only for the actual creation of genuinely affordable housing units (for purchase and for rent).

The County Council has already passed an “incentive package” for the “Additional Rental Unit” (ARU) affordable housing initiative. This package would effectively lower the cost of construction from $10,000 to $17,000 per unit – via “fee waivers and other incentives”. The ARU law allows homeowners who comply with certain guidelines to construct a second dwelling on their property intended for long term rental or family use.

The County could utilize these same mechanisms to incentivize and support developers seeking to comply with the 30% affordable requirement. In addition, the County could consider further incentives based on the deferral of future property tax income.

Please stay with me for the moment as we venture into the weeds. A landowner who now owns a single-family residence pays X amount of property tax annually based on an owner occupant Homestead rate of $3.05 per $1,000 of assessed value. When that same landowner constructs a new additional single-family home or ARU, the tax assessed value of their property would normally increase to reflect the additional value created by the construction of the second home AND the rate may increase to the Residential (rental) rate of $6.05. The County could “waive” and simply ignore for tax assessment purposes the value of the new ARU. For a $400,000 tax assessment increase, based on a range of $3.05 and $6.05 tax rate = an increase of $1,220 to $2,420 per year in property taxes. Extend this benefit over 10 years = $10,220 to $20,420 in additional incentive above and beyond what is already in place for ARU’s.

Obviously, because of inflation, the tax savings number quoted is very conservative.

The County could thus offer both ARU builders and those complying with the 30% requirement, an incentive package that could save developers/builders $20,000 to $40,000 per unit or more, and there would be no direct impact on the County budget.

It is important to note that the County is not receiving any tax income from these units because they do not exist, and thus the County would be “giving away potential future property tax revenue” and not real dollars out of today’s budget. It is also important to realize that the units being incentivized are affordable and located in existing urban areas where core County services are already in place (parks, police, fire, etc).

The County has the power of zoning and density. The County also has a significant capacity to borrow money at very low rates. And the County of course “makes the rules” that govern construction and development. The County should utilize these powers to the benefit of the public and not just the benefit of landowners and developers.

Each of these powers can be used to incentivize the construction of truly affordable housing. Instead of just giving away density, the County could and should “trade extra density” in exchange for the development of affordable housing. The County could use its low-interest borrowing capacity to help with the cost of infrastructure, in exchange for affordable housing development, and they could “amend the rules” – but not at the expense of health and environment.

There are many, many things the County could and should do to accelerate the development of affordable housing.

Rather than remove requirements for affordable housing, the County should support and incentivize landowners/developers to comply. If landowners prefer to land-bank those properties located within or adjacent to existing urban areas, then the County should consider purchasing that same land, via condemnation if needed. Utilizing private contractors for the construction, the County could then partner with a nonprofit developer and sell the homes or lots to local residents at affordable prices, with protections that they remain affordable in perpetuity.

About garyhooser

This blog represents my thoughts as an individual person and does not represent the official position of any organization I may be affiliated with. I presently serve as volunteer President of the Hawaii Alliance for Progressive Action (H.A.P.A.) I am the former Vice-Chair of the Democratic Party of Hawaii. In another past life, I was an elected member of the Kauai County Council, a Hawaii State Senator, and Majority Leader, and the Director of Environmental Quality Control for the State of Hawaii - in an even earlier incarnation I was an entrepreneur and small business owner. Yes, I am one of the luckiest guys on the planet. Please visit my website AND sign up for my newsletter (unlike any email newsletter you have ever gotten, of that I am sure) - “Come to the edge.” “We can’t. We’re afraid.” “Come to the edge.” “We can’t. We will fall!” “Come to the edge.” And they came. And he pushed them. And they flew. - Christopher Logue (b.1926)
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2 Responses to Affordable Housing Development Must Remain A Mandate

  1. I agree, Gary. “Trickle down” didn’t work in the 80s. Why would it work now? There is more money to be made than there is land available in our islands. If our islands were the size of Texas, for example, yes, then 10,000 homes will create a surplus, and thus a price drop. But we do not have the same parameters since we are a popular destination island chain, with world wide, moneyed travelers, and well-heeled investors. There are non-profit developers working with Maui, right now, two different companies. Kim Coco Iwamoto is reportedly an investor or owner of affordable housing and, she, by her own admission, said she could make it profitable enough for her interests. Why not others? Thanks, Gary. I appreciate your blog.

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