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The Honolulu Advertiser
Posted on: Tuesday, August 19, 2008

HAWAII'S HOUSING DILEMMA
Hawaii public housing authority seeks solutions on Mainland

 •  Chief brings can-do spirit to agency

By Mary Vorsino
Advertiser Urban Honolulu Writer

Hawaii news photo - The Honolulu Advertiser

Palolo Homes residents gather in a community room to chat and play: clockwise, from left, Teresa Welle, with 1-year-old niece Mya Welle-Phal, and 2-year-old son Weison Kotlip; Faye Salavea and her 2-year-old son, Xjaduss Sefo; Jan Ii and 2-year-old Kamalani Peters, playing the xylophone; Bina Guerrero, with 7-month-old daughter Jeina; Ollie Kiili; and Treena Sefo, with her baby, Iosua.

GREGORY YAMAMOTO | The Honolulu Advertiser

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PUBLIC HOUSING MODELS

  • Privatize: Usually involves issuing a long-term lease for public housing buildings as a means to rehabilitate them while keeping them affordable. Nonprofits often take over these projects, using grants and tax credits to pay for large capital projects.

  • Mixed-use/mixed-income: A public housing authority takes advantage of the value of land, by partnering with a developer or nonprofit to maximize usage of a parcel, building more units or retail space on a project site. The model usually involves a major rehabilitation of the existing public housing units, and the addition of near-market or market rentals.

  • De-federalize: A relatively new model, in which a housing authority opts out of the public housing program, instead using Section 8 rental vouchers to subsidize units. The advantages of the model are that the authority is no longer subject to the strict requirements of the public housing program and can seek its own way of operating that makes the best financial sense.

  • Sell-off: In some cities, authorities have sold public housing projects outright as either a means of rehabilitating them or as a way to generate revenue to build new affordable housing.

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    Hawaii news photo - The Honolulu Advertiser

    Kuhio Park Terrace is one of the most depressed and problem-ridden housing projects in the Islands.

    BRUCE ASATO | The Honolulu Advertiser

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    PUBLIC HOUSING BRIEFING

    What: A briefing on the state of public housing and plans for renovating the inventory

    Where: Conference Room 325, state Capitol

    When: 9 to 11 a.m. Friday

    Written testimony: Can be e-mailed to senchunoakland@capitol.hawaii.gov, faxed to 586-6131 or submitted on the day of the briefing.

    No oral testimony will be accepted at the meeting because of time constraints.

    For more information: 586-6130

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    Hawaii news photo - The Honolulu Advertiser

    The state is evaluating Mainland models for ways to renovate public housing without spending money it doesn't have.

    JEFF WIDENER | The Honolulu Advertiser

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    Hawai'i housing officials face this dilemma: Doing nothing to renovate the aging inventory of public housing in the Islands means it will continue to deteriorate, at some point beyond repair; but a traditional revamping project would cost hundreds of millions of dollars money the state doesn't have.

    For solutions, the Hawai'i Public Housing Authority is looking to models in several Mainland cities, which have responded to years of funding shortfalls for capital needs in public housing with creative financing schemes, partnerships with developers and by privatizing developments.

    The models are not problem-free and would require considerable work to bring to the Islands, but officials say the alternative is selling off projects or tearing them down.

    "As we look toward the future," said Chad Taniguchi, HPHA executive director, "recognizing that this is a very valuable resource, the question is how do we take care of the need" of long-standing maintenance backlogs.

    Selling off some properties "is just a reality that will occur if we don't turn things around," Taniguchi said.

    While the state considers what to do with its 83 public housing developments, the city of Honolulu has decided to sell all 12 of its affordable properties to bidders that would keep rents under-market for an unspecified period of time.

    Some localities, such as Salt Lake City, have decided to sell their deteriorating properties outright, using the revenues to build more affordable housing and housing displaced residents with rent vouchers.

    Still, Taniguchi stresses the state is not there yet.

    Instead, as the HPHA is in the midst of a massive "turnaround plan" to tackle a long-standing deficit, more than 500 vacant units in need of repairs, chronic rent delinquency and scores of urgent maintenance needs, it is also considering models for redeveloping or renovating public housing with little to no upfront costs shouldered by government.

    Officials say redevelopment is a lengthy process conceivably lasting 20 years or more and targeting many of the public housing projects in the Islands, starting with those in the urban core, where land values and developers' interests are higher.

    "We're not working to keep things as they are," Taniguchi said. "I want to see public housing being good housing and eventually public housing looking like private housing or better."

    Models for approaching redevelopment will be discussed at a legislative hearing Friday on public housing.

