A key to permanent affordability

In my last column, I described Kaua‘i’s urgent need for affordable housing, explained how meeting that need could improve many aspects of life on Kaua‘i, and outlined a strategy for solving our housing problem.

In today’s column, I review and expand that strategy and explain why permanent affordability is the key to solving our housing problem.

An affordable housing strategy in review

• Developers should be required to provide a certain percentage of affordable homes within each approved development. Approximately 20 percent of their units should be for families between 80 percent to 120 percent of the median income (currently defined as $60,900 for a family of four).

• Additionally, developers should dedicate land within their projects for rental or limited equity cooperative housing for families below 80 percent of the median income. The county, nonprofit developer or the landowner should provide housing for 10 percent of the families in the development. Density bonuses could be granted to developers to offset some of the burden.

• We should require permanent affordability for homes developed under the county’s affordable housing policy.

• We should help aspiring homeowners become “mortgage ready.”

(Those interested in becoming “mortgage ready” should come to the last Housing Educational Fair this Saturday, from 9 a.m. to 1 p.m. at Waimea Theater.)

Two additional elements of a good housing strategy

• The county should incorporate “smart growth” policies in its planning by limiting growth to certain areas on the island and providing infrastructure to those areas. By focusing growth in compact areas and creating well functioning and livable communities, the county will be able to make optimal use of its limited capital and provide infrastructure such as water sources, transportation systems, and wastewater facilities to those growth areas. In this way, we could ease some of the infrastructure burden on developers in exchange for development that truly benefits the larger community.

• The county should not sell or allow the sale of subsidized affordable houses on the open market when Kaua‘i is in a “down cycle,” because an “up cycle” is just around the corner. Around 1981 when visitor occupancies dropped dramatically due to a United Airlines strike, a family could get an ocean view, long-term rental for $400 per month, so many moved out of Princeville’s employee housing project. The county approved Princeville Corporation’s request to turn its half-empty employee rental units into market condos. Six years later, the market turned and affordable units were needed, but Princeville’s units were no longer available as affordable units. Today, in an area that desperately needs affordable housing, those units are selling for $400,000.

Permanent affordability is a key to solving our housing problem

For many, the most difficult part of the affordable housing equation is the concept of permanent affordability. Some people feel that if you can’t re-sell a house on the open market, you’re not getting home ownership.

Under a permanent affordability (also called “limited equity”) concept, a person or family buying a unit is able to live in their house, apartment, or townhouse all their lives if they want to, and pay no more than 30 percent of their household income for mortgage or leasehold rents. They would be able to take tax deductions on real property and mortgage interest payments and pass their unit on to an heir willing to live in the unit. If they chose to sell their unit, they would be entitled to their equity, the change in market value for the original improvements, and market value for any new improvements. If they wanted to move into a larger or smaller affordable unit, they would have priority since our affordable housing inventory would include an abundance of homes in each bracket.

As the above example demonstrates, the main property “right” that a homeowner would not have is the right to sell the house for high profits on the open market. This is necessary in order that a qualified family be able to purchase the unit. In short, that restriction keeps the house affordable.

Providing an affordable house to a qualified family is estimated to cost the taxpayers or developer approximately $250,000 per house and lot. In the past the county has imposed a 10 year buy-back clause on its affordable housing projects to protect the public’s investment and to discourage speculation. If a qualifying family sells its home within 10 years of buying the house, the house is bought back by the county at a set formula and re-sold to another qualifying family. However, once 10 years has passed, the family can sell it on the open market and make a profit (over and above his equity) of at least $250,000 in today’s market. Especially in resort areas such as Princeville and Po‘ipu, this often means that the affordable housing is gone after 10 years.

In a more recent project, the Kukui‘ula re-zoning, the council imposed a 99-year buy back clause (equivalent to permanent affordability) for workforce housing that will be built by Kukui‘ula in the Po‘ipu area. We did this because we want to make sure that such workforce housing will continue to exist in Po‘ipu for many years.

This is the question: Is our goal to provide a few families with a nest, and nest egg, at the expense of other qualifying families who are then not able to even get a nest?

Or is our goal to provide a stable, affordable nest to as many qualified families as possible and leave the nest egg to their own efforts, thriftiness and hard work?

What is the greater good?

Permanent affordability will enable us to create a constantly expanding inventory of affordable units. This will give us the chance to achieve a future on Kaua‘i where everyone who needs an affordable home has one. With a little more thought and planning we can also ensure the homes are energy efficient, durable, well designed and located close to services in a community where people love to live.

With an affordable housing bill before the County Council, we have a chance to create a future in which our children will be able to come home or stay on Kaua‘i and live comfortably, where homelessness is a thing of the past, where long-term families of average and lesser means — as well as new families — will be able to contribute to a wonderful community of continuity and diversity, where all people have a chance to create a good life on Kaua‘i.

If this is our vision, permanent affordability is one of the keys.

If you’re interested in weighing in on the issues of affordable housing, please join us at the next Affordable Housing Workshop chaired by Community Assistance Committee Chair Shaylene Iseri-Carvalho Tuesday at the Historic County Building from 9 a.m. to noon.

Any comments or questions can be emailed to jyukimura@kauai.gov.

• JoAnn Yukimura is a Kaua‘i County Council member and writes a regular column for The Garden Island.


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