In 2022, the Legislature of Hawai’i took a significant step in addressing the pressing issue of affordable housing by allocating a historic $300 million to the cause. The aim was to alleviate the ongoing affordability challenges faced by residents in the state. More than two years later, the initial outcomes appear promising, with approximately 2,000 rental units set to become available for individuals at below-market rates in the upcoming year. However, the situation remains complex, highlighting the substantial gap still present between demand and supply in the housing market.
From 2020 to 2024, the Hawaii Housing Finance and Development Corporation has been instrumental in managing the distribution of these funds, awarding around 40 projects which collectively promise nearly 5,000 affordable rental units across the state. These units are designated for a diverse range of renters, spanning those who earn less than 30% of the state’s average median income to families earning up to the median income, which was nearly $140,000 last year for a family of four in Honolulu. These efforts represent only part of the estimated 10,000 affordable housing units projected to be operational by 2026, funded through various sources including federal, state, and county allocations.
A 2019 assessment of Hawaii’s housing requirements served by the housing finance corporation indicated that the state would require nearly double the number of affordable units needed to meet current demands. The 2022 legislative budget specifically directed the substantial $300 million to the state’s Rental Housing Revolving Fund, which facilitates low-interest loans for housing developers. This allocation marked the largest single investment into the revolving fund since its inception 16 years ago. Following this, an additional $280 million is planned for utilization during the 2024 and 2025 fiscal years.
Governor Josh Green has proposed a further $250 million for the Rental Housing Revolving Fund in the next two fiscal years, which would be funded through general obligation bonds, contingent on legislative approval. The substantial investment has resulted in $320 million dedicated to the development of around 2,000 apartment units across various locations from Hilo to Kihei and Kaka’ako. This funding has played a critical role in advancing housing options for lower-income families, specifically those whose earnings are below 60% of the state’s area median income—approximately $83,500 for a family of four in Honolulu.
Despite the pressing need for affordable housing, building such units in Hawai’i presents unique challenges, particularly because the costs associated with constructing affordable housing are often on par with those for market-rate housing. Consequently, the lower rents generated yield less revenue, making it difficult for developers to recover their investments. In turn, this financial shortfall complicates securing the necessary capital for project initiation. The low-interest loans from the revolving fund are intended to bridge this financial gap for developers.
Over half of the funding allocated in 2022 has already been directed towards five lower-income projects, four of which are currently under construction, totaling 1,036 apartment units. Arjuna Heim, the director of housing policy at Hawai’i Appleseed, a nonprofit dedicated to research and advocacy, emphasized the pivotal role of these funds. “This program is essential for delivering housing to individuals at the low- and very low-income spectrum,” Heim remarked, noting its irreplaceable contribution to the housing challenge.
Additionally, approximately half of the record budget allocation was set aside for Tier 2 projects, often referred to as workforce housing. These units aim to assist renters earning between 60% and 100% of the median income, a demographic that has been historically overlooked in funding initiatives. Dean Minakami, the executive director of the Housing Finance and Development Corporation, stressed the importance of this funding in light of the population decline being observed, particularly in Honolulu, indicating that both lower and middle-income households are disproportionately impacted.
The Tier 2 housing projects that received funding are expected to yield 756 affordable units, with a commitment to keeping rents affordable for over half a century. Developer Stanford Carr, who is working on the Kahuina project in Kaka’ako, underscored the critical nature of these funds for workforce rental properties. The Kahuina project will encompass a blend of market-rate and affordable units and is anticipated to start construction in 2025.
Despite the substantial funding, developers engaged in low-income and workforce housing ventures still encounter significant hurdles, including permitting delays, economic fluctuations, and supply chain issues, which have been exacerbated by the pandemic. Among the Tier 2 projects funded in 2022, two are currently progressing through design and permitting stages, with timelines yet to be established. Hualalai Court, a project on the Big Island that received a $67 million allocation, is on track to break ground around mid-2025.
The demand for affordable housing in Hawai’i significantly outweighs the current supply, leading some advocates to recommend reevaluating strategies for funding and development. The Grassroot Institute of Hawaii suggested that the high cost of regulatory compliance detrimentally impacts housing availability and advised scaling back the authority of the state’s Land Use Commission to nurture urban development. Additionally, they propose eliminating fees that contribute to construction costs, which could lead to a clearer path for affordable housing projects.
On the other hand, the advocacy group Housing Hawai’i’s Future has proposed that the state should finance construction for homes aimed at higher-income residents, positing that this might open up existing housing stock for lower-income individuals. They argue that creating housing for purchase will facilitate quicker financial returns, enabling reinvestment into additional housing projects more efficiently.
Lastly, Catholic Charities Hawaii has voiced the need for increased investment in the Rental Housing Revolving Fund, focusing particularly on projects serving those earning below 80% of the state’s median income. Chief Operating Officer Tina Andrade emphasized the persistent struggles individuals face within the lower-income brackets: “The need remains critical, and while some progress has been made, sustained efforts are essential to address this ongoing challenge.”
