A nonprofit developer trying to build rental loft housing on state land in Kakaako for low-income artists has overcome a big financing hurdle to put the roughly $37 million project in good position to break ground next year.
The board of a state agency that facilitates affordable-housing development voted unanimously Thursday to issue tax credits for the planned 84-unit apartment building called Ola ka ‘Ilima Artspace Lofts where monthly rent is expected to start at $437.
The approval was a linchpin for the developer, a Minneapolis-based nonprofit called Artspace, being able to finance the eight-story building that has been in the works for more than three years.
"This is the critical financing step in this project," said Greg Handberg, Artspace’s senior vice president of properties. "This is the hurdle. We’re off to the races."
The Hawaii Housing Finance and Development Corp. approved $2.1 million in tax credits — $1.4 million in federal credits and $712,500 in state credits. The credits can be claimed annually for 10 years, giving them a face value of $21 million. The developer expects to net about $16 million selling the credits to investors.
Other pieces of financing already in place include $1.9 million granted by the Legislature earlier this year and $1 million allocated by the city last year.
Artspace still needs to sew up a few other pieces of financing, including a $4.5 million loan being sought from HHFDC’s rental housing trust fund, though the tax credit approval is expected to make obtaining loans easier because it provides a large piece of equity in the project.
"It’s really viewed as gold," Darren Ueki, HHFDC finance manager, said about the tax credits. "It’s a huge hurdle."
Artspace, which is working with an affiliate of nonprofit EAH Housing on the loft project, anticipates that it can start construction next year and finish in late 2016.
As part of the tax credit financing arrangement, the lofts would be affordable for 65 years and restricted to households earning 30 percent to 60 percent of Honolulu’s median income.
The income limits equate to $20,150 for a single person or $40,260 for family of four at the low end, and $28,750 for a single person or $57,480 for a family of four at the high end.
Monthly rent is projected to range from $437 to $1,334. About half the units would rent for $800 to $1,000 per month.
Artists receive a preference for tenancy and are selected with help of a committee of artists who do not judge the quality of art from prospective tenants.
Artspace, which has developed 36 artist housing projects in 14 states since being founded in 1979, said federal fair-housing law supports housing for artists as a special group covered under the law.
A broad spectrum of art qualifies tenants to live in Artspace projects, including literature, photography, architecture, singing, dancing, filmmaking and acting. Even workers such as technicians, administrators and teachers who help produce or support art can qualify.
The local nonprofit PA’I Foundation is also involved in the project and will manage ground-floor space for Native Hawaiian art performances and education along with other community uses.
Artspace has been working on Ola ka ‘Ilima for three years, and in April 2011 was given exclusive rights to negotiate a lease for a 30,000-square-foot lot owned by the Hawaii Community Development Authority on Waimanu Street makai of the Pacifica Honolulu condominium tower.
HCDA, a state agency regulating development in Kakaako, has extended its negotiation window with Artspace a few times given the challenge of obtaining tax credits awarded by HHFDC on a competitive basis.
Last year, Artspace failed to secure tax credits due to HHFDC shifting the timing and criteria of its program. The developer has said that producing low-income housing for artists usually takes three to five years because tax credits are typically the financing backbone.
