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Monday, June 19, 2000

State seeking
to end affordable
housing policy

Critics say market changes
make that requirement for three
communities too restrictive now

By Rob Perez


The state housing agency wants to eliminate a 60 percent affordable housing requirement imposed on developers who build in three state-planned residential communities.

The requirement was the centerpiece of former Gov. John Waihee's housing policy from the late 1980s and '90s, but critics now say it is too onerous in a housing market that is vastly different.

The Housing and Community Development Corp. of Hawaii last week decided to ask the state Land Use Commission to drop the requirement that developers in the villages of Kapolei on Oahu, Leialii on Maui and Laiopua on the Big Island build 60 percent of their homes as affordable by state standards.

Instead, the HCDCH wants the commission to leave any requirements for affordable housing in those communities to the counties, as is the case now with private developments needing land reclassifications from the commission.

The county requirements, which differ from county to county, are not nearly as stringent on developers.

"I think this is a good move," Dan Davidson, executive director of the Land Use Research Foundation, which represents major landowners and developers, said of the housing agency's plan.

But he said the state agency still needs to be cautious about how much of a role it plays as master developer, especially if the Maui and Big Island developments take off.

Faced with soaring home prices and a shortage of affordable housing, the Waihee administration sunk millions into planning the three master-planned communities. Roads and sewers were built to ready them for housing. The idea was to sell large parcels to home builders, who would be required to make 60 percent of the units affordable to people earning 120 percent of the area's median income. Sales from the 40 percent of homes priced at market rates were to subsidize the cost of the affordable units.

The policy met with mixed success.

Kapolei has about 2,500 homes today, but the two neighbor island developments largely have been on hold because the state for now is unable to sell ceded lands, property once owned by the Hawaiian kingdom and held in trust for the benefit of native Hawaiians. The Maui and Big Island projects are on ceded lands.

Even if the ceded land issue wasn't a factor, the 60 percent requirement makes land in the three communities virtually impossible to market, said Ron Lim, Gov. Ben Cayetano's special assistant for housing.

Part of the problem is that the 60 percent policy includes restrictions dealing with appreciation and resale of the homes -- restrictions that a developer wouldn't have if it built a strictly private project, Lim said.

And because the general market has shifted to more affordable homes, the 60 percent policy would make developments in the state-planned communities uncompetitive, he said.

"A buyer would be crazy to buy our land with all those restrictions," Lim said.

Supporters of the 60-40 policy say it enabled many families to purchase homes they otherwise wouldn't have been able to afford, especially during the height of the real estate market.

But critics said the government had no business being in the housing business.

Even in a good real estate market, the 60-40 policy didn't make sense, Davidson said. "In a bad real estate market, it's just an impossibility from a financial point of view."

Lim said he expects the requirement to be eliminated before the end of the year.

If that happens, about a dozen small parcels in Kapolei that are earmarked for multifamily housing would become more marketable, Lim said.

It hasn't been determined how such a policy shift would affect the last two planned housing projects -- villages 7 and 8 -- in Kapolei that have been on hold because of the sluggish market.

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