Here’s How Affordable Housing Policies Have Impacted Hawai‘i’s Housing Supply

This report on affordable housing policies by county governments and state agencies provides different perspectives on what works and what doesn’t – and what might work better.
02 22 Affordable Housing Impacts Hawaiis Supply Web
Photo: Aaron Yoshino

Everyone agrees that Hawaiʻi needs more affordable housing.

What we don’t agree on is which government policies will best fill that need.

But some policy failures are obvious. One glaring example: From 2006 to 2014, a Maui County policy meant to encourage construction of affordable housing only resulted in three such units. And the same policy may have discouraged other residential construction.

Local developer Stanford Carr, who has built housing on Maui, Hawai‘i Island and O‘ahu, says that Maui policy essentially “flatlined” the county’s housing industry until it was changed.

“Government is really slow to react to fix something after they realize that was a bad decision,” he says. “And the only ones hurt by it are our communities and primarily the younger generations, first-time homebuyers. So this problem has been in existence for decades. It hasn’t gotten any better.”


Inclusionary Zoning

Maui’s policy is a form of inclusionary zoning, which requires developers to offer a percentage of new residential units in their projects to lower-income households at rent or sales prices they can afford. Generally, housing is considered affordable when households pay no more than 30% of their incomes on housing costs.

Honolulu, Kaua‘i and Hawai‘i counties, plus two state agencies, have their own inclusionary policies with different requirements governing the amount of housing that must be affordable in a project, who can live in them, how long they must remain affordable, and how much they can be sold or rented for.

Some developers say inclusionary policies in general mean they must charge market-rate buyers or tenants more to subsidize the affordable units. Understanding how these inclusionary policies impact Hawai‘i’s housing supply is complicated. Maui and Kaua‘i counties and two state agencies track the number of affordable units generated by their inclusionary policies. Honolulu, however, does not have a breakdown of affordable units by regulation or program. And Hawai‘i County is negotiating with a consultant to review its policy.

Also, other factors impact the production of affordable housing, not just government policy. Those include the general economy, the real estate market, interest rates, and availability of land and financing, writes Susan Kunz, Hawai‘i County housing administrator, in an email.

“By its nature, inclusionary zoning relies on private development to produce affordable housing so if development is not happening, no affordable housing gets developed,” she writes. “We are currently in an active market with low interest rates that is now spurring more development activity and also resulting in more affordable housing units.”

Some developers and others familiar with Hawai‘i’s housing industry have complained for years about Hawai‘i’s inclusionary policies. They say these policies actually reduce the housing supply because of burdensome requirements and they want major changes in those policies.

Related: Some Ideas on How To Create More Homes For Local People

Not Enough Supply

Hawai‘i has had a shortage of housing for a long time. In 1970, Hawai‘i’s then-lieutenant governor, Thomas Gill, issued a report titled, “Hawaii’s Crisis in Housing.” The report said the crisis was driven by a shortage of available housing units to meet current needs, and the high cost of renting or buying a home.

That shortage resulted in “serious overcrowding, doubling-up of families, rapidly rising rents and the unavailability of adequate housing for many people,” the report said.

Those issues still plague Hawai‘i. A December 2019 study commissioned by the Hawaii Housing Finance and Development Corp., the main state agency charged with developing and financing low- and moderate-income housing, found Hawai‘i will need about 50,000 more housing units between 2020 and 2025.

Area median income, or AMI – half of the residents of an area earn less than that level and half earn more – is a key factor in the affordable housing equation. Most of the needed units called for in the 2019 study are for people who make less than 140% of the AMI. Depending on the county, that 140% of AMI can range from $99,000 to $169,000 a year for a family of four. Local policies tend to set the cap for what is considered “affordable housing” as housing that targets income groups up to 140% AMI.

The greatest need is for housing for people at or below 60% AMI – $72,480 for a family of four in Honolulu – with a little more than 19,000 units needed statewide.


How the Cost of Affordable Housing Raises the Cost of Other Housing

You can think of inclusionary zoning as a tax on development – a tax that ends up getting paid by other homebuyers. Here’s a simple example that reflects the reality of some affordable housing rules in Hawai‘i.

