Affordable Housing Requirement

And Housing Strategy Implementation

Zoning and Housing Committee
April 13, 2017

What well talk about today

OverallAffordableHousingStrategy
PrioritiesandImplementationUpdate
AffordableHousingRequirementOrdinance
ResearchandAnalysis
StakeholderInput
PercentagesandDetails,30yearPeriod
ScheduledPhaseinbyAreaOverTime
HowInLieuFeesProduceHousing
AdministrationandMonitoring
AHFinancialIncentivesOrdinance
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 Affordable Housing Strategy
1. IncreaseAffordable&WorkforceHousingInventory
2. IncreaseLowIncome&HomelessHousingOptions
3. InvestinBetterNeighborhoods
4. UpdatePoliciesandRegulationstoPromoteHousing
Production
5. CoordinateImplementation&MeasureProgress

Responding to Council Initiatives

TheAffordableHousingStrategyrespondstoCity
CouncilResolutions:
13274todevelopanaffordablehousingpolicy
fortransitorienteddevelopment(TOD)districts
13168,CD1toamendtheunilateralagreement
policy
1428toestablishanaffordablehousingstrategy
14200toregulateaccessorydwellingunits.

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 Developed by Staff Team

AffordableHousingStrategydevelopedbyfive
Citydepartmentsin20132014.
MayorsOfficeofHousing
DepartmentofCommunityServices
DepartmentofBudgetandFiscalServices
DepartmentofPlanningandPermitting
OfficeofStrategicDevelopment
Strategicactionplanofrealisticprojects,policies,
andinvestmentsbasedondecadesofworking
groupsandtaskforces
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Affordable Housing Vision

Oahu will provide housing choices that build

community, strengthen neighborhoods, and
fit family budgets.
All people will have access to shelter.
Transit-oriented and transit-
ready development
Compact, mixed-use
community design
Healthy, age-friendly
communities

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 Latent Demand by Income Group (2012-2016)
Oahu needs more than 24,000 additional housing units to meet demand.
Over 18,000 or 75% of demand is for households earning less than 80% of AMI.
Just 10% of demand is for households earning 140% AMI and up.
< 30% AMI < 50% < 80% < 120% < 140% 140+% Total
plus HPIT AMI AMI AMI AMI AMI Units

Maximum AMI
(family of 4) $28,750 $47,900 $76,650 $114,980 $134,140 >$134,140
Ownership Units

Single-family 887 277 1,499 643 752 1,143 5,201

Multi-family 963 392 539 286 294 565 3,039
Rental Units
Single-family 134 69 183 0 0 287 673
Multi-family 4,022 2,811 2,047 1,047 515 502 10,944
Homeless 4,712 --- --- --- --- --- 4,712

TOTAL 10,718 3,549 4,268 1,976 1,561 2,497 24,569

* Hawaii Housing Planning Study, 2011, prepared by SMS Research and Marketing Services, Inc.
* City & County of Honolulu, Homeless Point-in-Time Count 2014, assumes all earn less than 30% AMI. 7

Affordable Housing Strategy

Mayorsimplementationpriorities(seehandout)
AffordableHousingRequirement(phasedin)
FinancialIncentives feewaiversforsewer,park
dedication,buildingpermits,realpropertytaxes
LeverageCityLands ninepropertiesidentified;
willbeRFPd toprivatedevelopersandnonprofits
Rentalhousingfinance:$100M/yearinprivate
activitybondstoleverage4%lowincometaxcredits
TODZoningandInfrastructureInvestments
AccessoryDwellingUnitsandIncentives
HousingFirstandShelterInitiatives 8

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Infrastructure Finance District Iwilei to Kalihi

AHR Background Research

Almost500municipalitieshavesimilar
requirements,includingthoseinsimilarhot
marketswithhighdevelopmentcosts.
Staffresearchfoundthat,comparedwithcurrent
UArequirements,mostprogramshad:
Muchlongeraffordabilityperiod
LowerAreaMedianIncome(AMI)ranges
Lowerpercentageofunitsrequired
Appliedtoallbuildingpermits(aboveacertain
size),notjustrezoning
Wetalkedwithstaffandexpertsfromothercities.
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 AHR Background Research (2)

