Use developers’ fees for purposes of affordable housing

THE ISSUE The city auditor reports that fees paid by developers so they can be relieved of affordable housing requirements are being transferred to the city's general fund.

When the city's department of housing and community development was shut down nine years ago following a corruption scandal, its function of encouraging affordable housing shifted to the Department of Planning and Permitting. However, a city audit has questioned whether the transfer was successful, and the City Council needs to assure that city revenue best suited for advancing affordable housing will be spent that way.

The former city housing office was closed after staff members were caught engaging in a bid-rigging scam in which the city paid $5.8 million to various companies in Ewa Villages. That "resulted in the awkward division of its functions among existing departments," according to a report by city Auditor Les Tanaka.

The audit focuses on the deposit of at least $3.5 million of nearly $4.5 million collected since 1992 from developers to the city's general fund instead of being used for affordable housing. The revenue came from fees paid by developers for being relieved from requirements that they include affordable housing in their projects.

Under the old system, the revenue went into a fund that could be used to provide grant, credit or cash subsidies to low-income buyers of homes in such projects. Since then, the money was to be spent on general housing for sale or rental, with no requirement of affordability, but instead was transferred to the city's general fund to be used for unrelated activities, according to the audit.

Henry Eng, the planning department's director, maintains that nearly $3.3 million from the fund was spent on maintaining existing affordable housing. Tanaka said that claim is not supported by city finance files or by "a former administration memorandum" detailing lapses or lack of expenditure for those purposes. Mayor Mufi Hannemann has said the city spends $3.5 million a year on upkeep of 12 housing projects, which he wants the city to sell.

Tanaka is not alleging impropriety, just a failure to use common sense as a matter of policy. "The net effect of the current situation," he said in the report, "is that the city is accepting cash payments from developers instead of actual housing units built and that those monies are not spent on affordable housing-related initiatives."

Tanaka's main recommendation is that the City Council clarify the ordinance pertaining to the fund by specifying whether using revenue from the fees for affordable housing purposes should be an option or a requirement. The Council is considering a series of bills and resolutions relating to affordable housing, and Tanaka's recommended legislation should be at the top of the list.