About the Author

Micah Hicks

Micah Hicks lives in Manoa and works as an engineer. 

“Affordable” projects supply too many units with two bedrooms or less. But most residents want at least three bedrooms.

In fall 2019, just as I began a career shift into data analytics, Harvard Business Review’s cover story was headlined “Don’t Let Metrics Undermine Your Business.”

It’s a lesson I would take to heart and a real danger. Metrics are meant to measure progress towards some goal. But metrics can supplant the goal because metrics are easier to achieve than goals. You can count calories, but if all your calories come from Oreos and Coke, you’ll almost certainly end up diabetic anyway.

If you wanted a case study in managing to the metric to the detriment of the actual goal, you couldn’t find a better example than Hawaii’s attempts to combat our housing crisis.

Hawaii’s housing programs pivot around a single metric: area median income calculated by the U.S. Department of Housing and Urban Development.

AMI becomes particularly sticky in the “gap group” of income ranges that federal programs don’t cover, but which still can’t afford Hawaii’s housing market. This gap runs from around 80% to 140% of AMI.

On Oahu, two programs have been brought to bear on the problem: 201H, so called after the chapter of Hawaii law embodying it, and transit-oriented-development, or TOD.

These offer developers a slew of zoning exemptions, expedited approval processes, tax credits and fee waivers in return for including affordable housing in what would otherwise be a market rate development.

Like a lot of metrics, it’s measures something real and has driven positive change. Around 3,500 homes have been built or approved under these programs. But despite its promises of affordability these programs are failing to build the affordable housing Hawaii families need.

Take a recent and controversial project, Kuilei Place. Approved through a 201H process, it promises to be a majority affordable project: providing 600 units to those making under 140% of AMI.

(Courtesy Micah Hicks)

But three-quarters of the “affordable” units being built at Kuilei cost more than an equivalent unit on the market today.

For instance, Kuilei will provide 148 one-bedroom apartments, with prices ranging from 80-140% AMI. Almost all — 91% — of these units are priced more than the market median price for a one-bedroom condo, which according to RocketHome data is $411,000. The median price at Kuilei is around $464,000 — about 13% over the market.

If you can’t afford a one-bedroom unit on the market today, you won’t be able to afford one at Kuilei.
Building homes that cost more than the market is just one part of the problem. The bigger problem is that we don’t build the units locals need.

Our “affordable” housing projects over supply units of two bedrooms or less versus demand for those.

But, according to a housing market preference survey by the Hawaii DBEDT, most residents want at least three bedrooms. If you look at what kind of housing Hawaii residents buy when they finally give up and head to the continental U.S., that holds up.

Census data from IPUMS at the University of Minnesota show that every year since 2001, around 70% of Hawaii born households moving to the continent have left for a three-bedroom unit.

(Courtesy Micah Hicks)

So, what sort of housing do we need if we want to keep locals here? A good guess would be three-bedroom units. What do we build? Not that.

Instead, we’ve flipped things around. While the majority of kamaaina want at least three bedrooms, almost 90% of the “affordable” housing stock we’ve built under the 201H and TOD programs are two bedrooms and less.

This is the problem with managing to a metric: it’s one dimensional. The cornerstone of Hawaii’s housing policy is an income range that runs from $73,000 to $242,000. Stuff anything into that box and you can call it affordable.

If Oahu wants to avoid more situations like “The Flats” at Ala Moana, our elected officials need to do more than look at AMI. They should treat the processing of approving affordable housing as if they were the prospective buyer.

(Courtesy Micah Hicks)

First and foremost, they need to build affordable homes: not actuarially affordable homes but actually affordable homes. They should look at the actual market price, not theoretical affordability based on AMI.

It also means ensuring an appropriate mix of units sizes, meaning we need to build units with more bedrooms. This is unlikely to be popular with developers.

At Kuilei for instance developer Kobayashi can command about 30% more per square foot selling “affordable” one-bedrooms than they do selling three-bedrooms. That means either we need to offer higher valued exemptions, or the public will need to chip in.

Hawaii has the bones of a good affordable housing program. But if everything boils down to AMI, affordable housing will remain out of reach. It’s time for Hawaii politicians to look beyond the metric and instead focus on the goal.

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About the Author

Micah Hicks

Micah Hicks lives in Manoa and works as an engineer. 

Latest Comments (0)

Some interesting metrics and conclusions, however, aside from the AMI argument, is the cost of building any "new" condo building. From what I have learned the cost to build a new high rise is around $1K/sf, thus no matter how many bedrooms you can fit into a 1,000sf, the end cost the developer is $1M to produce. This number may flux some with tax credits, increased density and other government subsidies, but as a round number its still out of reach for most of the young working class.Note that truly affordable builders oft times retrofit older buildings, such as Queen Emma because the reno cost is far less than a new build and yields a better PSF cost. If the state wants to build new affordables they will need to start re-developing buildings in places like Mayor Wright housing in order to get the build costs low enough to provide the kind of gap housing desired. It should be noted that unionized building costs are part of the high cost of building new, along with, highest in the nation, supply costs. Since super PAC's like BCN have elected our politicians, don't look for these two factors to ever change.

wailani1961 · 2 months ago

Those who are in the lower income brackets can't afford "affordable housing" and those in the median to upper income brackets don't qualify to purchase due to other factors such as financial investments. The result is many "affordable housing" units remain unsold.

elrod · 2 months ago

As noted, "according to a housing market preference survey by the Hawaii DBEDT, most residents want at least three bedrooms." Having taken that survey, one can question its validity on the basis too preference: what do you WANT? I wanted 9 bedroom on Diamond Head (smile) rather than say I could but afford (2 bed condo in Kaimuki). An affordable housing expert blogged "studies the state has been doing for years about preference is a waste of money"). He went on to contrast this preference survey to a factual one based on actual household data, i.e., the 2020 US Census. That, he said, captured facts such as household income, household size and the age of the oldest in household. His data segmentation, and analysis of the 2022 data showed there are 25,400 one person renter households making under 60% AMI (thus, (qualifying for studios)(*60% is the lowest income families). He compared that to 11,500 households of 3 to 6 persons (thus qualifying for a 3 bedroom unit). Thus there was more than 2x an actual need (demand) for studios vs demand for 3 bedroom units (as opposed to preference). *60% AMI means making less than $70,000 combined for 3 people to qualify for a 3 bed unit.

rickycassiday · 2 months ago

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