Creating A Transit-Oriented Workforce Housing Strategy for Honolulu

A Transit-Oriented Housing Strategy

Materials

Labor

Capital

Demand

Land

Wage Income

Public Policy

Market

JobGrowth

Housing MosaicHousing Mosaic

Regional ApproachRegional Approach

Creating A Transit-Oriented Workforce Housing Strategy for Honolulu

Goal: Increase Workforce Housing near Transit

Source: The Center for Transit-Oriented Development

Breaking the Cycle of Unintended Consequences Breaking the Cycle of Unintended Consequences in Transit-Rich Neighborhoodsin Transit-Rich Neighborhoods

Construction Costs ComparisonConstruction Costs ComparisonMarket TrendsMarket Trends

Source: Rider Levitt Bucknall

Workforce Housing

Source: Center for Housing Policy, 2009 Housing, Rents, and Income Data

Source: Hawaii State Data Book, 2009

Distribution of Honolulu Household Demand vs. Supply by HUD AMI Levels

3.7% 0.1%10.2% 2.9%

18.0%

0.4%

8.5%8.5%

20.3%

1.9%

21.8% 31.4%

13.1%

7.4%

25.6%30.3%

13.8%

10.5%

10.0%8.9%

7.4%

20.9%

11.7%8.5%23.6%

58.7%

12.3% 9.6%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Single FamilyDemand

Single Family Supply Multi FamilyDemand

Multi Family Supply

> 180% AMI

141 - 180% AMI

121 - 140% AMI

81 - 120% AMI

51 - 80% AMI

30 - 50% AMI

< 30% AMI

Combined Housing and Transportation Costs% of Household Income

32.0% 35.0%28.6% 26.3% 27.0%

33.0% 29.2% 32.2%

18.6%20.4%

21.5%21.0% 22.6%

21.3%21.4% 15.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Transportation

Housing

Source: http://htaindex.cnt.org

DefinitionsDefinitions

• Affordability – Pay no more than 30% Affordability – Pay no more than 30% of Gross Monthly Income. Housing of Gross Monthly Income. Housing meets needs of householdsmeets needs of households

• Area Median Income – At 100% of Area Median Income – At 100% of AMI, half residents earn below that AMI, half residents earn below that amount and half aboveamount and half above

• Very Low Income - <30% of AMIVery Low Income - <30% of AMI• Low Income – 30% to 59% of AMILow Income – 30% to 59% of AMI• Moderate Income – 60% to 79% AMIModerate Income – 60% to 79% AMI• Middle Income – 80% to 120% of Middle Income – 80% to 120% of

AMIAMI

• New real estate development in Honolulu is challenged by high construction costs which result from:– Strong labor unions and associated high cost of laborStrong labor unions and associated high cost of labor

• Although recent declines in construction activity have reduced labor rates – Although recent declines in construction activity have reduced labor rates – military construction projects continue to support Oahu’s relatively high military construction projects continue to support Oahu’s relatively high construction wagesconstruction wages

–High cost of land• Approximately 1% of Hawaii’s land is developable;Approximately 1% of Hawaii’s land is developable;• The supply of developable land is constrained by:The supply of developable land is constrained by:

– MountainsMountains– Military owned landsMilitary owned lands– State of Hawaii owned landsState of Hawaii owned lands– Privately-owned landsPrivately-owned lands

– Premium cost of materials which usually must be importedPremium cost of materials which usually must be imported• Hawaii does not have plentiful natural resources that are generally used in Hawaii does not have plentiful natural resources that are generally used in

traditional building materialstraditional building materials–Other factors

• Expectation that developers pay for infrastructure upgradesExpectation that developers pay for infrastructure upgrades• Length of time required for permit and entitlement review timelineLength of time required for permit and entitlement review timeline• Zoning considerations (i.e. green space and parking requirements)Zoning considerations (i.e. green space and parking requirements)

Market Trends

FactorsFactors That Affect the Amount of Travel & Modal That Affect the Amount of Travel & Modal ChoiceChoice

Automobile Transit Cycling & Walking

Out-of-Pocket Costs

Fuel & Maintenance Roadway Tolls Parking Fees

Transit Fare Maintenance

Time Costs Driving Parking Search Walking

Walking Waiting Riding

Riding Walking

Service Attributes

Effort Safety Comfort

Effort Safety Comfort

Effort Safety Comfort

ShortShort & Long-term Effects of Transportation & Long-term Effects of Transportation System ImprovementsSystem Improvements

Employment location Residential location

Infrastructure investment

Work and non-work travel (frequency, destination,

mode)

Automobile ownership

Mode to Work

Transportation improvement

Long-term decisions

Medium-term decisions

Short-term decisions

Potential Livability Benefit Outcomes associated Potential Livability Benefit Outcomes associated w/TODw/TOD

Downtown &NeighborhoodRejuvenationMetropolitanSustainability &VMT ReductionSocial Equity forJobs & HousingEconomic Growth with Environmental Quality

