County has options to encourage affordable housing

Making it easier for developers and landowners to make more money by eliminating their requirement to provide affordable housing, is in my opinion bad public policy.

The recent doubling (and more) of allowable density in the Lihu‘e town core without obtaining any commitment to build any affordable housing whatsoever was a huge financial gift to those landowners. To grant these same landowners (and others) still yet another gift by eliminating the 30% workforce-housing requirement now on the books, would be a huge mistake and, arguably, a betrayal of the public trust.

Landowners and developers will design, build and sell their projects targeting the highest market price they can get in order to maximize profits. This is totally understandable and to be expected.

However, it’s not in the public’s best interest to eliminate existing affordable-housing requirements in order to maximize a project’s profit potential. This is especially true in situations where the landowner/developer is offering nothing tangible in return.

There is nothing on the table and, consequently, the county is essentially “negotiating with themselves.” The discussion by some on the council that making it easier for landowners/developers to make more money would result in the building of more “market” inventory, and that additional inventory will thus create more affordable inventory “downstream” — is all just speculation (pun is most definitely intended).

If a landowner/developer was actually proposing to develop something and needed support to “make the numbers work” in order to comply with the affordable-housing requirement, then yes, the county should absolutely look at how they can assist in achieving that goal. But removing the requirement to build affordable housing and expecting to achieve more affordable housing is a foolish negotiating position at best.

Keep the affordable-housing requirement and incentivize as needed, but only for the actual creation of genuinely-affordable housing units (for purchase and for rent).

The County Council has already passed an “incentive package” for the “Additional Rental Unit” (ARU) affordable-housing initiative. This package would effectively lower the cost of construction from $10,000 to $17,000 per unit via “fee waivers and other incentives.” The ARU law allows homeowners who comply with certain guidelines to construct a second dwelling on their property intended for long-term rental or family use.

The county could utilize these same mechanisms to incentivize and support developers seeking to comply with the 30% affordable requirement. In addition, the county could consider further incentives based on the deferral of future property-tax income.

Please stay with me for the moment as we venture into the weeds. A landowner who now owns a single-family residence pays X amount of property tax annually based on an owner-occupant Homestead rate of $3.05 per $1,000 of assessed value.

When that same landowner constructs a new, additional, single-family home or ARU, the tax-assessed value of their property would normally increase to reflect the additional value created by the construction of the second home, AND the rate may increase to the Residential (rental) rate of $6.05.

The county could “waive” and simply ignore for tax-assessment purposes the value of the new ARU. For a $400,000 tax-assessment increase, based on a range of $3.05 and $6.05 tax rate = an increase of $1,220 to $2,420 per year in property taxes. Extend this benefit over 10 years = $10,220 to $20,420 in additional incentive above and beyond what is already in place for ARU’s.

Obviously, because of inflation, the tax savings number quoted is very conservative.

The county could thus offer both ARU builders and those complying with the 30% requirement an incentive package that could save developers/builders $20,000 to $40,000 per unit or more, and there would be no direct impact on the county budget.

It is important to note that the county is not receiving any tax income from these units because they do not exist, and thus the county would be “giving away potential future property-tax revenue” and not real dollars out of today’s budget. It is also important to realize that the units being incentivized are affordable and located in existing urban areas where core county services are already in place (parks, police, fire, etc).

The county has the power of zoning and density. The county also has a significant capacity to borrow money at very-low rates. And the county, of course, “makes the rules” that govern construction and development. The county should utilize these powers to the benefit of the public and not just the benefit of landowners and developers.

Each of these powers can be used to incentivize the construction of true affordable housing. Instead of just giving away density, the county could and should “trade extra density” in exchange for the development of affordable housing. The county could use its low-interest-borrowing capacity to help with the cost of infrastructure in exchange for affordable-housing development, and they could “amend the rules,” but not at the expense of health and environment.

There are many, many things the county could and should do to accelerate the development of affordable housing.

Rather than remove requirements for affordable housing, the county should support and incentivize landowners/developers to comply. If landowners prefer to land-bank those properties located within or adjacent to existing urban areas, then the county should consider purchasing that same land, via condemnation if needed. Utilizing private contractors for the construction, the county could then partner with a nonprofit developer and sell the homes or lots to local residents at affordable prices, with protections that they remain affordable in perpetuity.

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Gary Hooser formerly served in the state Senate, where he was majority leader. He also served for eight years on the Kaua‘i County Council, and was the former director of the state Office of Environmental Quality Control. He serves presently in a volunteer capacity as board president of the Hawai‘i Alliance for Progressive Action and is executive director of the Pono Hawai‘i Initiative.

4 Comments
  1. Westside Resident July 15, 2020 8:38 am Reply

    You can’t build enough inventory to reduce prices, look at Oahu.

    Furthermore, entitlements divide society.

    Finally, build roads first if you increase density.


  2. Kauaidoug July 15, 2020 11:34 am Reply

    Where was this issue when downtown Lihue development was planned? Ridiculous. Why do we pay these people for what?
    We need to watch this because there is a lot of money getting ready to be made by developers and their lackeys. This is a major income stream for someone (s) at the expense if people who HAVE NO VOICE AT THE TABLE.


  3. Paradise Lost July 15, 2020 1:06 pm Reply

    I’m reminded of how Kawakami’s campaign received half it’s funding from developers on O’ahu.


  4. WestKauai July 15, 2020 5:58 pm Reply

    In this same issue of TGI, they announced availability of affordable housing in Waimea, apparently a joint venture by private and government (county?) interests. Perhaps this sort of thing should be encouraged in Lihue and elsewhere…


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