A new multifamily project has 100 units of 1,000 square feet each. It costs $450,000 to build each unit. That includes costs for land, construction, design, financing, permits, sewers and more. But 30 of those units must be sold for $300,000 – affordable to people earning 120% of the area median income, or AMI.

How does the developer recover the $150,000 difference for each of those 30 units?

That $4.5 million must be added to the price of the 70 market- rate units – about $64,000 more for each one. That means those 70 market-rate units are more expensive than they’d otherwise be without the affordable housing requirement.


Housing Constraints

Paul Brewbaker, principal of TZ Economics, says Hawai‘i’s housing shortage would be even worse if not for some recent trends. For instance, the state’s population growth rate is lower, families are having fewer children, more households have no children at all, and more individuals are living alone. Even so, he says, Hawai‘i is not building nearly enough homes.

He says the 2010s was the worst decade for housing construction on O‘ahu since the 1940s. And over the last several decades, fewer homes have been built on the Neighbor Islands, according to Brewbaker’s seasonally adjusted data on quarterly new housing units authorized by building permits.

“The main thing that’s different is the way we regulated homebuilding,” he says, adding that for the past 25 years he has shared his housing data with major building industry officials and real estate groups, developer associations, housing conference participants, and state and county lawmakers.

Hawai‘i is well known for its complicated web of land use regulations. Justin Tyndall, an assistant professor of economics at UH, says anecdotally, Hawai‘i’s regulations are more stringent than other places in the U.S., though it’s difficult to make comparisons. Honolulu was not included in a recent national regulatory index that quantitatively compares how difficult it is to build in different markets, Tyndall says, so he and other UH Economic Research Organization researchers are surveying local planning officials across Hawai‘i to get comparable data. (UHERO published the results of that study in April 2022. It can be found here.)

Related: Yes, We Can Solve Hawaii’s Housing Crisis


“Production Quotas”

The goal of inclusionary zoning is simple: to pave a way for people with lower incomes to have affordable places to live by requiring or incentivizing the construction of affordable housing in new developments.

These types of policies have been in place in the U.S. since the 1960s and in Hawai‘i since at least the 1980s. Philip Garboden, an affordable housing professor at UH, says inclusionary zoning has become more popular over the last 20 years, especially in high-rent, high-cost cities. According to the Lincoln Institute of Land Policy, a nonprofit based in Massachusetts, more than 800 U.S. jurisdictions have inclusionary housing programs. Brewbaker calls these policies “production quotas.”

The requirements vary from county to county and among state agencies in Hawai‘i.

  • The Hawaii Community Development Authority and Kaua‘i County requires certain new developments to provide 20% affordable units, while Maui County requires 25%.
  • Hawai‘i Island requires developers to provide enough affordable housing so that they earn affordable housing credits equal to 20% of the number of units or lots in a project. Developers earn more credits when they target lower income households. For example, a developer will earn 2 credits per unit when building and renting a rental unit for a household earning less than 60% of the AMI – $51,360 for a family of four.
  • Honolulu requires different percentages of affordable units depending on whether a project is built in a transit- oriented development area and whether they are offered as ownership or rental units.
  • The Hawaii Housing Finance and Development Corp.’s 201H inclusionary policy requires that at least 50% of housing units plus one in a project be affordable. The policy allows for expeditious review of eligible projects and exemptions from planning, zoning and construction rules.

With the exception of 201H, new developments must have a minimum number of dwelling units or be built on specific-sized lots to trigger the requirements of these policies. They also require that these affordable units remain affordable for a certain number of years and target specific income groups. Some also restrict the amount of equity a homeowner can earn when selling an affordable unit.


An Ineffective Policy?

If you ask those in the housing and development industry how successful these policies have been at increasing Hawai‘i’s affordable and overall housing supply, you’ll likely hear mixed responses.

Brewbaker says, “Right off the top, economics tells you that if the government imposes a production quota, it’s almost certainly going to be less efficient at delivering what’s needed in the market than if the producer – in this case the builder – is simply responding to the signals the prices send from the marketplace.”

