As new, luxury glass highrises in Kakaako open for residents, Stanford Carr is seen as the builder for the other end of the income spectrum.
Of course, he said, he can manage to get his low-income rental projects such as Halekauwila Place only by pairing it with the more market-priced tower rising next to it, Keauhou Place, which also will include townhomes and retail at street level.
Housing is needed at that price point, too, said the president of Stanford Carr Development. But it’s the low-income rentals that are needed for many people in high-cost Hawaii. And the hurdles to secure the federal and state financing are high.
“You have to go through an entire proctology of asset check, credit check, you name it,” he said with a laugh. “Most people are going to say, ‘I’m not going to do this.’ Because it’s open kimono.”
Ultimately, the return on investment that transit-oriented development can yield for workforce housing and retail is why Carr is an ardent booster of the rail project.
The Maui-born Carr likes to spend what free time he has with his wife and family. But making this kind of development pencil out is an all-consuming job, and Carr plans to work with other developers to teach what he’s learned.
It’s challenging, he said, but the work can produce real improvements in life quality for working people.
Kewalo Place, his next Kakaako affordable project set to break ground next spring on Piikoi Street, should help renters find homes close to their work in town.
“That will allow someone who works at Ala Moana Center to live and walk to work,” he said.
QUESTION: Are there any policy changes that would help make affordable housing easier to produce?
ANSWER: We’re all trying to work on that. We had some legislative bills that became law last year that will be very helpful in producing more workforce rentals.
Q: Can you talk about that?
A: One of the bills was to accelerate the low-income housing tax credit program… so that purchasers of the state low-income housing tax credits can use those credits to offset their tax liability over a 5-year period in lieu of 10. …
This is piggybacking on the Internal Revenue Code, Section 42, which was established in the 1986 Tax Reform Act to build more workforce rentals across the country. These are rentals that serve families earning 60 percent of the area median income (AMI) or less.
But you know, that’s a single person making $42,000 a year. But in Hawaii, because of our cost of living and our median rents, it’s considered low income.
Our Halekauwila project, I like to say that 100 percent of our residents represent about 80 percent of our workforce.
Q: Interesting. In other words, a lot more people qualify for that housing?
A: A lot of people do qualify. There’s a huge demand and need for it, the necessity to build more of this inventory. But there’s even a greater demand to build above 61 percent, 61 to 100 percent AMI, for families that don’t quite qualify to purchase a home, but have very little options as to what is out there for rent inventory.
And one of the largest inventories of rental units is privately owned, investor-owned condominiums that are rented out at market rates. The unfortunate thing is the market dictates those rent levels …
Everyone’s competing for the same rental inventory. That leaves those renter households with less money, because they more than likely did not receive a raise in pay scale proportionate to what the increase in rent is, and will have that much less discretionary, disposable income, or need to find an alternative apartment to rent at a cheaper or lower cost, which sometimes requires them to move out of the urban core to the suburbs, right? Then they have to commute more. …
What’s important to know about this program is you have an income restriction to move in there. There’s an asset test, they verify your tax returns, bank accounts. Because these are tax credits with the IRS. We have to comply. So we’re completely at risk on whether we capture those taxes if we fail to do our job properly …
Q: So the qualifications review of the applicants is …?
A: Pretty stringent. We have to comply with it for a 15-year period.
Although the tax credit is for 10 years, the compliance is 15.
Q: And now the tax credits will be for five years?
A: For the state program. The federal program continues at 10 years, because Congress would have to change that, and the U.S. Treasury Department.
Q: And do you know if there is any move afoot to do that?
A: No.
Q: Is this more of an issue for us than other states?
A: It’s more of an issue for Hawaii because of our high costs of land and, more importantly, construction costs. Everything needs to be imported. So our challenge is at times the freight costs more than the material itself.
And that’s why in Hawaii you don’t see production rentals, as you do with our counterpart states on the mainland.
And it gets tougher and tougher, as there are new regulatory issues. More recently, because of Hurricane Sandy, there are new FEMA (Federal Emergency Management Agency) maps, and they’ve adopted new policies … and they’ve lumped us into the same category as the contiguous 48 states.
We get caught in the crossfire of what happened in New Orleans, or the East Coast or Dade County, Fla., while we’re surrounded by water.
Q: Meaning, the maps now extend farther?
A: Farther into Kewalo, Kakaako area, which requires us to go through further steps, through both HUD (federal Department of Housing and Urban Development) and FEMA, in order to get the necessary approvals to build.
Q: That happened since Sandy?
A: Yes. We are the first. Hale Kewalo is the first project to be faced with this challenge.
Q: There is no exemption possible?
A: There is an exemption, but FEMA denied us the exemption; we have to go through a HUD eight-step process. …
Q: Do you think this is what discourages other developers from pursuing this niche?
A: Yes. It’s the risk, it’s the time consumption necessary to put these complicated financial structures together. There are a lot of moving parts. There’s a lot of personal and financial risk, with very little reward.
However, this is our business; this is what we do. We’re very comfortable in our space. If we don’t do it, I would say, who will?
Q: Well, that’s a good question. Do you think there’s room in this market for more developers doing what you’re doing?
A: Oh, a whole lifetime worth. This is a platform we will always continue to build on. … History will repeat itself. There will be a time we’re going to go into a recessionary down cycle. We’re going to be able to continue to have people work.
We built Franciscan Vistas in Ewa, which serves basically fixed incomes from 60 percent down to 30 percent AMI. Brand-new one-bedroom apartment was $500 a month rent. …
We triggered the construction loan in 2009, in the midst of a deep recession. We finished 150 senior rentals in June 2011. So it provided much-needed construction jobs during that period and, more importantly, enabled us to stretch the dollar further because everybody was hungry for work.
Q: Do you think projects like this would help balance the portfolio for other developers?
A: Absolutely.
What we’re trying to do is come up with different tools, create tools in the toolchest, to incentivize and make it easier for developers like myself to build more of this.
It’s going to take public-private partnerships. It’s going to take free land. It’s going to take long-term ground leases with state lands or city lands to enable us to build in the urban core. And it’s still not easy.
