Back on the Map
By Andrew Gomes
Advertiser Staff Writer
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After years of meager activity, the state is pumping up its pipeline of affordable housing projects constructed by private developers using public land and financing incentives.
The Hawai'i Housing Finance & Development Corp. is on pace to help deliver nearly 5,000 homes for rent and sale to low- and moderate-income residents over the next five years — a production level not achieved by the state since the early 1990s.
In addition to that, nearly 1,600 more homes could be built during the same period if agency trust funds are infused with roughly $120 million as is being proposed via several bills before the Legislature.
"We're kind of in a new paradigm," said agency director Orlando "Dan" Davidson. "We're going to get a lot of housing built."
The agency's plan for delivering 4,689 homes, or 6,293 with additional funding, between fiscal years 2007 and 2011 should mean significant relief for Hawai'i's affordable housing crisis and the many residents who have difficulty affording a place to live.
"The state needs to get more involved because they aren't doing enough," said Yvonne Ortiz, a Honolulu resident who said she almost became homeless last year because of rising rents. "People are having a hard time. A lot of people are becoming homeless."
The Hawai'i Housing Finance & Development Corp., or HHFDC, was formed last July after lawmakers split apart another agency that was charged with affordable housing development but was consumed by its other major task, managing public housing, because years of public housing neglect threatened a federal government takeover.
The Legislature also raided various affordable housing funds to the tune of $212 million between 1995 and 2005, which hobbled efforts to produce affordable units.
As a result, the state's prior affordable housing agency, the Housing & Community Development Corp. of Hawai'i, delivered only about 1,100 affordable units from 2002 to 2006 as home prices about doubled and rents became the highest in the nation. The result was an affordable housing crisis despite a thriving state economy.
WHAT LED TO CRISIS
Not since the early 1990s, when state efforts for developing affordable housing were the purview of a different agency, was there comparable production to 5,000 units in five years.
Charles Wathen, a developer and affordable housing advocate who is one of several HHFDC board members, said raiding affordable housing funds was shortsighted and has made Hawai'i's affordable housing crisis more acute.
The raided funds, he said, should have been used to buy rental buildings in the late 1990s when real estate was not hot, giving the state valuable inventory that would have softened today's affordable housing crisis.
"That old agency was sort of kicked around a little bit," he said. "That money was so valuable."
Today, Wathen sees that agency staffers who survived the bureaucratic consolidation and division are reinvigorated by their refocused mission and new leadership under Davidson, a former private industry development executive and attorney who was hired to lead the HHFDC in August.
"He brings to the table such a vast knowledge of development and land use," Wathen said of Davidson, who also has been director of a private Hawai'i landowner and developer trade association as well as deputy land director for the state Department of Land & Natural Resources. "I think he has fully energized that agency to produce housing."
The HHFDC produces affordable housing with two main tools, land and financing.
The agency's development branch solicits proposals from private developers to build affordable housing on state land. Free land greatly reduces the cost of homes, which are sold or rented at prices affordable to people usually earning 60 percent to 140 percent of a county's median income.
A financing branch allows developers to use forms of public financing, including tax credits and below-market loans, to subsidize the cost of building affordable housing.
Often land and financing programs are combined to deliver homes for a lower cost to tenants and buyers. The agency also is able to expedite permitting and provide general excise tax exemptions for developers, and provides mortgage assistance for first-time home buyers.
PROJECTS UNDER WAY
Among the more than 25 projects in the agency's development and financing pipelines:
Davidson said the HHFDC's creation last year sparked renewed interest from developers pursuing affordable housing projects with the state.
The agency's Rental Housing Trust Fund used to finance rentals has a $22 million available balance and developer applications for $59 million.
In the past, the agency and its predecessor have been criticized for not making use of all trust fund money, but Davidson said proposed projects will tap out the rental fund and the agency's Dwelling Unit Revolving Fund, which provides below-market construction loans.
"We're not going to leave any money in the (funds) laying around," he said.
Davidson added that if the Legislature stokes the funds over the next two fiscal years, all additional money should easily be used up.
Of still-pending bills, the richest potential boost for HHFDC funding is proposed in House Bill 668, which would appropriate about $120 million to the agency's two main funds as well as $20 million to a fund providing construction financing for rental projects and $8 million that could provide down-payment loans to first-time homebuyers.
Another bill, House Bill 150, would deliver $60 million into the Rental Housing Trust Fund over the next two fiscal years, and would increase to 65 percent the share of conveyance taxes that go into the fund. The rental fund's share of conveyance taxes last year was increased from 30 percent to 50 percent but only for one year.
Gov. Linda Lingle's administration in its budget is also requesting that $50 million be put into the rental fund over the next two fiscal years.
Reach Andrew Gomes at agomes@honoluluadvertiser.com.
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