The Honolulu City Council on Wednesday will consider a measure that aims to increase the number of lower-priced homes built near the rail line.

Honolulu’s land-use ordinance already encourages development along the line. The bill would amend the law to  establish a clear trade-off: developers could get a break on certain zoning restrictions and the benefit of being near a rail stop; in exchange, they must sell about one-third of their units as affordable housing.

“We’re in a housing crisis,” said Councilman Brandon Elefante. “The demand for housing has just skyrocketed through the roof.”

Convention Center Kapiolani Boulevard Waikiki Century Center2. 19 nov 2016
A site at the corner of Kapiolani Boulevard and Atkinson Drive will be redeveloped into a luxury condo-hotel that won’t contain any affordable housing. Developers are looking at other lots in Ala Moana, and the city says it wants to ensure that some affordable housing is built. Cory Lum/Civil Beat

The median price of a home in Honolulu reached $760,000 last year, and the high cost of living has forced some residents to leave the state. Studies have pegged the number of needed units in the tens of thousands.

No one disagrees with the premise that Honolulu needs more housing priced at less than market rates. Opposition to the bill has come chiefly from those who say the measure doesn’t go far enough to ensure that transit-oriented development includes housing for working residents.

Whether the bill sets off a battle between developers and affordable housing advocates remains to be seen.

The response from developers so far has been measured.

David Arakawa, executive director of the Land Use Research Foundation of Hawaii, which represents large landowners along the rail route, said that city and county officials have been working with his constituents attempting to craft a formula that both developers and affordable housing advocates can embrace.

“The bill’s a good idea,” Arakawa said, but added his members have objections to provisions they say will make it hard to develop housing. “We look forward to more in-depth discussions with housing advocates and the city on how we can build more housing for all of Hawaii’s residents.”

Law Encourages Rail-Oriented Development

The Honolulu land-use ordinance encourages development near rail stops by setting up a framework for creating special zoning districts. But the city has yet to establish one of the zones. The first planned zone, for land surrounding a rail stop in Waipahu, is pending.

In the meantime, the Honolulu land-use law lets developers apply for an interim development permit that lowers several existing land-use restrictions if the property is a half-mile or less from a rail stop. The purpose of the interim permits is to “provide opportunities for creative, catalytic redevelopment projects within the rail corridor that would not be possible” under current zoning.

For example, the interim development permit allows developers to increase the amount of living space the developer can put on a piece of property, known as the floor area ratio, to up to twice what would normally be allowed by the parcel’s zoning law.  In addition, the maximum height may be up to twice that allowed by the underlying zoning.

Honolulu City Council Member Brandon Elefante. 8 feb 2017
Honolulu City Council Member Brandon Elefante’s bill includes a 30 percent requirement for affordable housing. Cory Lum/Civil Beat/2017

In exchange, the interim permit ordinance has numerous criteria that the City Council is to consider when deciding whether to grant an interim development permit. The current ordinance explicitly says it provides “significant flexibility” to developers building near rail stops. But the ordinance also says the highest flexibility will be offered for projects that enhance neighborhoods by offering diverse employment opportunities, pedestrian and bicycle facilities, and an “appropriate mix of housing and unit types, particularly affordable or rental housing, or both.”

However the ordinance does not establish a minimum percentage of affordable units a project must have. In fact, a developer could get an interim development permit and provide no affordable housing — which is what happened with the first project to obtain one of the interim development permits.

Last year, the City Council approved a new luxury condo-hotel called Manaolana Place, located near the Hawaii Convention Center, despite criticism from housing advocates that the project took advantage of density and height exemptions without having to provide any affordable housing.

Whether the bill sets off a battle between developers and affordable housing advocates remains to be seen.

Instead of requiring the developer to include affordable housing, the Council’s resolution  gave the developer three options: to build 20 rental housing units near Ala Moana’s planned rail station; to partner with the city or state public housing agencies to build the same number of units in the same area; or to give the city money to build 20 rental housing units, but not more than $3 million.

At the time, Councilman Trevor Ozawa criticized Mayor Kirk Caldwell’s administration for a lack of clear guidelines about how many affordable units should be required or an appropriate formula for determining what a developer should pay instead of building new units.

The bill now before the City Council provides guidelines on affordable units; it also goes further than an earlier bill introduced by the Caldwell administration.

The administration’s measure would have required 20 percent affordable units if the properties were offered for sale at the development and 25 percent if the developer builds affordable units elsewhere.

A developer could also have met the requirement by offering 15 percent of units as rentals. The administration’s bill gave the further option of allowing developers to make a payment, known as an in-lieu fee, instead of developing affordable properties.

Elefante’s draft, which was approved last week by the council’s Committee on Zoning and Housing, is simpler.

It would make developers set aside 30 percent of units as affordable. It says that at least two-thirds of the affordable units must be affordable to households with incomes no greater than 100 percent of the Honolulu area median income and one-third affordable to households with income no greater than 80 percent of the area median income. According to the U.S. Department of Housing and Urban Development, the median family income for Honolulu is approximately $86,600; 80 percent of that would be about $69,200.

The units must be on site under the bill, and in lieu fees are not allowed.

The vast majority of those who have testified have supported the measure. The Hawaii Appleseed Foundation for Law and Economic Justice described the bill as a way to ensure that rail-oriented development includes housing opportunities for working taxpayers who are helping to pay for the $10 billion project.

“The billions of public dollars invested in the rail are increasing the value of properties in close proximity to rail stations,” the Hawaii Appleseed Foundation wrote in testimony submitted to the Zoning and Housing Committee. “Affordability requirements such as those proposed … can be used to capture the community’s fair share of the value created by this public investment, rather than providing a windfall to landowners and developers.”

Striking A Balance

The crux of the issue is to find the right formula. Harrison Rue, TOD Administrator for the city’s Department of Planning and Permitting, said the administration has done extensive research and analysis before crafting its bill, which required less affordable units than the bill before the council. The administration’s requirements also are outlined in a proposed island-wide affordable housing bill, Rue said.

Elefante commended the planning department for its work, but said he believed the 30 percent requirement strikes the right balance to ensure developers create affordable housing without making the burdens so great that developers don’t build anything.

David Callies, a professor at the University of Hawaii’s William S. Richardson School of Law, said a 30 percent set-aside for affordable housing is higher than requirements mandated in other states, where he said requirements are in the 15-20 percent range. But Callies said 30 percent is not unusual in Hawaii.

“My impression is 30 percent is about where it usually ends up,” said Callies, who is an expert in real property and land use law.

Still, some believe the current bill does not go far enough.

George Massengale, director of community engagement with Hawaii Habitat for Humanity, said the measure should set aside housing for residents earning 30-60 percent of the median income, or families earning about $26,000 to $52,000.

The Office of Hawaiian Affairs echoed that idea, testifying that its research shows half of the housing demand is for units sold for people earning 60 percent of the median income or below.

In the end, Elefante said, finding the right balance is difficult.

“A lot of this is an unknown,” Elefante said. “And we can always make adjustments.”

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