UHERO in 2010 published a report about the impact inclusionary zoning had on O‘ahu’s housing market and analyzed studies of these policies across the U.S. It concluded that inclusionary zoning policies were failing on O‘ahu and in other jurisdictions. In addition, the researchers’ study of other U.S. policies found that inclusionary zoning tended to increase the market price of housing and decrease the number of housing units available.

Garboden, the UH economist, says the disincentive for developers to build increases when the required percentage of affordable units increases and when the affordability period is lengthened.

“That’s this trade-off that inclusionary zoning always forces you to make is how big a tax do you want to create on new development, how much can you create, and so you often – and this isn’t just a Hawai‘i thing – you end up with these not very effective policies because of all the compromises that are necessary,” he says.

From 2007 to 2020, Kaua‘i County’s Ordinance 860 required developers to provide 30% of their housing as “workforce housing” for residents earning less than 140% AMI. Kaua‘i’s policy considers “workforce housing” and “affordable housing” to be the same thing – housing that serves income groups below 140% AMI. It resulted in zero such units. From 2006 to 2014, when Maui’s policy only resulted in three units, the requirement was 50%. Both counties have since lowered their requirements.

Since 2014, Maui’s new policy has resulted in 460 completed affordable units with another 701 either under construction or pending construction, the county’s Department of Housing and Human Concerns wrote in an email. It’s too soon to know the difference Kaua‘i’s recently revised policy will make.


Impact on Development

To trigger the requirements of Kaua‘i’s Ordinance 860 from 2007 to 2020, projects had to have at least 10 dwelling units or 20 hotel rooms. While many homes were built in that time, the projects weren’t big enough to trigger the policy, says Adam Roversi, Kaua‘i County’s housing director.

He adds that perceived failures or successes cannot be laid solely at the feet of Ordinance 860. For example, the U.S. housing market collapsed barely a year after the policy was adopted.

Affordable housing was still built on Kaua‘i while that ordinance was in place, but through other mechanisms. Since 2011, about 500 affordable homes have been built on the island; Roversi says those units were created by the county and its private partners. And some homes, like those in DR Horton’s Ho‘oluana at Kohea Loa community in Līhu‘e and the 134-unit Koa‘e Makana in Kōloa, were made possible by ad hoc requirements imposed on developers before the enactment of 860.

On O‘ahu, Dean Uchida, director of the county’s Department of Planning and Permitting, writes in an email that the county doesn’t have a complete breakdown of affordable units by regulation or program. His predecessor, Kathy Sokugawa, told the Honolulu City Council’s zoning committee in 2018 that many factors delay the time between when a project with affordable housing is approved and actual construction of the affordable units begins. “In the City and County of Honolulu, for example, projects that were approved decades ago (under a different affordable housing policy) are only now being built due to market factors and the on- and off-site infrastructure needed before construction can begin.”

However, the department’s fiscal year 2020 Annual Report on the Status of Land Use on O‘ahu reports that affordable units make up about 40% of the 101,187 units in the planning stages or under construction on O‘ahu. “This is consistent with the cumulative effect of the various affordability requirements that have been in use over the past four decades,” the report says.

Some low-income rental projects serving households at or below 60% AMI were also able to proceed on Maui outside of the county’s 50% inclusionary policy. One was the 28-unit Imi Ikena Apartments in Wailuku.

Kevin Carney, EAH Housing’s Hawai‘ i VP, says a condo building was originally planned for the site. But the developer couldn’t make a 50% workforce housing requirement pencil out, he says, because they’d have to offer the market-rate units at a price that was not sellable. Instead, EAH Housing partnered with the California developer that bought the land to build the apartments, assisted by $9.4 million from federal low-income housing tax credits.

He says Maui’s strict policy stopped the construction of most housing in the county. “Every developer in Hawai‘i is aware of what happened on Maui as a result of that 50% requirement,” he says.

EAH, which has offices in Hawai‘i and California, manages 22 local properties, including 15 that they developed or redeveloped. Because the nonprofit’s local developments serve residents at or below 60% AMI, its projects are eligible for government subsidies, like the low-income housing tax credits.

Linda Schatz, principal of Schatz Collaborative, which provides real estate development services to landowners and investors, says the counties’ inclusionary zoning requirements are harder to meet when projects are privately financed and have no subsidies. Generally, those are projects that serve 80% to 120% AMI. On O‘ahu, that’s families of four who earn $96,640 to $144,960 per year.