Wefollowedbestpracticesidentifiedbyrecent
nationalstudiesoninclusionaryhousing:
EconomicsofInclusionaryDevelopment,ULI2016
MakingInclusionaryHousingMoreFlexible,Hickey2015
Inclusionary Housing,Jacobus,LincolnInstitute2015
SeparatingFactfromFictiontoDesignEffective
InclusionaryHousingPrograms,Sturtevant2016
DeliveringonthePromiseofInclusionaryHousing:
BestPracticesinAdministrationandMonitoring, Jacobus2009

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City-Sponsored Studies

Wecommissionedtwostudiesandapolicymemo
toanalyzetheaffordablehousingrequirement,
tailoredspecificallyforHonolulu:
ResidentialNexusAnalysis. KeyserMarston
Associates,2015
AffordableHousingRequirementFinancial
Analysis.StrategicEconomics,2016
PolicyMemoonAffordableHousing
Requirement.RickJacobus,2017

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 Residential Nexus Analysis
(Keyser Marston Associates)
Analyzedtheimpactnewresidential
developmenthasonaffordablehousingneeds
Helpsdetermineinclusionaryhousing
percentagesandinlieufeesthatare:
proportionatetotheseimpacts
sufficienttomitigatetheseimpacts
Inclusionary%acrossfivebuildingtypesranged
from17.3%to21.7%(atallAMIlevels)
Calculatedaffordabilitygaps(subsidyneededper
affordableunit)
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Residential Nexus Analysis (2)

(Keyser Marston Associates)
Affordabilitygaps(subsidyneededperunit)
$0for120to140%AMIunits(nosubsidyneeded)
$69,850for80to120%AMIunits
$169,300for50to80%AMIunits
$288,300for30to50%AMIunits
$367,300forunder30%AMIunits
Sincemostrentersandbuyerscanpaypartor
mostofthecost,thesubsidyonlyneedstocover
thedifference betweenwhataunitcoststo
produceandwhattheycanaffordtopay.
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 Residential Nexus Analysis (3)
(Keyser Marston Associates)
NexusCostsperSFofbuildingarea
CostperSFofcreatingnewaffordableunits
Supportspolicydecisiontosetinlieufees
Rangedfrom$31.70to$57.70
Selectedmiddleofthemiddleat$45.00/SF

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Affordable Housing Requirement

Financial Analysis (Strategic Economics)
Proformaanalysistotesttheimpactofthe
proposedAHRondevelopmentfeasibility.
Alsoanalyzed:
Bonusdensityandcommunitybenefits
Financialincentives,feewaivers,lessparking
IPDTprojects
Testedfeasibilityofseveralbuildingprototypesin
differentlocationsaroundOahu.
Severalroundsofinterviewsandfocusgroups
withlocaldevelopersandindustryreps.
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 Affordable Housing Requirement (2)
Financial Analysis (Strategic Economics)
Developedsixprototypeswithfourbasic
buildingtypesandprogrambylocaldesignfirm

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Affordable Housing Requirement (3)

Financial Analysis (Strategic Economics)
TestedfeasibilityofproposedAHRformulas
Revenue,cost,andreturnassumptions
developedthroughmarketresearch,developer
interviews,andcitystaffinput.
Assumedpurchaseoflandatmarketrates(some
projectsaremorefeasiblewithlowerornocostland).
AlaMoanahighrisecondosarefeasiblewith
higherdensity;with25%returns(19%w/AHR)
LowrisecondosinPearlridgeareclosestto
feasibility,with10%returns
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 Affordable Housing Requirement (4)
Financial Analysis (Strategic Economics)
Mostotherprototypesnotyetfeasibledueto
highconstructionandlandcosts.
Someprojectsgettingbuiltwithreducedcost
orfreeland,subsidies,orotherincentives.
AHRitselfisonlyamodestburden.
Recommendationtophaseinhotmarket
areasfirst,thenaddareasatreducedAHR.
ExpectationthatasinitialTODprojectsare
built,thenewmarketcompswillhelpother
projectspencilout.
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Policy Memo on Affordable Housing

