The state has taken the first major step toward addressing its distressing housing shortfall in providing rentals for people lower on the income scale, with the passing and now enactment of House Bill 2748. The measure, signed Friday by Gov. David Ige, is expected to generate $570 million for the development of thousands of new affordable apartments.
It is a significant advance, because it removes the key stumbling block of financing availability, the lack of which has held up numerous projects in the pipeline of the Hawaii Housing Finance and Development Corp. (HHFDC), the agency that puts such development projects together.
However, even as supporters rightly celebrate this progress, many of them also tack on a cautionary note: Care must be taken to spend the money in such a way that directs enough attention to the most serious housing need.
Much of the benefits in this legislation package could apply to the financing of units affordable to those earning a maximum of 140 percent of AMI (area median income). That amounts to $77,000 for an individual and $109,900 for a family of four.
Lawmakers unofficially dubbed the measure “the Bob Nakata Act,” after the former lawmaker and now housing advocate who lobbied strenuously for it.
Nakata expressed relief that the bill was enacted but is among those watching the distribution of the funds. The HHFDC must act quickly to move out projects that have been bottled up for lack of financing, but still must ensure needier families are served, he said.
He’s right to be concerned. The greatest part of the housing shortage, many experts agree, is for residents who earn between 60 and 80 percent of the area median income, or less.
The bill, now known as Act 39, provides $200 million of the funding through an appropriation for the state’s Rental Housing Trust Fund.
This is a cache to fill gaps in project finances, which usually involve a “stack” of state, federal and private sources. Compared to the $25 million the fund received in state monies last year, the move to ramp up the state’s share by that much is receiving well-earned applause.
It’s envisioned as enough to fund about 1,600 affordable rental housing units for those in that 60-80 percent AMI group: families of four with a yearly income of $62,800.
But besides the direct allocation, the law enlarges an incentive for developers by expanding a tax exemption that will help underwrite the construction of rental units for families at or below 140 percent of AMI.
By law, at least 20 percent of those units must be at or below 80 percent of the area median income. The exemption to the general excise tax was created last year and was capped at $7 million each year. That ceiling has been raised to $30 million each year and is now authorized through 2030.
Over 12 years the law is anticipated to enable construction of 24,000 new rental units through an infusion of $360 million, in conjunction with other funding sources. Additionally it injects $10 million into the state’s Dwelling Unit Revolving Fund, providing interim financing. That includes paying financing interest charges on bonds and infrastructure costs.
HHFDC will have its hands full with oversight and managing the funding. The agency also must work cooperatively with county and state agencies to see that infrastructure — additional sewer capacity, in particular — is provided for such a mammoth housing expansion. Long-awaited projects will be held up further if that is not done.
The state’s acute homelessness problems surely strengthened the political will necessary to push Act 39 over the finish line, to give housing the boost it’s need for so long. Truth be told, though, this is the starting line of another marathon effort to produce the actual homes. Now is the time to stay focused on that, the ultimate prize.