“Those projects don’t happen because the requirements are so heavy that nothing can pencil, and that’s why development just doesn’t work when the inclusionary requirement ends up being so stringent,” she says.

Carr agrees. He says developers generally break even when their for-sale units target 100% AMI and above. Anything below that means developers are selling at a loss.

“You need to sell above 100% to the 140% and the market-rate units to make enough margin to be able to subsidize the loss of affordable for-sale, and, overall, your project has got to be feasible enough that the bank will loan you the money,” he says. “Because if it’s a break-even deal, the bank’s not going to loan you the advance to build. It’s too much risk. Or it’s going to require a tremendous amount of more equity in order to finance the deal, and at that point it’s not worth taking the risk. The returns aren’t sufficient to satisfy the capital markets.”

“201H is one of the most powerful tools we have. What it actually does – and I’ll use the bad word – is it deregulates, it literally takes away regulations from housing and it makes it legal for us to build housing.”

– Linda Schatz, Principal, Schatz Collaborative


Incentives, Not Mandates

Developers will often tell you that they favor incentives, rather than mandates, to get them to build more housing. Those incentives can include things like increased density, fee waivers and expedited permitting, and some are already offered through the various state and county policies.

“History has shown in Hawai‘i for the major developers that they build for teachers, policemen, nurses, firefighters, government workers, that’s their market,” says David Arakawa, executive director of the Land Use Research Foundation of Hawaii, a private, nonprofit trade association whose members include major local landowners, developers and a utility company.

He and other developers agree that Hawai‘i needs to provide more incentives so that developers can do more of this.

“We do need housing at all income levels, and so in order to provide all those income levels, there has to be incentives,” Carney says. “And unfortunately, in Hawai‘i that hasn’t happened a lot of the time. There’s just the mandate but there’s no incentives to provide that mandate. So you wind up maybe only getting a portion of what you needed, or maybe not getting anything at all, and the development comes to a stop.”

The more effective inclusionary zoning policies tend to be ones that are incentive-based, Garboden says. One example of that is the state statute that allows “50% plus one unit” projects that target households at or below 140% AMI to qualify for expedited review and exemptions from planning, zoning and construction rules.

Denise Iseri-Matsubara, executive director of HHFDC, says that since its inception in 2006, the 201H statute has resulted in about 12,000 units for people making less than 140% AMI. Now, about 1,000 units are built each year using this process. Demand for housing is still much greater than what has been produced, but Iseri-Matsubara says the statute has been successful in producing more affordable homes.

Schatz says “201H is one of the most powerful tools we have.”

“What it actually does – and I’ll use the bad word – is it deregulates, it literally takes away regulations from housing and it makes it legal for us to build housing,” says Schatz, who focuses on multifamily rental projects that target people at 80% to 140% AMI.

Exemptions for things like height limits, setbacks, parking requirements and real property taxes enable EAH to build its projects, Carney says, because they help the nonprofit save money and make it possible for it to provide rents that are affordable to people at or below 60% AMI.

“Without all those exemptions, the projects would not work. That’s the bottom line,” he says. In Kaka‘ako, HCDA’s executive director, Deepak Neupane, says a public facility dedication fee exemption and loosened density restrictions are major incentives for building in the district.

About 4,200 of nearly 12,600 housing units built in Kaka‘ako are affordable to residents at or below 140% AMI. Those 4,200 units include nearly 1,400 affordable rentals and nearly 490 rentals specifically for seniors.

Neupane says he’s heard criticism from developers about inclusionary zoning generally, but he thinks Kaka‘ako’s reserved housing rules have worked well so far. Nonetheless, HCDA’s board, he says, is considering amending its rules and looking at different incentives for developers to provide even more affordable housing.

“I mean 20% has worked and created a lot of affordable housing in Kaka‘ako, but we do understand there is a need for more affordable housing,” he says. “So how do we create additional affordable housing without creating a burden on the developer, so nothing gets built? You can’t just increase the requirement, and nothing gets built.”

