Under pressure from developers and other opponents, a state board charged with managing development in Kakaako has rejected rule changes intended to make sure certain housing units always remain affordable.

But the opponents aren’t celebrating yet. The Hawaii Community Development Authority board still wants to add regulations to preserve affordable housing built in the district, but is taking more time to figure out what they should be.

The board plans take up a new set of rule changes at its July 6 meeting, and intends to schedule two additional public hearings.

The agency has been considering changing the rules governing Kakaako development since 2014, when residents protested new high rises and complained about how expensive the new units would be.

HCDA meeting wide. 7 june 2017

HCDA board members discuss rule changes during a meeting Wednesday.

Cory Lum/Civil Beat

“We have public hearings for a reason, that is, to listen to testimony,” board chairman John Whalen said at Wednesday’s meeting. “In order to do that and consider revised rules, we first need to dispose of the present draft.”

The biggest point of contention was a proposal to impose shared equity and buyback requirements on units considered “workforce housing,” a program in which developers get a density bonus and fee waivers in exchange for building units that are affordable to people earning up to $84,900 for an individual or up to $121,250 for a family of four.

Members of the development, construction and banking industries said that proposal would make building more projects impossible.

The board is now considering making the buyback requirement last 30 years, rather than in perpetuity. Whalen said the change was in response to concerns from representatives of local banks who testified that homes subject to such provisions may be more difficult to finance. It’s also an effort to ensure HCDA’s rules fall in line with proposed changes at the City and County of Honolulu.

A previous version of this story incorrectly said that the board was no longer planning to impose perpetual shared equity requirements on workforce housing units. That proposed amendment is still under consideration.

Whalen said despite Wednesday’s rejection of the proposed rules, the board is still committed to finding a way to make housing in Kakaako more affordable and keep it that way longer.

“There’s no reason to think that housing prices are going to go down in that area,” Whalen said Thursday. “We want to make sure that there are still middle-income and moderate-income people who can buy a place in Kakaako 30 years from now.”

Wednesday’s vote came near the end of a four-hour meeting during which investors and developers of the district’s only workforce housing project, 801 South Street, urged the board to reject the rule changes outright. Only board member William Oh, a principal at Standard Financial, was willing to do so. His motion to keep the workforce housing rules the same failed when none of the other seven board members who were in attendance seconded it.

Meanwhile, Wei Fang was the only board member who wanted to go forward with the rule changes that would have imposed perpetual shared equity and buyback provisions, among other amendments. The founder of the nonprofit Interisland Terminal said in an email Thursday that she voted against rejecting the rules because the HCDA staff had already spent a year talking to stakeholders about them.

HCDA Chair John Whalen. 7 june 2017

John Whalen is a former city planning director who leads the HCDA board.

Cory Lum/Civil Beat

“I felt that the existing draft was strong and while a couple points within the draft might be clarified, I didn’t think they were substantive changes that required another costly and time consuming round of hearings, which may not even produce any significant improvement from the current draft,” she said.

The board debated Wednesday how best to calculate buyback prices, and voted to get rid of a restriction on workforce housing developments so that they can apply for public funding.

HCDA’s staff is working on finalizing a new version of the rules.

Ryan Harada from Downtown Capital, the developer of 801 South Street, said that changing the buyback provision to 30 years would still be problematic.

Harada also said it’s frustrating that the rule changes are being contemplated when so few units have been flipped. Two dozen units have been resold in 801 South Street Tower A, just 4 percent of the units in the tower.

“To say that you’re going to put all of these restrictions … because a few units sold in this booming real estate market?” he asked. “Look at the bigger picture.”

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