Honolulu Mayor Kirk Caldwell has spent the past year and a half working on a proposal to require every large development on Oahu to set aside a certain percentage of units for low-income or moderate-income people.

Currently, only developments that receive rezoning approval have to ensure that 30 percent of their units are considered “affordable,” a policy that produced a measly 33 units in fiscal year 2014.

Caldwell is hoping to gain the City Council’s approval to impose that requirement on all developers who build 10 or more units, an idea that’s been praised by affordable housing advocates.

But Tuesday’s Building Industry Association conference provided more evidence that many in the industry aren’t happy with the proposal, and that’s delaying the mayor’s plan to roll out the change this year.

Mayor Kirk Caldwell holds press conference at the Fasi building discussing the letter from HART (from Dan Grabauskas) about possible extension of the rail project. 15 sept 2015. photograph by Cory Lum/Civil Beat
Mayor Kirk Caldwell wants to require more residential developments to include affordable living units. Cory Lum/Civil Beat

Speakers at the conference focused on the city’s housing shortage talked repeatedly about the suffocating effect of Hawaii’s land use regulations on housing production.

“The way the system is now is calculated to almost kill projects by a thousand cuts,” said University of Hawaii law professor David Callies.

But while current regulations were fodder for complaints, several people voiced concerns about Caldwell’s push for inclusionary zoning, or the policy of requiring a portion of new construction to be affordable to specific income groups.

Inclusionary zoning has been used in over 400 U.S. jurisdictions since 1970 to increase the supply of affordable housing and promote mixed-income communities, but the policy has met significant resistance from critics who argue it’s ineffective and unconstitutional.

“It’s just a Band Aid solution,” said Jason Nishikawa from the real estate agency Marcus and Associates.

“All it does it create a false market,” said Jon Yamaguchi, who runs a real estate consulting firm.

“Mandatory set-asides simply drive up the cost, which is passed on to the homebuyer,” said Callies, noting that inclusionary zoning must be accompanied by incentives for developers.

“Do we forgive sewer hook-ups? I want to do that. Do we forgive park dedication? …Do we give you greater density? Do we give you the height limits that you need? Do we waive our real property taxes for rentals?” — Mayor Kirk Caldwell

Caldwell said he’s open to providing incentives. In his opening remarks at the conference, the mayor pleaded with developers to tell him what they need to build low-income rentals.

“Do we forgive sewer hook-ups? I want to do that. Do we forgive park dedication? …Do we give you greater density? Do we give you the height limits that you need? Do we waive our real property taxes for rentals?” he asked. “Will you build affordable if we forgive GET (general excise tax) income?”

He appealed to developers’ distaste for government interference, emphasizing the 30 years he spent as an attorney in the private sector and the fact that his wife works in banking.

“I don’t believe in regulation for regulation’s sake,” Caldwell said. “I understand fully the profit motive.”

He noted that his administration’s steps toward building more affordable housing have so far involved loosening existing regulations: one new ordinance makes it easier for homeowners to build and rent attached units; another bill would make it easier for developers to build denser, taller projects around the city’s planned rail line.

“We’re not regulating, we’re deregulating,” he said. “We’re not mandating, we’re not building ourselves.”

Caldwell even said he doesn’t oppose controversial luxury developments in Kakaako that cater to out-of-state buyers because of the additional tax revenue they bring.

“At the same time, we need to build to this market that’s not being met,” he said.

The mayor’s inclusionary zoning policy was supposed to be ready last summer for introduction to the City Council. But additional financial analysis and discussions with developers over what the proposal should look like have dragged out the process.

Now Harrison Rue, who is in charge of managing development around rail, says the city may not publish the final policy proposal until January 2016. Next week, a group of developers is meeting with the city’s financial consultant to go over the figures, and Rue thinks discussions may continue over the next couple of months.

The mayor said he’s committed to partnering with developers, and expressed confidence that a compromise can be reached.

“We’re not going to submit something until it has a balance where you can work with what we’re proposing,” Caldwell promised the conference attendees.

Read the September 2015 draft of the mayor’s proposed housing policy below:

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