Related: Kakaako’s Affordable Housing Rarely Is


“Affordable” vs. “Workforce” vs. “Reserved” Housing
Affordablehousing Map

Affordable and market-rate housing projects in the Kaka‘ako Community Development District. | Map: Google Earth

These three terms are often used interchangeably by people in the housing industry, but government policies define them differently. Here are some distinctions.

Affordable housing: Generally refers to housing in which occupants pay no more than 30% of their income for housing, according to the U.S. Department of Housing and Urban Development.

But other definitions are used: For example, Hawai‘i Revised Statute 201H- 57 defines “affordable housing” as being affordable to households with incomes at or below 140% of the area’s median family income.

Reserved housing: Mainly used by the Hawaii Community Development Authority, which has a reserved housing program for its Kaka‘ako and Kalaeloa districts. Reserved housing is designated for eligible residents who earn under 140% AMI.

Workforce housing: Generally housing that is considered affordable to households making 100% to 140% AMI, but some policies, like Kaua‘i’s and Maui’s, define it as housing that targets any income group earning below 140% AMI. Under Kaua‘i County’s Housing Policy, “workforce housing” and “affordable housing” are interchangeable. HCDA’s rules define a “workforce housing project” as a new residential project in which at least 75% of the units are set aside for households earning no more than 140% AMI.

“Every public servant on a platform when they’re campaigning for office, affordable housing is always a priority of theirs. … Yet we haven’t been able to produce the housing. Why is that?”

– Stanford Carr, Developer


Search for Solutions

Several of the people we spoke with say local policies need to change to help spur more housing development. And some efforts are already underway.

In 2020, Maui Councilmember Mike Molina introduced a bill to raise the affordable housing requirement for Maui 201H projects to 75%. He says developers gave mixed responses as to whether they could make that work, but 75% was an ask, not a demand. According to HHFDC’s 2019 study, Maui needs 10,400 new housing units between 2020 and 2025. Maui’s mayor ultimately vetoed the bill, and the council was unable to override.

In Honolulu, Uchida writes that county administrators are reviewing all of the various affordable housing policies, rules and ordinances to see what needs to be done to increase the overall supply of housing.

“The lack of supply of housing has prevented families who purchased a ‘starter’ home a few years ago from stepping up the housing ladder as their income increases,” he writes. “As they step up to say a market priced home their ‘starter’ home becomes available for an entry level family. That is a healthy housing ladder.”

Rep. Nadine Nakamura, chair of the state House Housing Committee, says her committee is working with different government agencies to identify the major subsidies needed for developers to build housing for the various income groups on the housing ladder, as well as the subsidies needed to keep people in them, such as rent assistance for very low- and extremely low-income units.

For the last six months, Carr and Harry Saunders, president of Castle & Cooke Hawai‘i, have been vetting county and state affordable housing policies and making recommendations. The developers are co-chairs of the Hawaii Business Roundtable’s Housing Committee and are working with several housing industry groups, as well as the four county mayors and their housing directors, and the chairs of the state Senate and House housing committees.

“Every public servant on a platform when they’re campaigning for office, affordable housing is always a priority of theirs. … Yet we haven’t been able to produce the housing,” Carr says. “Why is that? … That’s why Harry and I are gluttons for punishment to take this endeavor on because we’ve seen the perennial mistakes over the decades. And again, all with good intentions, but they don’t realize, fast forward, the unintended consequences.”

When we spoke, Castle & Cooke Hawai‘i had just welcomed its first residents at Malina at Koa Ridge, a set of affordable condominium townhomes in Central O‘ahu. Koa Ridge is expected to have 1,000 affordable housing options when it’s fully built. Saunders points to U.S. Census Bureau data showing that Hawai‘i’s population has declined each of the last four years as a main reason why the state needs to find solutions.

“If we don’t make some dramatic changes, they’re going to keep leaving,” he says. “And we’re not going to have our youngest and brightest here anymore. I don’t think that’s the Hawai‘i we want.”

Castle And Cook Nohona Exterior Plan Kapolei

Castle and Cooke Hawai‘i’s Nohona neighborhood in Kapolei. | Photo: courtesy of Castle & Cooke Hawaiʻi

Housing Rules

The four counties, plus the Hawaii Community Development Authority and the Hawaii Housing Finance and Development Corp., have their own policies requiring developers to provide a certain amount of housing for income groups under 140% area median income.

