One of the state’s biggest investments over the last decade has been to subsidize affordable housing. Over the next two years alone, the state Legislature has invested $200 million into its Rental Housing Revolving Fund.
The fund gives favorable loans to affordable housing projects. Interest rates are typically below 1%, and repayment periods sometimes don’t start for 30 years.
Money from the fund is often used with federal Low-Income Housing Tax Credits, which can cover up to about 70% of the costs of projects over 10 years for those considered very low income — below 60% of the annual median income.
“If your listeners are out there wondering what the Legislature is doing with your tax dollars, a lot of the budget is kind of already locked into place and we don't have that much discretion, but the single largest discretionary expenditure that we as legislators are making is funding the Rental Housing Revolving Fund, which funds subsidized housing in Hawaiʻi,” said Senate Housing Committee Chair Stanley Chang.
Developers access those funds through a process called the "Qualified Action Plan," or QAP. It gives points to projects based on criteria like project readiness, affordability periods, and development costs.
“The QAP is essentially a gamification point allocation system to be able to have government, public and other key stakeholders have a kind of input on what type of housing should be prioritized, where it should be prioritized, for whom, and how long it should stay affordable,” said Housing Hawaiʻi’s Future Executive Director Lee Wang.
“The conversations coming up as it pertains to social benefit are important conversations that Hawaiʻi Housing Development Corporation is facilitating.”
Every point counts on the QAP
The nonprofit Catholic Charities Housing Development Corporation has successfully navigated the QAP process. It broke ground this year on Hale Pilina, a 178-unit affordable housing project on Maui.
“It is a very competitive process, and rightfully so because the state is allocating a huge amount of resources to go towards supporting low-income housing,” said Catholic Charities Housing Development Corporation Executive Director Denise Iseri-Matsubara.
She emphasized that even one point on the QAP can determine whether or not your project gets funding.
And the Hawai‘i Housing Finance and Development Corporation is considering changing some of the points on the QAP.
One of the proposed changes is decreasing the points given to nonprofits to just one. Being a nonprofit currently yields eligible organizations two points.
Iseri-Matsubara explained that one of the benefits of having a community nonprofit as a developer is that its mission is aligned with the state to preserve the housing as affordable.
“Bonafide nonprofits with missions that are aligned with the state's objectives for housing, really have it within their DNA,” she said. “Their commitment, their reason for existence really is to promote affordable housing and preserve it.”
But community nonprofits are already at a disadvantage when competing with private developers because project readiness is weighted so heavily at 24 points — which requires a lot of upfront capital.
“We're talking anywhere from $1.5 million to $3 million upfront, and if you don't get an award, it could be very disastrous,” Iseri-Matsubara said. “Smaller nonprofits just don't have that kind of money. And Hawai‘i as a whole doesn't have a whole lot of small nonprofits developing housing.”
Preserving affordability of government-subsized developments
While the state’s Rental Housing Revolving Fund has been around for just over a decade, the federal Low-Income Housing Tax Credit has been around since the 1980s, so some properties could hit its affordability period — and some already have.
HHFDC reported last year that about 2,000 units will hit their affordability period in the next 20 years.
Currently, the shortest affordability period a project can have is 45 years — although if it expands longer, it can get more points — which many projects do.
But legislator Chang wants the affordable housing built using these funds to stay affordable in perpetuity.
“Virtually every single one of them that was ever built is going to expire at some point between now and the year 2100. Every affordable housing building that we build is a ticking time bomb,” he said.
“The time will come when the developer is free to raise rents to market, kick out all the existing low-income tenants, and then bring in market-rate tenants, and then sell the building for a fair market value and pocket all of the proceeds themselves.”
He added that when that happens, it is typically up to the state or county to step in.
“We will be persuaded and compelled to buy back that building, which the state already paid for in the first place to be built,” he said. “So the state ends up having to pay for each building twice.”
That’s one of the reasons why he wants government projects to be given priority, even if it may not be as quick to start building.
There are incentives for developers to extend the affordability period. As the buildings age, developers can apply through the QAP for more funding to do large renovations and then extend the affordability period by another 30 years. However, the QAP does prioritize new projects — giving it more points.
Raising public awareness
With so much funding at stake, Hawai‘i Appleseed is working to raise public awareness about how QAP works and how the community can be involved.
“Where we come in is like talking to and engaging the public in a meaningful way … Your average community member isn't like, ‘Of course, it's time to comment on the QAP and I should really get into it this year and write out my testimony encouraging that it reflects the values that I think are important for our local community,’” said Hawai‘i Appleseed Housing Policy Director Arjuna Heim.
“The financing factor of all of it is the most complicated and kind of opaque, but also makes or breaks if a project is real or not.”
She explained that there needs to be more community conversation about what it wants to see the QAP reflect.
The state is hosting a public hearing on the QAP changes Wednesday morning. People can sign up until the end of Tuesday to provide comments at the Hawai‘i Housing Finance and Development Corporation website.
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