    For residents, talk of exploring redevelopment options is both exciting and worrisome.

    Fetu Kolio, a resident of Mayor Wright Homes, said a major rehabilitation could engender more community involvement and could not only tackle maintenance concerns, but help kick out bad elements from public housing.

    "Gangs are drawn to public housing projects because they know residents don't care and residents don't care because of the way their housing looks," Kolio said. If residents did care about their projects, he said, it would be a lot harder for wrongdoers to move in.

    FUNDING SHORTFALL

    Whatever model the state chooses for revamping projects, there is a realization that the old model investing tens of millions of dollars of federal and state money to rehabilitate projects just isn't possible anymore. In fact, it hasn't been possible for years.

    Lanakila Homes on the Big Island and Kalihi Valley Homes are two recent rehabilitation projects that have faced major delays because of funding issues.

    In the case of Lanakila, the project to modernize the 230-unit development built in the 1950s started in 1995. More than a decade and about $27 million later, the work still isn't finished. HPHA now believes that 94 remaining units at the development pegged for demolition could still be salvageable, and they are looking at renovating them instead.

    Work to rehabilitate Kalihi Valley Homes started in 2000 and was expected to wrap up this year. Instead, its new completion date is set at 2016 and its price tag is $75 million (up from $47 million), even with a scaleback of the original renovation plans. State housing officials also decided to abandon the demolition of 72 apartments, and instead will do bare-bones renovations to them so they are livable.

    Jory Watland, a longtime affordable-housing advocate, said the examples illustrate how good intentions can go very wrong when they're not thought through. Watland has been fighting for years to reconsider the demolition of units at Lanakila, which have sat vacant while the state tried to get the money to tear them down. A Kalihi Valley resident, Watland was also instrumental in saving the units at Kalihi Valley Homes that were scheduled for demolition.

    He said the state needs to be thinking about ways to renovate public housing without spending lots of money.

    And that's just what housing officials are doing.

    PROMISING MODEL

    HPHA Board Chairman Travis Thompson said the authority plans to study what he and others view as the most promising model for renovating distressed public housing projects mixed-income or mixed-use redevelopment, in which a developer adds near-market and market rental units on a public housing site while also renovating or rebuilding the existing public housing units. The model allows the state to retain the same number of public housing units, while also breaking up the clusters of poverty that many housing projects have become.

    And it doesn't require much funding from the state, if any.

    The model has seen success in other cities, including Seattle and San Francisco.

    Taniguchi visited San Francisco this summer to see mixed-use projects and understand the process of attracting developers, planning for a revitalization and possibly moving tenants to other units in the short term as a project is being worked on. Meanwhile, Thompson has toured projects in Seattle to see how the city has taken old, crumbling public housing developments and turned them into pleasant neighborhoods with a mix of incomes.

    "They took an area that had the highest level of crime absolutely a scourge on the face of the Earth and now it looks upscale. I believe that's the future of public housing. That's got to be our future," Thompson said, adding that eventually he wants people to drive by public housing in the Islands and "not know it's public housing."

    The mixed-use model, proponents add, could address several problems HPHA faces, including:

  • Hundreds of millions of dollars in capital needs improvements at aging public housing developments;

  • Crime in public housing, by spurring more community awareness and improving neighborhoods;

  • The concentration of poverty in many public housing projects, which can contribute to depressed communities.

    The mixed-income model is based on a simple financing scheme: A private developer uses public money, land or assets to leverage investments, which go to renovating existing public housing units and building other units, which are meant for a mix of incomes, and potentially retail venues. The redevelopment is often partially underwritten with tax credits or federal subsidies for units meant for tenants with 50 percent to 80 percent of median income.

    The plan is designed to not only renovate distressed public housing projects, but create a community designed to flourish by decreasing the concentration of poverty and increasing the in-flow of cash for operating and upkeep costs.

    Lowell Kalapa, president of the nonprofit corporation that oversees Hale Pauahi in Chinatown, said mixed-use developments provide a win-win for public housing residents and the state. The Hale Pauahi tower is modeled somewhat along those mixed-income lines, in that 49 percent of its tenants pay below-market rents and the rest pay market rents.

    Kalapa said he has talked with developers and bankers on the Mainland who have expressed interest in backing a redevelopment of Hawai'i public housing projects.

    "I think we can do it without any state money," Kalapa said, adding he believes the state should start with its toughest, most beleaguered project Kuhio Park Terrace.

    ISSUES UP FRONT

    But the mixed-use model is no cure-all.