Some policies require a minimum number of units to be affordable for targeted income groups and others require a minimum percentage of the residential floor area to be affordable. And some policies differentiate between for-sale units and rentals.

This summary focuses on requirements for residential projects.

Hawaii Housing Finance & Development Corp.’s 201H Statute HCDA Kalaeloa Reserved Housing Rules HCDA Kakaʻako Reserved & Workforce Housing Rules Kauaʻi County Housing Policy Honolulu Affordable Housing Requirement Maui Residential Workforce Housing Policy Hawaiʻi County Affordable Housing Policy
Eligible Projects Housing projects with 50% + 1 affordable units Building multifamily dwelling units on lot greater than 40,000 gross square feet Building multifamily dwelling units on lot greater than 20,000 gross square feet Projects with 10 or more dwelling units New construction or conversion of 10 or more for-sale dwelling units, or subdivision of land creating 10 or more zoning lots for residential use Projects with 10 or more lots, lodging/timeshare/ dwelling units; conversion of 10 or more hotel units into dwelling or timeshare units; hotel redevelopment project that increases number of dwelling/lodging units in the hotel by 10 or more Projects with 5 or more residential units/lots on rezoned land
Affordable Requirement 50% +1 unit For sale: 20% residential floor area Rental: 15% residential floor area 20% units 20% units Transit-oriented development (TOD) for sale: 10%, 20%, 30% units TOD rental: 15% units For sale projects in other areas: 5%, 10%, 15% units Rental projects in other areas: 5% *These are for projects seeking bonus height or density, or both 25% units If the units are affordable forever the requirement is 20% Developer must earn affordable housing credits equal to 20% of the number of units/lots
Max AMI Targeted 140% 140% 140% 120% For sale: 120%
Rental: 80%
140% 140%
Other Options N/A Build required units off-site In-lieu fee or build required units off-site Dedication of land, in-lieu fee, substitute for-sale units with rental units Conveyance of land, in-lieu fee or build the required units off-site. Off-site production requires different percentages of affordable units In-lieu fee, conveyance of land Conveyance of land or infrastructure, build required units off-site, obtain excess credits from another developer
Regulated Periods For sale: 10 years For sale: 5 years Rental: 15 years For sale: 10 years Rental: 30 years Units sold during sales period that are restricted by buyer’s income: 50 years Units sold during sales period not restricted by buyer’s income: 10 years For sale: 5, 10, 30 years (depending on how much affordable housing provided) Rental: 30 years For sale: 5-10 years, depending on income group Rental: 30 years For sale: 10 years Rental: 20 years


Hawaiʻi’s Affordable Housing Inventory

Click here to read the list maintained by the Hawaii Housing Finance and Development Corp., a state agency tasked with developing and financing low- and moderate-income housing projects and administering homeownership programs.

Nearly 360 projects with a little over 26,000 units are on the list, which was last updated December 21, 2021. Those projects include senior, family, state and federal public housing; special needs housing; and labor housing that received financing from HHFDC or went through its 201H process.

Denise Iseri-Matsubara, executive director of HHFDC, says this list only provides a partial picture of affordable housing in Hawai‘i. What’s missing, she says, is private sector inventory that doesn’t receive HHFDC assistance.


How Affordable Housing Policies Have Changed

Local governments have required developers to provide affordable housing in their new projects for decades. This timeline tracks some major policy changes.

1977: Waipio Gentry agrees to provide 10% affordable housing at 80% of the area median income in one of the first unilateral agreements by developers involving housing. A unilateral agreement is defined by Honolulu County as a covenant that runs with the land and states the conditions under which a developer has agreed to use that real property. These agreements are formed when a zone change is granted.

1982: The Hawaii Community Development Authority adopts reserved housing requirements for Kaka‘ako.

1988: Under Act 15, the state Housing Finance and Development Corp. (the predecessor of HHFDC) can enter into agreements with eligible developers and exempt their housing projects from zoning rules. At least 60% of the units in a project have to be affordable. This legislation helps spur residential development in the Villages at Kapolei and Ewa Villages.

