Mahalo for supporting Honolulu Star-Advertiser. Enjoy this free story!
A grand, unconventional idea to end Oahu’s affordable housing shortage at no long-term public cost has been narrowed down in the Legislature after three years of effort.
State lawmakers recently received an updated study of a proposal for a state agency to develop and sell at cost leasehold high-rise condominiums on state land. , in a model that could produce thousands of homes at prices affordable to low-to-moderate income buyers.
The analysis concluded that a key part of the plan – selling condos with 99-year ground leases – is not feasible despite parts of the plan delivering on the promise.
“While there is an appetite for greater state involvement in expanding affordable homeownership opportunities – as evidenced by discussions with Hawaii residents as part of this study – there are too many hurdles to the concept for it to be feasible,” the report said.
The report was produced by the Hawaii Budget and Policy Center at the nonprofit Hawaii Appleseed Center for Law & Economic Justice under the guidance of lawmakers after reviewing an initial bill in 2019 that proposed to establish a development agenda leasehold condos on federal lands.
Dubbed ALOHA Homes (Affordable Locally Owned Homes for All), the plan spearheaded by Senator Stanley Chang draws inspiration from a long-running similar program run by the government of Singapore.
Chang, (D, Diamond Head- Kahala-Hawaii Kai), chairs the Senate Committee on Housing and has considered the High Density Leasehold Housing Program to produce homes on public land within a mile of train stations from Oahu City.
Under the ALOHA Homes plan, an initial state investment to produce a first group of homes would be entirely recouped from the proceeds from the sale of condos, which could then be reinvested in a second project, then a third, and so on. right now.
During the lease period of the land, the condo buyers would own and maintain their buildings. At the end of the 99-year land leases, ownership of the homes would revert to the state.
Chang previously estimated that 270 acres of state land near planned train stations could be used to produce 67,500 condo units, including land next to Aloha Stadium, Leeward Community College, Honolulu Community College and McKinley High. School.
The ALOHA Homes concept has drawn support from Governor David Ige and a handful of lawmakers, but bills to establish the program have not passed in each of the past three years.
Early last year, Hawaii affiliate Appleseed produced a preliminary analysis of the plan that found demand for leasehold condos was likely high, while many of the program’s provisions could meet the housing needs of many. overpriced residents of local property.
The study’s initial findings concluded that the state could produce leasehold condos with 1,000 square feet of living space, including two bedrooms and two bathrooms, for $400,000, which was more than the Chang’s projection of $300,000 but still affordable for households earning around $80,000 a year, or 80% of median income in Honolulu.
By comparison, a similar market-priced home would cost a private developer about $600,000, largely due to land costs, higher financing expenses and profit margins, the study found.
The study authors, however, said they needed more time to assess the contentious issue of public land use for leasehold housing.
In the final report delivered to lawmakers last month, the study’s authors said a big problem with leasehold property is that the value of these homes begins to drop significantly when the remaining lease term drops below 40 year. At that time, someone wanting to sell such a home would have fewer options as buyers would have difficulty financing a purchase.
Singapore, the report notes, solves this problem by buying out tenants at the end of a lease. To do this in Hawaii would be inconsistent with ALOHA Homes’ premise that the program is revenue neutral to the state.
The report also noted that other places with leasehold housing on government lands allow renewal of land leases, and that this in Hawaii would raise legal, political, and moral concerns regarding the disposition of deeded state lands that once belonged. in the Kingdom of Hawaii and is intended to maintain a fiduciary duty for the benefit of Native Hawaiians.
Another issue mentioned in the report is whether the owners of ALOHA Homes could convince or force the state to sell the land under their homes in the future.
“Significant differences between Hawaii and Singapore, on which ALOHA Homes is based, make it impossible to replicate Singapore’s success,” the final report states.
Citing the report’s conclusion, the agency called upon to carry out the leasehold condo development, the Hawaii Housing Finance and Development Corp., recently declined to back a pending bill to create the ALOHA Homes program.
“Given the results of the study, HHFDC is unable to support this bill in its current form,” Denise Iseri-Matsubara, the agency’s director, said of Bill 3261. Senate during a Feb. 3 hearing by the Senate Housing and Government Committees. Operations.
Hawaii Appleseed testified that it would still be worth pursuing on a smaller scale, cost-leasehold condo development on undeeded public land, which is in more limited supply and includes land purchased after the state was established. .
“The legislature’s passage of a version of ALOHA Homes would help address an important housing need for a significant segment of Hawaii residents,” the organization said in written testimony.
Unlike versions of ALOHA Homes bills over the past three years, SB 3261 was drafted to exclude the use of surrendered land.
Chang said the program could still have a big advantage in this condition.
“There are still many, many plots that are not given up,” he said. “I still think it continues to have the capacity to supply enough homes to meet Hawaii’s demand.”
Chang noted that Aloha Stadium sits on unceded land and could house up to 100,000 homes if very high density was allowed. However, state lawmakers previously approved a plan to have private developers build a new stadium surrounded by mostly commercial and residential uses on the 98-acre site in Halawa.
Both Senate committees unanimously passed SB 3261 after agreeing to amend the bill in hopes of improving its chances of becoming law.
