“How do you feel about the balance between preserving Hawai‘i’s land and current affordable housing units versus encouraging residential and commercial land development? Do you believe that the government should encourage more land preservation, more land development, or do you think that the balance is about right already?”

These were the Honolulu Civil Beat questions during an April 2012 poll. 1,162 registered voters across Hawai‘i gave their opinion: 53 percent of those surveyed wanted more preservation, 14 percent wanted more development, 23 percent said the current balance was about right, and 11 percent said they were unsure.

Despite more voters opting for preservation, development has continued in order to meet Hawai‘i’s huge housing demand. The poll was taken during a time when the Hawai‘i Land Use Commission was considering petitions for major master-planned residential developments – Ho‘opili and Koa Ridge, which both have now housed thousands of families in Ewa Beach and Central O‘ahu, respectively. Around this time, the Hawai‘i Legislature was also contemplating relaxing environmental regulations to allow for transit-oriented development near Honolulu rail stations – a plan that is now in place with the adoption of mixed-use zoning and new land use regulations to develop urban landscapes with affordable housing around each station.

While opting for development to increase the affordable housing supply in Hawai‘i is a popular and perhaps necessary solution, preservation is another proposal for increasing affordable housing for working and low-income families.

What is preservation?

Preservation in real estate can have a variety of applications – from restoring historic buildings to retaining undeveloped land to ensuring the federal housing subsidy and low-income housing restrictions remain in place to renovating affordable housing units to meet the local, state and federal requirements and negate their deterioration. The overall idea of preservation is to keep and maintain the housing or land that is already in place.

How can preservation help affordable housing?

Preservation of affordable housing typically relates to preserving policies, regulations, deeds and restrictions to ensure current affordable housing units remain in Hawai‘i’s overall inventory and are not transformed to market-rate housing units. Preservation also typically entails rehabilitation of affordable housing units to maintain livability as properties age.

Preservation of policies and programs help keep designated housing units affordable for the long term.

Not including affordable housing for sale, which typically is found in new developments, the number of Hawai‘i affordable homes is estimated to be around 16,300 in 2021, according to data from The National Housing Preservation Database. However, a shortage of nearly 25,000 homes exists for extremely low-income (ELI) families, and nearly 1,300 of the 16,300 publicly supported rental homes have affordability restrictions that are expected to expire in the next five years.

In Hawai‘i, affordable housing units are typically owned or financed through public entities and funds. The Public Housing Authority owns several units while the Department of Housing and Urban Development, and the USDA have financed the development of housing units in the past that are currently designated as affordable. The City and County of Honolulu and other island county governments have also zoned certain properties affordable, including those affordable housing projects developed through Hawai‘i Revised Statutes 201-H.

However, when affordability restrictions or programs lapse, affordable housing units can be eliminated from the overall inventory. Some property owners will increase the rent or sell the housing unit(s). Proponents of preservation, on the other hand, advocate that affordable housing restrictions, deeds and policies should continue for the duration of the home’s existence.

“Affordable housing should have long-term deed restrictions and there is no financial reason not to restrict them in perpetuity. Many cities and states have active affordable housing preservation programs to save inventory, but Hawai‘i and the counties do not,” argues Charles P. Wathen of the Hawaii Housing Alliance.

Renovating existing affordable housing units give them a longer lifespan for a lower cost, when compared to constructing a new affordable housing development.

Hundreds of affordable housing units are lost each year due to deterioration or abandonment. Preservation of affordable housing usually also includes repairs to the property – sometimes by a new owner or through a public-private partnership. Proponents of preservation cite its cost-effectiveness, sometimes one-third to one-half less than building a new unit.

Excluded from the publicly owned or financed affordable housing unit inventory, Hawai‘i also has a number of naturally occurring affordable housing (NOAH) units, which are often in older buildings with smaller units at affordable rents or in the form of small multi-family housing units. However, many of these older buildings often go into disrepair, causing their sale and frequent demolishment to make way for newer developers. The Hawaii Housing Alliance estimates that over 15,000 NOAH units have been converted to market-rate condominiums in Hawai‘i.

What are some examples of preservation in Hawai‘i?

Public-private partnerships to rehabilitate and manage large portfolios of affordable housing units have promised to preserve long-term affordable housing.

In late 2020, The State of Hawai‘i partnered with private companies, Stanford Carr Development and Standard Communities, in a $223.9 million deal to have the private companies take over the lease six condominiums (Pohulani Elderly, Kauhale Kakaako, Kamekee Vista, Kekuilani Courts, Honokowai Kauhale, and Lailani Apartments), which total 1,221 housing units. The agreement included that the six properties must be preserved as affordable housing for the long term with residents receiving rental assistance and a $85 million rehabilitation to modernize interiors.

“Leveraging private funds through partnerships like this is a more efficient use of State resources. It’s more cost effective to sell the leasehold interest and have Standard Communities and Stanford Carr Development bring private capital to pay for renovations and other capital improvements through the sale,” former Governor David Y. Ige said.

Craig Hirai, Executive Director of the Hawaii Housing Finance and Development Corporation (HHFDC), said the objective of the six properties transfer was to “achieve the dual goals of rehabilitating the properties for long-term preservation of the portfolio while fulfilling the State’s commitment to minimize displacement of existing tenants. The substantial renovations will be completed faster than would be possible under the State’s ownership and divesting the rental housing portfolio frees up HHFDC resources and provides HHFDC with additional capital that can be used to further advance its primary goal of increasing the supply of new affordable housing.”

Another recent preservation project was Community Preservation Partners (CPP)’s acquisition of the Smith-Beretania Apartments in Honolulu, which has 164 units that all receive rental subsidies under a Section-8 HAP contract. CPP partnered with local private lenders to make the deal a reality (BlackSand Capital, Bank of Hawaii, and Ahe Group), and using low-income housing tax credits, a $10 million renovation is planned.

“Preserving existing affordable housing in high-cost markets is very important to maintaining communities and ensuring that people have access to adequate and affordable housing,” said B.J. Kobayashi, chairman and CEO at BlackSand Capital.

“Preserving affordable housing is the obvious first step to meet our country’s rental supply needs. Our nation builds approximately 100,000 affordable apartments each year. But for every new affordable apartment created, two are lost due to deterioration, abandonment or conversion to more expensive housing. Without preserving existing affordable housing, we fall two steps back for every step we take forward,” says non-profit National Housing Trust, which has preserved and improved more than 36,000 affordable homes nationwide.

While preservation policies and efforts might be one tool to assist with maintaining the affordable housing inventory in Hawai’i, questions remain about preservation’s feasibility and ability to provide affordable housing to the tens of thousands of people who need it.

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