1998: Hawai‘i County creates its Affordable Housing Policy, which requires that rezoning requests for residential projects with 10 or more units set aside 10% of units for households earning under 140% AMI.

2005: Under HCDA’s Kaka‘ako Mauka Area Rules, developers have to reserve 20% of their units for households at 140% AMI and below. Those units have to stay affordable for 2-10 years, depending on the income groups the units target.

2005: Hawai‘i County updates its Affordable Housing Policy to require some projects with 5 or more residential units or lots seeking rezoning to earn affordable housing credits equal to 20% of the number of units or lots. The update also provides a density bonus and requires that the affordable unit or finished lot be completed with road access; drainage; water; electricity; sewer lines, if required; and telephone connectivity.

2006: State enacts 201H, which creates the Hawaii Housing Finance and Development Corp. and a process for certain affordable housing projects to receive expedited reviews and exemptions from various regulations.

2006: Maui enacts its Residential Workforce Housing Policy, which requires housing developments to reserve either 40% or 50% of their units for residents making up to 160% AMI. For-sale units must remain affordable for 25 years, and rentals must remain affordable for the life of the unit.

2007: Kaua‘i enacts Ordinance 860 (its housing policy), which requires that 30% of the units in a project be affordable at or below 140% AMI and that for-sale units stay affordable for 10 or 20 years and rental units for 40 years.

2010: Honolulu policy now requires at least 30% of units in a housing project with a unilateral agreement be affordable to households at or below 140% AMI.

2011: HCDA amends its Kaka‘ako Reserved and Workforce Housing Rules to require 20% of a project’s residential floor area be for reserved housing (15% if rental units). The regulated term for affordable housing units is also reduced to 5 years for ownership units; a 15-year term is required for rental units.

2012: HCDA adopts its Kalaeloa Reserved Housing Rules.

2014: Maui reduces its Residential Workforce Housing Policy requirements to 25% affordable units for residents making less than 140% AMI and reduces the affordability periods.

2018: Honolulu enacts its Affordable Housing Requirement via Ordinance 18-10, which is meant to give developers more options to address different development types and circumstances.

2018: HCDA amends its Kaka‘ ako rules to require 20% of units be set aside for reserved housing (for-sale and rentals), instead of residential floor area. The amendments also extend the regulated term for for-sale reserved units to 10 years and rental units to 30 years. The change for rentals is so the rules are more consistent with requirements for rental projects financed with federal low-income housing tax credits, which mandate that units remain affordable for 30 years.

2020: Kaua‘i amends its housing policy to require 20% affordable units, rather than 30%, and revises the affordability period for for-sale units.

Related: The High Cost of Affordable Housing


New Housing Supply in Each County

Here are the annual number of private residential units authorized by building permits. Most of the counties’ affordable housing policies were created in the early 2000s.

Affordablehousing Chart

Source: Compiled by TZ Economics using data from: The county building departments; Bank of Hawaii (annual, 1964−1999) Construction in Hawaii; The state Department of Business Economic Development and Tourism; Robert C. Schmitt (1977) Historical Statistics of Hawaii, University of Hawaii Press; Ray Morris, Territorial Planning Board (1939) “Zoning and Housing,” An Historic Inventory of the Physical, Social and Economic and Industrial Resources of the Territory of Hawaii, 2nd ed.


What You Should Know About Hawaiʻi’s Housing Ladder

Developers and affordable housing advocates frequently talk about the “housing ladder,” a term that refers to the different levels of housing that people will generally need and can afford as they move through stages of their lives. Each rung on the ladder references the housing required and the corresponding income group.

Linda Schatz, principal of Schatz Collaborative, says each housing segment has different types of developers and requires different financing and policy solutions.

Below is Honolulu’s housing ladder with 2021 area median incomes provided for a family of four.

