It’s been a year and a half since Honolulu Mayor Kirk Caldwell unveiled a proposal to require every large new residential development on Oahu to include low- or moderately-priced units.

It’s “a bold, strong, controversial new proposal,” Caldwell told reporters at a press conference in September 2014.

Perhaps too controversial.

Despite the fanfare over the announcement, Caldwell still hasn’t introduced the plan to the City Council. The administration says it needs more analysis and that the city is working on fine-tuning it with input from developers.

The long delay worries affordable housing advocates who had high hopes for the idea but have seen it fade into the background; it was not specifically mentioned during the mayor’s recent State of the City address.

Some fear that political pressure from developers may dissuade Caldwell from pursuing the policy as he seeks re-election.

Mayor Caldwell State of State1
Honolulu Mayor Kirk Caldwell talked about the need for more affordable housing in his annual State of the City address in February, but didn’t mention his idea to require large developments islandwide to include affordable units. Cory Lum/Civil Beat

“From our standpoint, there’s not enough progress,” said Rev. Bob Nakata, of the nonprofit Faith Action for Community Equity. “It’s a tough issue. It’s a political hot potato. The election probably interferes with quick resolution.”

But Harrison Rue, who manages development around the city’s planned rail line, said politics are not a consideration and work continues on the proposal to drastically expand the city’s affordable housing requirement, a common policy in many cities, including Boston and Denver, known as inclusionary zoning.

Every large housing project on Oahu would have to build a certain number of low-income rentals or moderately priced homes for sale, or the developer would have to pay a fee.

Rue said the city is committed to developing an affordable housing requirement that the Council can pass this year.

“It’s taking time to complete the financial analysis, and work with developers and housing advocates to get the details right – because we want it to be effective, not just feel-good,” Rue wrote in an email last week. “The policy needs to actually result in real, affordable housing being produced that stays affordable for decades.”

Scaling Back The Plan

The City and County of Honolulu already requires developers who obtain zone changes to sell 30 percent of the units they build to people earning no more than 140 percent of the area median income. Last year, the threshold would have been $93,980 for an individual or up to $134,140 for a family of four.

Caldwell proposed requiring all developers who were building at least 10 units to set aside a certain percentage for low-income rentals and moderately priced homes — or pay the city a fee.

Homes for sale would be aimed at people earning no more than 120 percent of area median income, $80,560 for an individual or $114,980 for a family of four.

Caldwell also proposed mandating that units remain affordable for 30 to 60 years, rather than the current minimum of 10 years.

A year later, the administration scaled back its proposal, lowering the minimum amount of moderately priced for-sale units from 30 percent to 20 percent.

The revised strategy called for those homes to remain affordable for 30 years, and added the option that developers could give the city land instead of building cheaper units or paying a fee.

But the idea continued to get pushback from the development industry, and was the subject of frequent criticism at an industry conference last November.

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

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

The U.S. Supreme Court recently declined to consider a challenge by developers to San Jose’s affordable housing requirement, leaving intact the California Supreme Court’s approval of the law.

Research on the effectiveness of inclusionary zoning policies elsewhere is mixed, and developers like Stanford Carr have criticized it as unconstitutional.

But the U.S. Supreme Court recently declined to consider a challenge by developers to San Jose’s affordable housing requirement, leaving the California Supreme Court’s approval of the law intact.

Rue has been holding meetings with numerous developers and community groups, including Castle & Cooke, D.R. Horton, Alexander & Baldwin, Stanford Carr, Kamehameha Schools Bishop Estate, the Land Use Research Foundation, Building Industry Association of Hawaii, EAH Housing, FACE and Catholic Charities.

The city also spent $87,300 to hire a California consulting firm, Strategic Economics, to analyze the proposal and determine how financially feasible it would be for developers.

It is the second consultant that the city has hired to analyze the proposal. Last year, the city paid California real estate advisory firm Keyser Marston Associates Inc. $75,000 to study how and why the city should adopt an affordable housing requirement. The company completed an 80-page analysis exploring what requirements would help the city meet demand and what in-lieu fees the city should charge.

The Strategic Economics analysis will be a more detailed study, Rue said.

“It includes working with a local architect to develop a range of typical development prototypes and costs; building a pro forma development model to test the various percentages and fees, along with potential incentives and community benefits,” he wrote in an email.

Rue said he doesn’t know when a bill will be ready to bring to the City Council.

“We’ve committed that we will propose something that works, and if it doesn’t work, we will adjust the formulas,” Rue said.

In the meantime, Caldwell has been pushing the Council to fund a new division within the Department of Community Services that would partner with developers to build housing.

Moving Ahead In Other Areas

In September 2014, Caldwell said that his overall housing strategy could produce more than 4,000 affordable units by 2019. The inclusionary zoning initiative would add 170 units annually, or about 20 percent of that.

It’s unclear whether the city is on track to meet that goal. In 2014, the city’s current affordable housing rules produced just 33 units. Data from 2015 wasn’t available this week.

Rue noted in an email that the city has moved forward with many elements of its strategy, including loosening rules on renting ohana units, acquiring property to house homeless people through Housing First and negotiating a senior housing development on River Street.

“When it was introduced in 2014, the 4,000-units-in-five-years estimate was what could be realistically produced if and when all the elements in the strategy were adopted and implemented,” Rue wrote.

Affordable housing advocate Chuck Wathen said that he’s not surprised by the delay in implementing Caldwell’s affordable housing requirement.

“I don’t think the voters care enough.” — Chuck Wathen, affordable housing advocate.

“He was going to face this tremendous pushback. That’s why I said it was revolutionary,” Wathen said. “I didn’t know how he could do it. I didn’t know how he could go against the establishment … Because it was so revolutionary, I didn’t see how it could ever be supported and passed.”

Wathen is cynical about the likelihood that the proposal will ever become law, given the political strength of the development lobby.

“I don’t think the voters care enough,” he said.

Kevin Carney, a low-income rental housing developer at the nonprofit EAH Housing, is more optimistic.

“It’s obvious, at least to me, that the major developers in our community do not want to have any changes made at this point in time, or any additional requirements to serve lower income levels and to keep those units affordable for longer periods of time,” Carney said. “I’m hoping that there’s a middle ground that we can reach on all those issues.”

He’s grateful that his organization and other nonprofits have been included in recent discussions about expanding the affordable housing requirement. But like Nakata and Wathen, he is disappointed with the long process.

“I hate to see it drag out for another year,” Carney said. “But again, we’re at the city’s mercy, so any opportunity that we get to participate and get to voice our concerns, we will be there at the table.”

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