Jenelle Peralta would like a place of her own. But like many other full-time workers in Honolulu, Peralta simply can’t afford one. Even the housing developed, rented and sold under state and local affordable housing policies is way out of reach.

“I’ve definitely heard about affordable housing, but I’ve never seen anything I can actually afford,” said Peralta, who lives with her family in ʻEwa and commutes to her full-time job as medical assistant at a doctor’s office in Makiki. “It’s gotten to the point where I’ve accepted the reality that I can’t afford my own studio.”

Peralta’s experience underscores a painful reality for thousands of workers – teachers, retail and tourism workers, medical assistants and others – who make up the backbone of Hawaiʻi’s economy. Housing meant to be affordable simply isn’t.

A Civil Beat analysis of wage data for selected occupations shows a big gap between what people actually earn and the key income benchmark used to set affordable housing prices. 

The analysis also shows that a root cause of the disparity is the benchmark itself. The calculation  – which pegs Honolulu’s median income for one person at $107,800 – is detached from the reality of the employment market. 

To be sure, people in many occupations earn $107,800 or more – and have enough money to pay for “affordable housing.” But for rank-and-file workers such as Honolulu’s 2,700 medical assistants, including Peralta, who typically earn around $49,000 a year, state and local affordable housing policies have simply left them out.

“It’s upsetting because as a local growing up here, I would have thought they would make it more accommodating for regular people who don’t have jobs with extravagant incomes,” she said.

Key Income Metric Includes Cost Of Housing

Known as area median income, or AMI, the benchmark at the center of state and local affordable housing policy on its face would seem to measure income. It doesn’t. 

Steven Bond-Smith studies economic development as an assistant professor with the University of Hawaiʻi Economic Research Organization. The U.S. Department of Housing and Urban Development starts with some income data then uses a complicated formula that also factors in Honolulu’s high residential rents to determine AMI, Bond-Smith said in an email.

The result, he said, is that “the $107,800 is constructed from market rent rather than measured income.” 

In other words, area median income is simply a technical term that doesn’t mean what it seems to.

“It is a program eligibility threshold driven by Honolulu rents, not an income measure (even though it is called AMI),” Bond-Smith said.

In essence, HUD reverse engineers AMI in part by concluding that, if people are paying that much for housing, they must have significant incomes.

Under state and local affordable housing policies, developers can receive a variety of incentives to help their projects pencil out if they set aside some of the new housing for people at certain AMI levels. 

Under a Honolulu land-use ordinance passed in 2019, for example, developers can build bigger and higher than zoning laws would normally allow by agreeing to rent at least 80% of the new units at 100% AMI for at least 15 years. In dollar terms, that means a studio in one of these projects can be rented for $2,696 per month and a two-bedroom apartment for $3,465, and be considered affordable.

Housing built under a state affordable housing statute can cost renters and buyers even more. Under the law, which is administered by the Hawaiʻi Housing Finance and Development Corporation, developers can be exempted from all manner of state and county land-use laws if they price at least 50% of the units at up to 140% of AMI. 

That means a studio can be rented for up to $3,773 a month and be considered affordable.

HUD officials declined interview requests.

Dean Minakami, executive director of the Hawaiʻi Housing Finance and Development Corporation, said part of the reason for the high AMI number is that HUD wants to make sure people with higher incomes can qualify for housing developed under its federal low-income tax credit program, which HHFDC administers. 

Developers can get tax credits amounting to equity to help finance such projects. In exchange the housing must be rented out at an average of 60% of AMI. 

While the higher AMI might allow more people to qualify for such housing, the flip side is that developers and landlords also can charge higher rents. 

While the state’s affordable housing statute lets landlords charge rents based on people who make as much as 140% of AMI, there’s a natural economic curb on that: the rents the market will bear, Minakami said. 

“The benefit is that it allows households that earn up to 140% AMI to have a place in that project,” he said, “but the actual rent would probably be around 100% because that is what the market dictates.”

Many Occupations Are Priced Out

To see what this means for masses of Honolulu workers, Civil Beat analyzed wage data published by the U.S. Department of Labor for selected occupations within some of Oʻahu’s largest industries: leisure and hospitality, healthcare, education and retail trade. 

Occupations were selected based on numbers of workers in the industry. The mean wages for those occupations were then compared to AMI tables to show the gap between annual wages and the AMI used to set affordable housing prices. 

Dave Kong, an economist and regional spokesman for the Bureau of Labor Statistics in San Francisco, noted that the BLS wage data shows only what people earn from their jobs. It doesn’t include income from things like investments and rental properties. In addition, while a medical assistant’s annual wages might not come close even to 60% AMI, they might have income from other jobs.

Still, the wage data shows that many workers in some of Hawaiʻi’s largest industries simply don’t earn enough to afford affordable housing.

Consider education workers. Honolulu’s 1,380 preschool through secondary school administrators tend to do OK, with a mean annual wage of $123,900, according to the labor statistics bureau.

The same can’t be said of Honolulu’s 4,220 elementary school teachers, who according to the labor bureau earned a median of $70,090 annually – well below the 100% AMI mark of $107,800. In fact, “affordable housing” would have to be priced at 70% of AMI to be affordable for elementary school teachers. 

Restaurant workers face the same mismatch. While Honolulu’s 680 restaurant and bar managers earned an annual mean wage of $87,350 – with those at the upper end of the occupation making as much as $123,440 – Honolulu’s small army of 54,350 cooks and servers didn’t do so well. Their median annual wage was $46,170. To be affordable for them, housing would have to priced at 40% of AMI rather than 100%.

Lawmaker: More Housing Is The Answer

As chairman of the House Committee on Housing, Hawaiʻi Rep. Luke Evslin often hears about Hawaiʻi’s AMI benchmarks. But Evslin says it’s not something he focuses on much because the number is set by the federal government and outside of the Legislature’s control.

Instead, Evslin promotes building homes of all types for residents with the idea that increasing supply across the board will make more homes available and lower costs. 

Promoting so-called “affordable housing,” Evslin said, “is good to a point, but it’s not the entire solution.”

Economists with UHERO agree that new inventory, regardless of price, leads to lower prices in general.

In March, UHERO published results of a working paper co-authored by economist Justin Tyndall looking at what happened after a 512-unit condo called The Central opened near Ala Moana in 2021. Developed under the state’s affordable housing statute, The Central included 69 units for people earning 80-100% of AMI, 122 units for 101-120% of AMI and 119 for 121-140% of AMI. The rest were sold at market prices.

The paper carefully tracked the chain reaction, known as housing filtering, that happened when people bought condos at The Central. The new buyers freed up less expensive local homes for others to move into, which freed up even less expensive homes for others, and so on. 

“The homes vacated by households relocating to The Central were approximately 40 percent less expensive per square foot than the units in The Central itself,” the study found. “These results illustrate an important feature of filtering: newly constructed housing does not need to be inexpensive in order to contribute to broader affordability improvements. The new supply expands housing opportunities throughout the market.”

All of this might be academic to workers like Jenelle Peralta, the medical assistant.

Peralta says she’s happy with her job. She gets paid around $46,000 annually, the going rate for certified medical assistants in Honolulu, along with bonuses and benefits. She’s working to get more credentials with the goal of eventually becoming a doctor. 

“I’m hoping to go to medical school,” she said. “But everything’s just so expensive.”

Civil Beat’s reporting on economic inequality is supported by the Hawaiʻi Community Foundation as part of its work to build equity for all through the CHANGE Framework; and by the Cooke Foundation.