AFFORDABLE HOUSING OPPORTUNITIES

The Lingle-Aiona Administration continues its commitment to increasing the inventory of affordable homes to Hawaii's families.  The Administration is building upon initiatives in 2005, 2006, and 2007 by continuing to dedicate financial resources to the development and preservation of affordable housing, increasing the inventory of affordable housing at a faster rate, and strengthening the financial tools that are available to facilitate the development of affordable housing.

Faster Delivery of Affordable Homes

Currently, State-funded housing projects are required to have full capitalization funding on hand before proceeding.  This requirement delays the delivery of more affordable housing inventory into the market and is unreasonable in projects where an income stream is derived by selling or leasing completed homes or improved lands.  Changing the law to follow the private industry standard that allows a developer-contractor to be bonded and to proceed with only those funds needed to complete an identifiable phase of the project will allow State-financed affordable housing projects to be expedited.

This bill allows the Department of Hawaiian Home Lands and Hawaii Housing Finance and Development Corporation to start construction of housing developments when they have the initial portion of construction funds for affordable housing projects, rather than waiting until they have the entire financing appropriated.  Many of the projects are undertaken by private sector parties as funds are made available by these State agencies.

Enactment of this measure will enable individuals on Hawaiian Home Lands waiting lists to purchase and occupy their homes more quickly and will expedite construction of affordable homes for the general public through the efforts of the Hawaii Housing Finance and Development Corporation.

Preservation of Existing Inventory

In 2006, the Hawaii Community Development Authority (HCDA) was prohibited from selling property in fee simple.  This causes a problem when the HCDA wants to buy back one of the affordable units it helped build in Kakaako and resell that unit to another qualified family as affordable housing.  This bill reinstates HCDA's ability to buy back 1,388 affordable units in Kakaako already constructed and provide homes to families.  The bill would also cover an estimated 2,000 future affordable housing units that will be built in Kakaako in the years ahead. 

Rental Housing Trust Fund

The Lingle-Aiona Administration is again proposing to provide reliable, consistent funding for the Rental Housing Trust Fund by making the current amount of conveyance taxes deposited into the fund permanent.

The conveyance tax is paid when a property is bought and sold in Hawaii.  The current law allows 50 percent of the tax to be deposited into the Rental Housing Trust Fund and has provided an additional $14.4 million in moneys to build much needed homes that would not have been available otherwise, but this allocation will expire on June 30, 2008 and the percentage will revert back to 30 percent.  This bill proposes to make the current allocation of 50 percent permanent.

The Rental Housing Trust Fund is leveraged by private and non-profit developers to build affordable rental housing units.  This permanent increase is estimated to bring $14 million into the Rental Housing Trust Fund over the next 2 years.

Development Financing Tools

The Hula Mae Multi-Family (HMMF) program promotes the development of new and the preservation and rehabilitation of existing affordable rental housing projects through the issuance of mortgage revenue bonds for interim or permanent financing at below-market interest rates.  The program is managed by the Hawaii Housing Finance and Development Corporation.  Eligible projects commit to provide a certain number of affordable units to households who qualify under specific income restrictions.  This bill would authorize the HHFDC to issue up to $100 million in additional revenue bonds to finance affordable housing projects in the HMMF.  The agency is currently authorized to issue up to $400 million of Hula Mae bonds but needs additional authority to keep pace with housing needs. 

The low-income housing tax credit (LIHTC) program promotes the development and rehabilitation of low-income rental housing through the use of federal and State low-income housing tax credits.  Eligible projects must set aside a certain number of affordable units for qualifying households.  The LIHTC program is a powerful financing tool for affordable rental housing development, especially when awarded in conjunction with State rental housing trust funds.  It encourages private developers to invest in housing for lower income families.

The annual State credit is equal to 50 percent of the federal credit allocation and has averaged about $1.2 million per year.  The LITHCs are used by investors to reduce their taxes owed over a ten-year period.  The credit is available only on the portion of the project that is set aside for low-income tenants and may be kept by the owner-developer, or sold to qualified investors/partners to raise equity for the development of the project.  Shortening the period over which the credits can be taken would make this financing tool more attractive.

Specifically, this bill changes the period over which state LIHTCs are taken from ten years to five years and would increase the present value of the credits when sold to investors, thereby providing a more attractive financing incentive to potential developers of affordable rental housing.  This change to a 5-year amortization period matches the 5-year period to use federal low-income tax credits.  Other states that offer these credits also use a 5-year period.

 
Ko Olina Tax Credit Expanded for Housing

The Leeward (Waianae) Coast has levels of poverty in excess of 20 percent in each of the census tracts comprising the Waianae community.  This condition has existed for over 40 years, despite the efforts of federal, State, and county programs to improve the living standards of individuals and families in this area.  The Lingle-Aiona Administration proposes targeted tax relief utilizing an existing credit for the Leeward Coast area.

To assist with community-based economic development and regional revitalization in the Leeward Coast, this bill would allow affordable housing projects, as well as new commercial business ventures, to be eligible to qualify for an existing Leeward region tax credit.

Currently the credit provides $7.5 million per year in tax credits.  The tax credits are due to expire on May 31, 2009.  This bill extends the period of eligibility of the credits one additional year to May 31, 2010.