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The Honolulu Advertiser
Posted on: Friday, November 24, 2006

City needs affordable housing incentives

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In ideal circumstances, market forces should provide what the marketplace demands: in this case, homes affordable for middle-income residents to buy or rent. But circumstances in the Islands are far from ideal, with speculative purchases of Hawai'i's precious land driving prices beyond reach.

There are ways to counter this when government holds a bargaining chip: permission to develop. Planning officials can add special affordable housing requirements for developers seeking a zoning change, a device used on O'ahu for decades in the creation of new subdivisions on the 'Ewa plain.

But critics of this device, known as "inclusionary zoning" correctly observe that there's a catch. If 30 percent of a project is priced at below-market rates, the builder has to raise prices on the other units, which drives up the median price overall.

So there needs to be incentives for developers to provide affordable housing, beyond the simple thumbs-up needed to build.

The redevelopment of Kaka'ako has been a special case, with special success stories. One of them is Keola La'i, a 42-story tower being built on South and Queen streets that includes 63 units at below-market prices in exchange for permission to exceed the area's height limit.

Developer A&B Properties Inc. is able to do that because Kaka'ako is being redeveloped by a separate government authority that set up "planned development" regulations enabling this kind of quid pro quo. The builder can recoup the revenue lost on the cheaper units because the added height allows more units to be sold. This assumes that the sewage, water and road capacity of the area can support the project, which is why there's been so much roadwork during Kaka'ako district upgrades.

In urban redevelopment elsewhere in the city, there are fewer opportunities to do something similar. In most of urban Honolulu, the highrise would be either out of keeping with the community, overtaxing on its infrastructure or impossible to develop on the typically small lots.

In recent months, an affordable housing advisory panel tapped by Mayor Mufi Hannemann has come up with numerous suggestions in a report to the City Council, including tax credits, streamlined permit review and adding city staff to focus on this mission.

Given the likelihood that rail development will provide an opening for redevelopment at transit stops, city leaders need to give these ideas serious consideration, without delay. Affordable units are scarce, and we can't miss this chance to provide them.