Requirement (Rick Jacobus)
Askedforanalysisandadviceontwoissues:
Givenunevenmarketconditionsislandwide,
shouldrequirementsbedifferentpercentages,
orphasedinovertimegeographically?
HowshouldtheCityplanforlongterm
monitoring,administration,andstewardshipof
affordablehomescreatedthroughtheprogram?
Updatedresearchonotherprograms,andmet
withstaff,developers,andstatepartners.
Includedadminandmonitoringideas(atend).20

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 Policy Options Studied (Rick Jacobus)
1. Targetonlyhighgrowthareas
2. Varyrequirementsbyzone
3. Projectbyprojectunderwriting
4. Varyrequirementsbyrents/prices
5. Hardshipwaivers/appeals
6. Varyrequirementsbyprojectsize
7. Scheduledphaseinofrequirements
Afterstaffworkshop,recommendedcomboof
#2and#7 Varybyzoneandphaseinovertime
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Affordable Housing Requirement (AHR)

Proposedaffordablehousingrequirementwillrequirea
percentageofallnewdevelopment(10unitsandup)to
beaffordablebypeoplewithlowtomoderateincomes.
Requiresasmallerpercentageofunits,acrossmore
projects,forlowerincomeranges,andmaintains
affordabilityforlongerperiod(comparedtoexistingUA).
Phasedinoverthreeyears,bylocation.
Variesbywhetherforsale,rental,andon oroffsite.
Minimum30yearperiodofaffordability.
Flexibilityfordeveloperswiththreecomplianceoptions.
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 Three AHR Compliance Options
1.CONSTRUCTIONONSITE
Preferred. Onsamelotorinsamebuilding(s)asprincipalproject.
2.CONSTRUCTIONOFFSITE
Higherpercentageofunitsrequired(ifforsale).
3.INLIEUFEE(OrLANDDEDICATION)
CashcontributionpaidtotheCity,inlieuofbuildingaffordable
units.Proposedfeeis$45/finishedSF (annualincreaseperCPI).
Projectsover25unitsrequireCouncilapproval.
Dedicationofland(withinfrastructure/improvedlots)tobeused
toconstructaffordablehousing.Maybeprovidedtoalandtrust
ornonprofit(withcityapprovalandoversight).Valuemustbeat
leastequaltoinlieufee.
Percentagessettoencouragerentalsandonsiteconstruction
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AHR Three-Year Phase-In

Phasedinperhousingmarketvariations:
Effectiveimmediately. OnlyAlaMoana,
Downtown,andChinatownrailstationareas.
2nd Year. Therestoftheisland,includingthe
otherrailtransitstationareas,willbesubjectto
therequirement,althoughatlowerpercentages.
4th Year. Allrailtransitstationareasbecome
onecategory,whiletherestoftheislandwillbe
subjecttothelowerrequiredpercentages.
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 1st Year: TOD Areas
Includes Ala Moana, Downtown, Chinatown station areas
1.CONSTRUCTIONONSITE (samelotorbuilding)
IfRental: 15%oftheunitsatupto80% ofAMI
IfForSale: 20% oftheunitsatupto120% ofAMI
(atupto100%ofAMI)
2.CONSTRUCTIONOFFSITE (samerailstationarea)
IfRental:15% oftheunitsatupto80% ofAMI
IfForSale: 25% oftheunitsatupto120% ofAMI
(atupto100%ofAMI)
3.INLIEUFEE (OrLANDDEDICATION)
Cashcontributionorimprovedlandinlieuofbuildingaffordable
units.Proposedfeeis$45/finishedSF.
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2nd Year: Islandwide

