Honolulu’s need for more and more affordable housing isn’t debatable, yet it attracts a great deal of discussion. Some of it is confused and much of it is confusing. The confusion begins with how “affordable” is defined.

Kuilei Place, a newly proposed 1,005-unit condominium development along Kapiolani Boulevard in Moiliili, with 60% of its for-sale units to be affordable to households with moderate and high-moderate incomes, offers reason to reexamine the concept of affordability in Hawaii.

The state agency tasked with oversight of affordable housing projects, the Hawaii Housing and Development Corporation (HHFDC), is facing criticism for being overly generous, most notably for the extreme height (400 feet) and zoning exemptions (worth approximately $40 million) granted to the proposed project’s developer, Kobayashi Group LLC. HHFDC documents show the total project budget at $619 million and total estimated revenues at $765 million.

More will be disrupted than the neighborhood’s skyline, starting with the lives of the current residents renting 141 low-rise, 60-year-old apartment units. They will face eviction (in exchange for two months of free rent) to allow the 3.2-acre project to be built.

With land for development limited, making housing affordable will always be challenging. Kuilei Place addresses a pressing need for home ownership opportunities for middle-income residents. Yet the project also misses sectors of Honolulu’s population that most need affordable housing.

Most jurisdictions define affordable housing as that meant for those earning less than 80% of area median income (AMI). Moderate or middle-income housing targets those between 80% and 120% of AMI. Hawaii has stretched the affordability band to 140% of AMI.

Of the 603 affordable units proposed for Kuilei Place, only 13 single-bedroom units (measuring 538 square feet, versus 645 square feet for units offered at unrestricted rates) will be available to buyers making 80% of AMI. Another 28 units will be for buyers making 90%. Affordable two-bedroom units start at 100% of AMI, but only 49 of the 382 units are so priced. The 73 affordable three-bedroom units start at 120% of AMI. The developers have also submitted an alternative plan where 165 of the 603 affordable units are offered as rentals.

The problem is broader than the choices developers are offering. As its name suggests, area median income varies by area.

The U.S. Census Bureau’s most recent estimates of median household income reveal neighborhood disparities. Its 2020 data show Honolulu County at $87,722. The level for East Honolulu is far higher: $139,487. Aiea ($114,961) and Pearl City ($101,517) are better off as well. Urban Honolulu, where demand for “affordable” housing is greatest, has a median household income of $72,454.

Current affordability discussions overlook two other important points. The first is interest rates. A buyer of an affordable two-bedroom unit at Kuilei Place would be asked to pay $664,666, according to documents submitted to HHFDC. A 20% down payment on that unit would come to $132,933. The monthly payment on a 30-year mortgage on the remaining $531,733 would have been $2,242 at a 3% interest rate. At 6.5% interest, it jumps to $3,362 monthly, resulting in a buyer paying back over $1.2 million in total.

The second point is that AMI calculations ignore management fees. They rise with inflation and with time, because as a building ages, more upkeep is required.

Creating affordable housing is a vital goal. The ability to do so will determine Honolulu’s future. But what is built will also need to be truly affordable, meaning within realistic reach of many more local residents, especially those in the areas it targets.

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More online: The Hawaii Economic Association (hawaiieconomicassociation.com) is sponsoring a webinar on affordable housing on Thursday.