Four years after the City Council voted to allow loft apartments in Chinatown for the first time since World War II, a new study on why so few residential lofts have actually been created recommends more incentives for landowners, including property tax exemptions.

It also says the housing stock in Chinatown is ill-suited to the creation of affordable lofts for artists, since many of the buildings are small and would need considerable work to be suitable for residential use. It suggests looking instead to nearby Iwilei or Kaka'ako for buildings to house upper-floor residential lofts.

The study, conducted by the National Trust for Historic Preservation, surveyed landowners and artists — presumably the population most likely to take advantage of lofts — and also looked at conditions in Chinatown to figure out why more upper-floor spaces haven't been converted to residential use.

The report concluded the economics of turning second- and third-story spaces into lofts just doesn't pencil out for many landowners, especially given the high prices they can get for upper-floor office space without investing any money.

The study, released today, says other big barriers to creating lofts include a "lack of housing leadership" and no apparent agreement on Chinatown's future, along with regulatory hurdles for landowners.

The study says the only significant loft project that appears to be under way in Chinatown is at the Mendonca Building, where owners Ernie and JoDee Hunt are planning to invest about $400,000 to renovate upper-floor space for 10 lofts for artists. The affordable units will open this year.

The study said that, "It is unclear whether the redevelopment of the Mendonca Building is just one willing property owner, or a true symbol of change. There does not appear to be a consensus among Chinatown property owners that housing is a good use for their buildings. In fact, several owners specifically indicated that they preferred commercial tenants."

AN EXCEPTION TO RULE

Ernie Hunt, co-owner of Mendonca, agreed that residential lofts aren't a perfect fit for all Chinatown landowners. He said he wanted to put in the lofts because he believes having artists living in Chinatown will help the community.

He also expects the venture to make economic sense, eventually.

"We're doing it for the art community," he said.

Setting up lofts in Chinatown was seen as a key way of revitalizing the community back in 2004, when the City Council approved regulatory changes that would allow landowners to set up residential spaces above ground-level businesses. Many still see residential lofts as a major revitalization tool.

BENEFITS OF RESIDENTS

Ed Korybski, the executive director of the Culture and Arts District Association in Chinatown, said more people living in Chinatown would help reduce crime and increase community pride.

"The biggest benefit is so that you have more eyeballs on the street," he said. "If you live there and you see something disreputable happening, you're likely to call the police."

The association asked the National Trust for Historic Preservation for the lofts study. Korybski said it's unclear where the association will go from here, but at least it has a clear idea of the issues involved.

The 41-page report makes several recommendations on how to encourage upper-floor residential living in Chinatown, including offering tax exemptions to property owners, setting up a city or private "one-stop shop" where people can get information on the regulatory issues involved in offering lofts, and coordinating the efforts of different agencies to promote loft living.

But the study also says that Chinatown is small, and the opportunities for creating lofts are much more limited compared to other cities. The boundaries of the Chinatown Special Historic District comprise about 15 blocks, and include about 150 parcels, 19 of which are owned by the city.

COSTS A DETERRENT

Also, the existing buildings in Chinatown are ill-suited for residential loft space, since many have no access to the upper floors except through the ground level retail space, said Lauri Michel, vice president for community revitalization at the National Trust for Historic Preservation and an author of the study.

The buildings are also small and need significant work.

A survey of 10 Chinatown landowners for the study found all of them had empty upper-floor spaces, and were interested in renting to commercial tenants.

Only four also expressed an interest in seeking residential tenants.

The landowners said the biggest challenges in renting residential lofts includes the considerable infrastructure upgrades required, putting in parking, and having to a pay a park dedication fee for converting even a single unit from office to residential. They also said residential tenants are harder to manage.

Robert Gerell, a real estate expert who was on the mayor's Chinatown/Downtown Task Force in 2004 and was a strong proponent of allowing lofts in the community, said the city failed to look at the regulatory barriers to setting up lofts. Add the park fee and the parking requirement to the cost of renovating an upper-floor unit (which often must be brought up to code) and setting up residential lofts no longer makes economic sense, Gerell said.

Still, Gerell said he has hope residential lofts will start cropping up in Chinatown "as a way to bring more vibrancy and occupancy" to the community.

The study's survey of about 200 artists showed they were interested in residential space in Chinatown but had trouble finding any. The biggest barriers, they said, were affordability, a lack of interest among landowners and a lack of space big enough to both work and live.