Includes Islandwide and all other rail station areas
1.CONSTRUCTIONONSITE(samelotorbuilding)
IfRental: 5%oftheunitsatupto80% ofAMI
IfForSale: 10% oftheunitsatupto120% ofAMI
(atupto100%ofAMI)
2.CONSTRUCTIONOFFSITE (samerailstationorDParea)
IfRental: 5% oftheunitsatupto80% ofAMI
IfForSale: 15% oftheunitsatupto120% ofAMI
(atupto100%ofAMI)
3.INLIEUFEE (OrLANDDEDICATION)
Cashcontributionorimprovedlandinlieuofbuildingaffordable
units.Proposedfeeis$27/finishedSF.
Note:1st yearrequirementsstillineffectinAlaMoana,et.al. 26

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 4th Year: Islandwide and TOD Areas
Full TOD requirements applied to all rail station areas
Islandwide stays at same lower requirements

1.CONSTRUCTIONONSITE(samelotorbuilding)
FullTODareapercentagesapplytoallrailstationareas
(sameasinitiallyappliedtoAlaMoana,Downtown,Chinatown)
2.CONSTRUCTIONOFFSITE (samerailstationorDParea)
Lowerislandwidepercentagesapplyeverywhere
exceptintheTODareas
3.INLIEUFEE (OrLANDDEDICATION)
ProposedTODareafeeis$45/finishedSF.
ProposedIslandwideareafeeis$27/finishedSF (60%of$45)

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What the AHR Applies To

Appliestoanyprojectconstructing10ormore
residentialunits,orasubdivisionof10ormorelots.
Appliestosubstantialrehab(50%ofcurrent
replacementvalue);exemptsrehabbelow50%ofvalue.
Wouldexempt:
commercialdevelopmentandhotels(exceptdwellingunits)
previouslyentitledprojectsorsubdivisions
projectssubjecttoaUnilateralAgreement(priorrezoning)
ohanadwellings,ADUs,microunits,201Hprojects
othergovernmentprojects
grouplivingandspecialneedshousing
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 SROs and Micro-Units

An SRO aPodment building in Seattle, WA geared

toward young professionals. Units are 170 sq. ft. on
average.

To make the most of limited space, some micro-units

use convertible furniture, such as the above design with
a Murphy bed that transforms into a dining table

Images from Reimaging Housing in Hawaii | Hawaii

This aPodment unit includes a private bath with Appleseed Center for Law and Economic Justice (2013)
shower. Full kitchen facilities are shared. 29

More AHR Details

Proposedaffordabilityperiodis30years,threetimes
thecurrenttenyearperiodunderUAs.(Resetsonresale).
Ifcityfundsorlandareused,requiredaffordability
periodwilllikelybe60yearsorlonger.
Requirementcanbeadjustedtoaccountforvaryingunit
sizes,lowerincomeranges,orotherfactors(similartohow
currentUArulesareadministered).
Enforcedatbuildingpermitissuance,orinthe
subdivisionapprovalprocess(forlandsubdivision/lotsales).
Currentlyupdating administrativerules;e.g.the30year
affordabilityperiod(willbeinagreementandrestrictive
covenantalongwithfeeandtaxwaivers). 30

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 Extended affordability period
CurrentUAruleslimitedto10years(frequently
allowedtoresellsooner,oftenatmarketrates)
30yearminimumismostcriticalelement;for
saleunitsshouldresetto30yearsonresale.
Somesaythatbuyersneedtobeabletosellat
marketrateafter10yearstobuildcapitaland
moveupthehousingladder.
PublicpurposeoftheAHRistohelpgrowand
maintainastablesupplyofaffordablehousing.