Category of Housing Income Required Potential Builders
Luxury (for sale)
Market (for sale)
Above 140% AMI
Luxury and market rate developers (No government subsidies)
Workforce/Reserved (rental or for sale)
Moderate Income (rental or for sale)
61% – 140% AMI
$72,480 – $169,120
Gap group/reserved housing/workforce housing developers (No government subsidies)
Low Income (subsidized rental housing)
Very Low Income (subsidized rental housing)
30% – 60% AMI
$36,240 – $72,480
Low-income housing developers (federal and state subsidies, free land is often required)
Extremely Low Income (Section 8 public housing) Homeless Under 30% AMI
State and county public housing
Other Solutions Needed

Few people now say that inclusionary zoning is the answer to Hawai‘i’s affordable housing woes. This housing shortage is multifaceted, so it’ll probably take many solutions to address it.

Here are some other efforts we learned about during our reporting:

  1. Maui County in 2021 finished its Comprehensive Affordable Housing Plan, which provides a roadmap to developing 5,000 units for local households below 120% of the area median income in the next five years. The plan was developed by a team of 19 community and land planners, engineers, data and policy analysts, attorneys, and community development professionals assembled by Hawaiian Community Assets.Some of the plan’s priorities include revising the county zoning code to lower housing costs and promote affordability by design; investing $380 million for community-serving infrastructure and $789 million for housing subsidies, new housing development, supportive services, and housing pilot and demonstration projects; and amending the county’s Residential Workforce Housing Policy so that developers dedicate 20% of land for low- and moderate- income housing.Jeff Gilbreath, executive director of Hawaiian Community Assets, says the current policy requiring 20% of the units in a project be affordable won’t result in enough affordable units to meet the county’s needs. By having developers dedicate land, the county can use that land to build housing at a higher density.
  2. State Sen. Stanley Chang is advocating for government to produce large numbers of needed housing. He introduced bills in the 2019, 2020 and 2021 legislative sessions to create the Aloha Homes program. In this case “Aloha” is an acronym for “Affordable, Locally Owned Homes for All.” The program is modeled after the one in Singapore, where most citizens live in government-built homes with 99-year leases.Under his proposed program, the state government would build hundreds of thousands of high-density public housing units on state-owned lands near rail stations and sell them to Hawai‘i residents at a starting price of $300,000. The Aloha Homes would be leased for 99-year terms, and 75% of the profit from resales would go to the state for building upkeep and to keep maintenance fees low.The Hawaii Housing and Finance Development Corp. commissioned a September 2021 study that said the current Aloha Homes concept as a whole is not viable. However, certain elements are doable and could help reduce housing costs, like state-supported financing, building at higher densities, streamlined entitlement, and restricting Aloha Homes to owner-occupant Hawai‘i residents with no other real property.Chang says he plans to introduce another Aloha Homes bill in the 2022 legislative session.“I believe whatever the amount of the housing shortage is, whether it’s 65,000 over 10 years or whether it’s 100,000 units by tomorrow, until somebody says, ‘I’m going to build 65,000 units and they’re going to be built right here,’ that is the only way to solve the housing shortage,” he says. “And the only entity who can do that is the state of Hawai‘i. … To expect private developers to build homes for $300,000 or $400,000 is not realistic in my opinion.”
  3. State Rep. Nadine Nakamura, who chairs the House Housing Committee, is working with the private sector and state and county agencies to coordinate infrastructure improvements for housing.She’s asking the counties to prioritize their affordable housing projects and identify the infrastructure needs associated with them. Then, Hawai‘i can use the funds it will receive from President Joe Biden’s Infrastructure Investment and Jobs Act to help pay for those projects. Hawai‘i is expected to receive at least $2.8 billion, with $1.5 billion going to update Hawai‘i’s highways and about $200 million for water infrastructure improvements.“This public-private coordination, partnership, is so critical to making affordable housing happen here,” she says.
  4. The bottom line is that more public investment in housing is needed.“We’re convinced that the current system is just so broken that all we’re going to be able to do is nibble around the edges with these small regulatory changes, with inclusionary zoning, with ADUs,” says Gavin Thornton, executive director of the Hawai‘i Appleseed Center for Law and Economic Justice.“All that stuff is definitely helpful and it’s well intentioned and it’s better than doing nothing, but we really need to reimagine the way that we’re providing housing to people and recognize that we’re all better off if everyone in our community is housed. And that means making serious government investments in creating that housing for people.”
Categories: Community & Economy, Construction, Government & Civics, Housing