Developers are winning their battle with Honolulu Mayor Kirk Caldwell over his affordable housing mandate, at least so far.

Caldwell started pushing more than three years ago to require that all large new developments include lower-priced units. Many other cities already do that to help provide affordable housing and stave off segregation between the rich and the poor.

At the time, local housing advocates called the proposal “revolutionary.” But the idea has been unpopular with a politically influential development industry that fears more regulations will stop projects from getting built.

The affordable housing requirement is just one aspect of the administration’s push to address Honolulu’s sky-high rents and persistent homelessness. Still, Caldwell has made it a cornerstone policy.

Mayor Kirk Caldwell presser post legislature adjournment1. 4 may 2017
Mayor Kirk Caldwell has spent years trying to convince a skeptical local development industry to support an islandwide affordable housing requirement. Cory Lum/Civil Beat

On Thursday, he personally urged the City Council Zoning and Planning Committee to pass Bill 58, which would enact the mandate. Caldwell told committee members it was “probably the most significant legislation you will be moving in years and years and years.”

“We’ve got to move these bills now,” Caldwell said, referring to both Bill 58 and its companion measure, Bill 59, which would give developers incentives to build moderately priced units around planned rail stations.

His plea didn’t work. The council panel, chaired by Councilwoman Kymberly Pine of West Oahu, decided to hold off voting on Bill 58 and instead continue to analyze the proposed mandate, which has been pending since last summer. Pine said it could be reconsidered next week, or maybe in February. She wants it passed soon, but also wants to accommodate developers’ concerns.

Committee members did unanimously agree to advance Bill 59, bringing developers one step closer to lots of discounts if they build affordable housing near rail stations. They won’t have to pay wastewater fees or building permit fees, and they’ll get property tax breaks.

The measure goes to the full council later this month.

The Caldwell administration introduced both bills as a carrot-and-stick approach, providing incentives while also requiring low- and moderate-income units to be built. Harrison Rue, who is in charge of redeveloping neighborhoods along Honolulu’s rail line, said the Bill 58 requirement is crucial for the island’s future.

But so far, only the carrot is advancing.

In the meantime, developers are relying on temporary permits to build high-end towers in Ala Moana with varying degrees of affordability.

“It’s critical for the long-term development of housing to make sure that a portion of everything we do, most everything we do, is affordable,” Rue said.

What’s At Stake

Brett Theodos, a senior research associate at the Urban Institute in Washington, D.C., says requiring affordable housing in developments goes to the core of what’s fair and equitable — and what a community values.

Mandating that developers build affordable housing is known as “inclusionary zoning,” because it’s a way to make sure that some poor people can still afford to rent or buy in wealthier communities.

Already, there are broad swaths of Oahu, especially in the north and east, that are unaffordable to the vast majority of local residents. In Kailua, the median home price last year exceeded $1.2 million, whereas on the Leeward Coast the median home price was $462,000, according to the real estate research firm Locations. The disparity forces poorer families to live farther west of downtown and endure some of the island’s worst commutes.

This map provided by the Honolulu Department of Planning and Permitting shows the disparity of housing affordability across Oahu. City & County of Honolulu

Right now, the city only requires developers seeking zone changes to set aside moderately priced units — and they stay at those price levels for just 10 years. (The state redevelopment district of Kakaako has different rules, however, with some units staying affordable for only five years.)

Nationally, more than 300 cities and counties mandate that developers build affordable units. But inclusionary zoning has backfired in places where the policies were too strict or poorly written.

That’s what happened when the Maui County Council tried to force every developer to make half of every project “affordable.” Honolulu officials say that’s why they’ve taken several years and spent thousands of dollars to try to find the sweet spot — and get the policy right.

Meanwhile, Oahu home prices continue to skyrocket, leaving home ownership out of reach for more of the island’s residents.

Concessions To Developers

Caldwell and the development lobby continue to wrangle over key details — including how long the city’s new affordable units would have to stay that way.

Pine’s latest draft of Bill 58 keeps rental units affordable for 30 years. But only for-sale units that are sold within the first 120 days would have that restriction. Units sold later would have just a 10-year affordability period.

The mayor wants the units to stay price-controlled for 30 years. Developers balk at that, arguing there’s no way banks will lend them the money for units restricted for so long.

Rick Jacobus, a California-based consultant on urban development and housing policy who is advising the Caldwell administration, told Civil Beat it’s typical for banks in other cities to fund these projects. Even if banks here aren’t used to financing them, it’s a hurdle that can be overcome, he said.

More than 80 percent of local governments with inclusionary zoning require that units stay affordable at least 30 years, and about a third mandate at least 99 years. It’s a way to help multiple generations of families instead of just one, said Theodos from the Urban Institute.

In Hawaii, expiring affordability requirements sometimes force state lawmakers to intervene and spend taxpayer money, such as when the state helped preserve low-income rentals at Kukui Gardens in downtown Honolulu and in the ongoing debate over low-income units on Front Street in Lahaina, Maui.

Nonetheless, Caldwell said Thursday he’d be willing to negotiate down to 20 years if that’s what it takes to get the mandate passed.

That’s not the only concession to developers. Pine’s latest version of Bill 58 allows developers to sell below-market units to wealthier people if they can’t find buyers within the first four months.

She also now supports allowing developers to pay a fee instead of actually building affordable units. A year ago she was adamantly against the idea. Now, after months of meetings with developers and other stakeholders, she said it’s a necessary compromise.

Honolulu City Council Kymberly Pine development hearing.
Honolulu City Council member Kymberly Pine leads a hearing on affordable housing rules Thursday morning. Cory Lum/Civil Beat

“I’m not interested in passing legislation that makes politicians look good. I really want to pass legislation that actually builds affordable housing,” she told Civil Beat.

The councilwoman expressed doubt Thursday about the relevance of the analysis of mainland cities provided by Jacobus.

“I thought all your studies of all the other cities, if we’re being honest, as a born and raised local girl, had nothing to do with being in Hawaii,” said Pine, noting that construction and shipping costs in Honolulu are high. “Their food is different, their people are different, their culture is different … We’re so different.”

Only a couple of nonprofit housing advocates attended Thursday’s hearing, their presence overshadowed by members of the development industry who came to oppose the proposed mandate.

Tensions ran high. Nonprofit developer Kevin Carney told the committee that he supports keeping units affordable for 30 years. That prompted David Arakawa, who leads the development lobby group the Land Use Research Foundation, to call out after Carney as he left the hearing.

“Unreal. Unreal. Sellout. Sellout!” Arakawa said as Carney walked past. “He needs city land so he has to kiss their ass.”

The latest draft of the affordable housing requirement in Bill 58. City & County of Honolulu

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