Affordable housing advocates fear the Legislature won’t allocate enough money this year to have a meaningful effect on Hawaii’s housing shortage.
When the session began in January, lawmakers had numerous proposals to increase funding for the Rental Housing Revolving Fund, a key mechanism for subsidizing rental housing. Several sought to allot more money to the fund from taxes on high-end real estate.
But more than two months into the legislative session, those ideas have fallen by the wayside. The state expects to receive significantly less in tax revenue than it initially projected, and lawmakers have been scaling back what they’re willing to spend.
What hasn’t changed is the state’s dire need for more housing. The Legislature has already set a goal of building 22,500 affordable rental units by the end of 2026, which would still fall short of the statewide demand for nearly 65,000 more units by 2025, according to the latest state study.
Kevin Carney, a nonprofit housing developer at EAH Housing, says more state funding is particularly important now because many companies expect the Trump administration to cut the corporate tax rate.
That, he said, is already lessening the value of tax credits and slowing production of low-income housing projects. Developers typically finance those projects by selling the credits to investors, who reduce their tax liability in return. But investors have less incentive to buy the credits now that they are expecting to pay less in taxes.
Developers like Carney are now looking to the government for more funding to make up the difference.
Catherine Graham, an advocate with the group Faith Action for Community Equity, says she understands how difficult it is for lawmakers to balance competing needs, but hopes legislators will make good on their earlier plans to increase spending on new housing units, particularly the Rental Housing Revolving Fund.
“It felt like this year started good but then the Council on Revenues said we didn’t have as much money as expected. So it’s kind of like all the air in the excitement balloon fizzled out,” Graham said. “There’s a need, developers are ready, but we need a little political will to go along with it. Or maybe a lot of political will.”
Gov. David Ige’s budget request this year sought $50 million for the Rental Housing Revolving Fund, and $8.4 million for low-income housing tax credits.
Last year, the Legislature set aside $36.6 million for the Rental Housing Revolving Fund and $4.23 million for low-income housing tax credits.
Ige wanted another $15 million for a 184-unit rental project on Alder Street in Honolulu and $50 million for the Dwelling Unit Revolving Fund — double what the Legislature gave to that fund last year for affordable housing infrastructure.
The governor also requested $50 million for renovating and developing public housing units statewide and $4 million specifically to update vacant public housing units statewide. Last year, lawmakers agreed to spend $35 million on public housing repairs, with specifically $6 million for the repair of vacant units.
If his budget is approved, the money is intended to support the creation of 5,100 units from 2017 to 2020.
But when the budget bill went to the House Finance Committee, Chairwoman Sylvia Luke slashed in half the amounts going to the Rental Housing Revolving Fund, the Dwelling Unit Revolving Fund and low-income tax credits.
Luke also removed funding for the Alder Street development, and cut the money going to statewide public housing repairs to $10.7 million, with $5.2 million going to specific public housing projects.
Carney attended a Senate Ways and Means Committee meeting last week and was disappointed that Sen. Jill Tokuda kept the funding for the revolving funds at $25 million, although she added back money for Alder Street.
The state says that each rental unit can require a subsidy as high as $140,000, so $25 million in the Rental Housing Revolving Fund could translate to just 178 units.
Carney says the legislative session is turning out to be “typical” in the sense that it started with a lot of excitement and recognition that Hawaii has a housing crisis.
“But then as we get into the session and the bills start falling to the wayside it’s deja vu all over again,” he says.
Both Graham and Carney are now pinning their hopes on House Bill 488. The latest draft would issue $75 million in general obligation bonds for the Rental Housing Revolving Fund, and the same amount for the Dwelling Unit Revolving Fund.
The proposal would also float $75 million in general obligation bonds for public housing improvements and development.
But while the measure passed the House already and is waiting for a hearing in the Senate, Espero says that lawmakers will probably decide upon one funding amount for rental housing and public housing instead of approving the bond expenditures in HB 488.
“It’s never enough,” Espero said of the money for housing. “We have funded some projects that are top priorities and that’s a good sign. At the end of the day we don’t have enough to go around because of all the other issues and priorities.”
He noted that Tokuda amended the budget proposal last week to include $51 million for public housing renovations and $35 million for a senior housing project.
The Legislature is also looking to spend millions of dollars on homelessness and infrastructure on Hawaiian homelands, he said.
The senator says he’s not disappointed that his $2 billion bill didn’t advance because he understands the legislative process. George Massengale from the Hawaii Habitat for Humanity feels the same way.
“It is what it is,” Massengale said. “We come back next year and we keep plugging away.”