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Moving up the Housing Ladder

AHRcancreateandmaintainasignificantsupply
whileprovidingafairreturntohomebuyers.
Assuming$300,000unit,10%down,average1%
annualincreasetiedtoCPI:
$30,000downpaymentincreases10%/year;
couldgrowtoover$77,000in10years.
Principalpaymentscouldaddanadditional
$40,000to$60,000inequityover10years.
Potential$117,000to$137,000downpayment
onafuturemarketratehomepurchase.
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 Moving up the Housing Ladder
Recentnationaldatahasshownthatthisequity
buildingworksinpractice:
2009UrbanInstitutestudyincludedSan
Francisco; forthe10yearperiodendingin
2010,thetypicalaffordablehomesellermade
$70,000onresale,foranaveragereturnof11.3
percentinterestonthedownpayment.
GroundedSolutionsNetworkusesHomeKeeper
datatotrackhowmanyaffordablehomesellers
areabletobuymarketratehomes;for80
programs,thenationalaverageis59.1percent.
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How do In-lieu fees work?

$45/SFappliedtoallfloorarea(noncommercial)
inabuilding;paidbeforebuildingpermitissued.
Hypothetical100unitbuilding,800SFunits.
100x800SFx$45=$3,600,000ininlieufees
Usingaffordabilitygapestimates(rounded):
$70,000for80to120%AMIunits
$170,000for50to80%AMIunits
3.6M/70,000=51 120%AMIunits
3.6M/170,000=21 80%AMIunits
Versus20 unitsat100and120%AMIifonsite
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 Admin Recommendations (Jacobus)

Needtoexpandcitycapacityasprogramgrows
Exploreusingsoftwaretools
Partnerwithstateagencies
Explorecontractingwithalocalnonprofit
Conductsomeadminandmonitoringroles
Considermonitoringandresalefees

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Admin Recommendations (Jacobus)

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 Key Program Admin Roles (Jacobus)

Supporting LongTerm
Development Stewardship
1. DeveloperOptions 1. Monitoring
2. Pricing 2. Enforcement
3. Marketing 3. Managingresales
4. EligibilityScreening
5. BuyerFinancing

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Admin and Monitoring Software

38

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 IPD-T Permit Revisions (at Council)
InterimPlannedDevelopment TransitPermit(IPDT)
FlexiblepermitprocesstofacilitatecatalyticTOD
projectspriortoadoptionoftheTODSpecial
DistrictintheLUO
Canbeusedbyany20,000SF+propertywithin
mileofarailstation(exceptHCDA)
Requiressignificantcommunitybenefitsin
returnforextraheightanddensity
Proposedrevisionswouldsetminimum
percentageofaffordablehousing
(seenextpage;sameasAHRforTODareas)
Minorrefinementsinuses,landscaping,signage,
openspace. 39

IPD-T Permit Revisions (at Council)

ProposedAffordableHousingRequirement
CONSTRUCTIONONSITE:
ForSale:20%ofunits;1/2at<100% &<120%AMI
Rental:15%ofunitsat<80%AMI
CONSTRUCTIONOFFSITE:
ForSale:25%ofunits;1/2at<100% &<120%AMI
Rental:15%oftheunitsat<80%ofAMI
INLIEUFEE(orLANDDEDICATION):
Cashcontributionorimprovedlandinlieuofbuilding
affordableunits(proposedfee$45perfinishedSF).
Minimumrequiredperiodofaffordability30years 40

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 Status and Next Steps
AffordableHousingRequirementOrdinanceinfinal
review;tobesenttoCouncilshortly.
AffordableHousingIncentivesOrdinanceinfinal
review;tobesenttoCouncilshortly.
RevisedIPDTOrdinanceatCouncil;needtoadopt
soontousekeyupdates.
TODLUOSpecialDistrict(Bill74)andWaipahuZoning
(Bill76)atCouncilforadoption.
DowntownandAlaMoanaTODPlansatCouncil;
AirportandHalawaTODPlansinprogress.

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Mahalo!
Department of Planning and Permitting
Mayors Office of Housing
Department of Community Services
Office of Strategic Development
Department of Budget and Fiscal Services
Download Housing Strategy at www.honoluludpp.org/
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