    In fact, advocates have raised several concerns about it in recent years.

    For one, it works best in public housing projects with low densities, where there is space for more units and potentially retail elements to be added. That means the model probably wouldn't fit well at Kuhio Park Terrace, one of the most depressed and problem-ridden projects in the Islands, unless its two high-rise towers were torn down.

    Also, the model has struggled in some cities, including in Chicago, which kicked off a massive, 10-year transformation plan in 1999 to redevelop 25,000 public-housing units, about 8,000 of which were to be built in mixed-income developments. Today, the transformation is years behind schedule. Only about 30 percent of the work to tear down housing projects and replace them with new, mixed-income neighborhoods is complete. Many of the 7,000 residents displaced for the work have not yet returned, and housing officials are re-evaluating the plan.

    Critics point out that many of the tenants displaced while work was under way at mixed-income developments in Chicago and elsewhere didn't return to the renovated projects, partly because of tougher screening procedures that many new projects instituted, including background checks and work requirements. In a 2007 review of redeveloped public housing projects, the Urban Institute found only about 5 percent of original tenants returned to mixed-use developments, though that figure was expected to rise as more work was completed and residents took up offers to move back to the projects they were displaced from.

    Kevin Carney, vice president of EAH Housing in Hawai'i, an affordable housing development and management nonprofit, said rehabilitating public housing projects by adding market and just-below market rentals to a property could be a viable option. But it's got to make financial sense to a developer and sometimes it doesn't.

    "The concept sounds wonderful and grand, but the bottom line is it comes back to money: How do you make it work?" Carney said. "It's not a silver bullet."

    Carney said a developer nonprofit or otherwise needs to make sure a mixed-income redevelopment project can cover its own debts and operating expenses from rent and other income sources. He pointed out that's getting harder in today's fickle real estate market.

    FEDERAL PROGRAM

    The mixed-use approach is the cornerstone of the federal HOPE VI program, launched in 1992 to rehabilitate distressed public housing. Since its inception, HUD has awarded about 500 HOPE VI grants in 200 cities totaling more than $5 billion to tear down public housing projects and convert them into mixed-income developments.

    Hawai'i has twice tried and failed to get HOPE VI grants.

    In 2000, the state tried for $32 million to rehabilitate Mayor Wright Homes, reconstructing the existing low-rise buildings and replacing their 364 units with 28 privately owned units, a small retail venue and 392 mixed-income units for families and seniors. HOPE VI grants also didn't come through for Kuhio Park Terrace, which officials were proposing to tear down and replace with low-rise, mixed-income units for families and the elderly.

    Today, there is even less of a chance that HOPE VI money will come through for Hawai'i. The program has suffered severe funding cuts over the past decade. In fiscal year 2008, $97 million was made available to public housing authorities through HOPE VI, down from almost $600 million in 1999.

    Taniguchi, the HPHA executive director, pointed out there are other models that Hawai'i can study.

    Last year, San Diego left the federal housing program, instead receiving subsidies for its 1,366 public housing apartments. The move allowed the San Diego Housing Commission to give some residents with lower incomes vouchers to move elsewhere, so those units could be filled with residents with higher incomes. The mix of incomes means more revenue for the commission, which is also leveraging its assets to build more affordable housing in the city.

    Some cities have also embraced privatization long something of a bad word among advocates, but increasingly becoming an attractive alternative for public housing authorities no longer able to manage or keep up units.

    But Holly Hollowach, chairwoman of Partners in Care, a coalition of homeless service providers, said one of the major concerns about privatization is that the neediest tenants can be pushed out.

    "Privatization could bring in very different rules, which might screen out the homeless families that public housing is now serving," Hollowach said.

    Others have warned that privatization sometimes chips away at the affordability of projects, outpricing those in the lowest income brackets.

    Palolo Homes is the only federal public housing project in the Islands ever to be privatized, and many say it has become a model for how privatization can rehabilitate housing projects without kicking out the poorest tenants.

    In 2002, Mutual Housing Association of Hawai'i took over the 306-unit project, using Section 8 rent vouchers for residents so that they could stay in their units. After the project changed hands, Mutual Housing kicked off a $15 million renovation project. The nonprofit also instituted new "house rules," with the help of residents, and worked with tenants to get them involved in the day-to-day operations at the housing project.

    "We try to promote a sense of ownership among residents," said Dave Nakamura, president of Mutual Housing.

    Today, Palolo Homes is the envy of its neighbor, the federal housing project Palolo Valley Homes.

    Reach Mary Vorsino at mvorsino@honoluluadvertiser.com.

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