Building up Hawaii’s inventory of affordable homes has been a goal of state policy for years, and the pursuit has grown even more heated in the run-up to the last election.
There was a $600 million cash infusion for Hawaiian homesteads to narrow part of the housing gap, for example, and the affordability issue was a unified theme of many campaign platforms, including that of Gov. Josh Green.
It looks like that conversation needs to ramp up again — this time around the failure of the state to fully implement a regulatory “buyback” tool aimed at keeping more units in Kakaako within an affordable price range.
The discussion, and follow-up action, must happen among board members governing the agency at issue: the Hawaii Community Development Authority (HCDA), a semiautonomous agency created in 1976 to manage the redevelopment of Kakaako, what was seen as a community with vast potential. There are also lawmakers representing the district, including House Speaker Scott Saiki, who should help troubleshoot all this. The governor also must be summoned for ideas.
The urban Honolulu shoreline location is an easy sell to residential developers, but special curbs were needed to keep condominium inventory affordable to Oahu’s middle-income workforce population. Otherwise, the characteristically tight supply of units in such a desirable area would inevitably lure buyers intent on flipping the sale to capture a quick profit.
What resulted was a patchwork of HCDA “buyback” rules attached to “reserved” units meant for sale to qualifying owner-occupants who meet income restrictions.
These rules vary among the projects — HCDA approved some rules as part of master plans for Howard Hughes and Kamehameha Schools developments, for example, and these apply specifically to each. The agency’s board approved other, general buyback arrangements later.
The terms set a period ranging from two to 10 years, depending on the project, during which owners are discouraged from selling or renting out their unit.
If they do want out before the end of the term, the rule requires the unit to be offered first to HCDA, which would buy it at a below-market rate set by a formula and then find a new qualified buyer.
The problem? Over many years, this hardly ever happened. Under the rule, HCDA is given first right of refusal, but the authority has been waiving it. The reason: a lack of staff and financing to manage the transactions.
What’s exasperating is the authority’s unpreparedness for this function. The buyback approach dates back at least to the HCDA Mauka Area Rules, adopted in 2005. The fact that the agency did not stand up the operation to deal with buybacks up until now is unacceptable.
Instead, HCDA tried enlisting another state office, the Hawaii Housing Finance and Development Corp. (HHFDC), as its agent to handle buybacks and resales.
This did have some logic: Financing housing is within the wheelhouse of the HHFDC, which has managed a total of five buybacks through 2019. But COVID-19 added uncertainty to the process, and HHFDC since has concluded the task is infeasible.
In December, the HCDA board approved changing the rules to allow a private nonprofit to take over the buyback and resale tasks. If a deal with such an agency can be struck, the aim of keeping housing affordable could fit well within the nonprofit’s own mission — and would help the state keep its decades-long promise of reserved housing stock in Kakaako.
But there are many more unknowns, including the full scale of the problem. Currently 501 reserved units are within the buyback window. If the nonprofit route doesn’t yield a solution, it’s up to the two state agencies involved to find one, without any further delay.
