Developer Howard Hughes Corp. objected Wednesday to a suggestion it keep rents low on a proposed affordable apartment project in Kakaako for 30 years instead of the required 15-year minimum.
"We are concerned that 15 years is not enough time to raise a family," said Bob Nakata, representing affordable-housing advocacy group Faith Action for Community Equity.
David Striph, Hughes Corp.’s senior vice president in Hawaii, said renters would save about $1,000 a month, which they could put toward a future home purchase. Striph said the subsidy amounts to $3.3 million a year, or $54 million over 15 years, and that asking for twice as much isn’t fair.
The question came up as Hughes Corp. asked the Hawaii Community Development Authority, the agency regulating development in Kakaako, to amend a permit the company has to build a condominium tower with moderate-priced units for sale so that it can instead rent affordable units in the planned tower.
The $200 million project, named 988 Halekauwila, is designed to satisfy an HCDA rule requiring moderate-priced homes as part of a larger master-plan of Hughes Corp. to develop up to 22 towers in Kakaako.
Rentals or for-sale condos are both allowed under the HCDA’s rules. But some board members suggested at an April 8 hearing that maybe Hughes Corp. should keep the rentals affordable for 30 years instead of at least 15 years specified by agency rules applying to the developer’s Ward Village master plan.
Hughes Corp. representatives emphasized that its rental proposal will deliver three times as much affordable housing quicker than it could choose to do if the board denies its request.
"The increase in the benefit to the community is huge," Race Randle, vice president of development in Hawaii for Texas-based Hughes Corp., told the board. "We will end up subsidizing a lower housing cost for 375 residents for 15 years."
Randle said the company is only required to start building 125 moderate-priced units around 2019, or two years after a pair of market-priced towers under construction are finished around 2017. So it could be 2021 before those 125 units are done, compared with a 2018 delivery of 375 affordable rentals that could break ground by year’s end.
The 988 Halekauwila tower, with 375 moderate-priced units, is proposed to deliver almost half of the developer’s mostly future obligation to make 20 percent of all residential units in its 4,300-home Ward Village plan affordable to residents with moderate incomes.
Several representatives of the construction industry along with a couple of Ward Village retailers spoke to the board at Wednesday’s hearing expressing support for the developer’s plan.
HCDA board member Tom McLaughlin asked Hughes Corp. officials why they can’t provide a way for renters to earn some equity in the tower to possibly buy a unit after 15 years.
Hughes Corp. needs five HCDA board votes to approve its rental plan. There are only seven members appointed to date. Two seats are vacant. HCDA members Tom McLaughlin, Steve Scott and John Whalen have expressed concerns about the plan.
One of the concerns is that Hughes Corp. could convert the rental units to condos for sale after 15 years and reap bigger gains on what would likely be homes worth more than if they were sold now as condos.
Hughes Corp. reiterated that someone who buys a moderate-priced condo under HCDA rules may resell it at a market price within two to five years, which eliminates affordable units much quicker than rentals.
Another difference between HCDA’s moderate-priced condo and rental rules is the income limit for residents.
Such condos are reserved for residents earning no more than 140 percent of Honolulu’s median income while rentals are reserved for residents earning no more than 100 percent.
Income at 140 percent equates to $85,200 for one person or $121,700 for a family of four. At 100 percent, the comparable limit is $60,850 or $86,900.
Hughes Corp. previously said it requested the change from condos to rentals after a market study commissioned from The Concord Group showed that Oahu has roughly eight times as many households qualified to rent (74,128) as qualified to buy (9,330) under HCDA requirements that also include asset limits.
Striph added Wednesday that financing 988 Halekauwila as a condo is more difficult, and that the company was rejected by a lender that helped finance its two market-rate towers, Waiea and Anaha.
Randle added that if the company is not allowed to make 988 Halekauwila rentals then it will seek to provide its required affordable housing some other way.
An HCDA vote on the developer’s request was scheduled for Wednesday, but Hughes Corp. asked that a decision be deferred. A new decision-making hearing is scheduled for May 13.