TOD 3.0

1. Route Alignment2. Station Location3. Station Area4. Land Assemblage5. Infrastructure6. Vertical Development7. Livability Benefits

Land Prices Land prices around station are likely to increase because of

speculation when a new transit line is planned Affordable and workforce housing developers lack the capital to

acquire land before the prices go up and hold it until ready to be developed

Financing Funding for workforce housing is limited or too restrictive Mixed-income and mixed-use projects require complex financing

structures involving multiple sources of funding

Timeline Sites often require land assembly and rezoning, leading to lengthy

acquisition and permitting process Community opposition to density and affordable housing can be

challenging Development near transit requires collaboration among the public,

private, and non-profit sectors , which can be difficult to coordinate given the different needs, constraints, and schedules

Creating A Transit-Oriented Workforce Housing Strategy for Honolulu

Challenge: TOD Housing Difficult, Time-Consuming, and Expensive

Source: Center for Transit-Oriented Development

1.1. Affordable housing and rental housing, both have Affordable housing and rental housing, both have negative connotation – NIMBY’s. negative connotation – NIMBY’s.

2.2. Typically, projected market rents do not support Typically, projected market rents do not support new multi-family (rental )construction;new multi-family (rental )construction;

3.3. Hawaii is dominated by service-sector industries, Hawaii is dominated by service-sector industries, whose average employee wage scales do not whose average employee wage scales do not support the purchase of housing (for-sale)support the purchase of housing (for-sale)

4.4. The majority of employer assisted housing The majority of employer assisted housing programs focus heavily on demand-side (for-sale) programs focus heavily on demand-side (for-sale) programs.programs.

Housing Challenges

aggressiveland

assembly

regionalconnections

partnershipapproach

targetedneighborhood

planning

sophisticatedmarket analysis

marketingneighborhoods

housing development/rehab tools

economicdevelopment

proceduresthat measure

impact

PARTNERSHIP APPROACH: Collective, long-term, sustained, and strategic investmentsare needed in order to produce important community development outcomes. In addition to brokering a common agenda, these partnerships are building the capacity of community-based groups and other stakeholders to ensure strong local leadership. These coalitions help increase the flow of resources into neighborhoods, define and execute market-based strategies, and develop new approaches to creating and seizing neighborhood development opportunities.

Community Challenge Planning Grant$40 million total – Honolulu receieved $2.3m max grant + 20% match) to: Foster reform and reduce barriers to achieving affordable, economically vital, and sustainable communities.

• Development of master plans or comprehensive plans that promote affordable housing co-located and/or well connected w/retail, businesses..aligned w/..transportation plans;

•Development & implementation of plans and strategies that promote livability and sustainability;

• Revisions to zoning codes, ordinances, building standards, or other laws to remove barriers…..;

•Revisions to building codes to promote …energy efficiency….;

•Strategies for creating or preserving affordable housing for low, very-low, and extremely-low families or individuals….;

•Strategies to bring additional affordable housing to areas that have few housing opportunities….;

•Planning, establishing, and maintaining acquisition funds and/or land banks for development, redevelopment, and revitalization for the development of affordable housing

1. Truly Affordable Housing1. Truly Affordable Housing– Pairing lower housing costs with lower Pairing lower housing costs with lower

transportation coststransportation costs

2. 2. Broadening Access To Opportunity– Producing better economic and social outcomes

3. Increasing Employers’ Access To Metro Workforce 3. Increasing Employers’ Access To Metro Workforce – Improving economic competitiveness and Improving economic competitiveness and

productivity productivity

4. 4. Stabilizing “High-Percentage” Riders– Increasing transit access to populations who will

use it the most

5. Alleviating Gentrification Pressures Near Transit 5. Alleviating Gentrification Pressures Near Transit StationsStations– Counterbalance the potential displacement of Counterbalance the potential displacement of

existing workforce housingexisting workforce housing

Creating A Transit-Oriented Workforce Housing Strategy for Honolulu

Goal: Increase Workforce Housing Along the Rail Corridor

Creating A Transit-Oriented Workforce Housing Strategy for Honolulu

2008 Comprehensive 2008 Comprehensive Housing Strategy for Housing Strategy for the C&C of Honolulu, the C&C of Honolulu, Mayor’s Affordable Mayor’s Affordable Housing Advisor Housing Advisor Group Group

2008 Report of the 2008 Report of the Governor’s Governor’s Affordable Housing Affordable Housing Regulatory Barriers Regulatory Barriers Task Force Task Force

Nine additional Nine additional studies and reports studies and reports conducted between conducted between 1991 and 2006 by 1991 and 2006 by federal, state, and federal, state, and local agencieslocal agencies

Build On Multiple State, Local Housing Studies

State-level Recommendations Change purpose of the Land Use Commission to long-

term planning Modify Low Income Housing Tax Credit allocation and

requirements

County-level Recommendations Establish county-level Office of Housing and provide

a single government point-of-contact for housing development (Ongoing)

Increase long-range housing planning capability at DPP

Streamline the entitlement process to reduce length, cost

Revise rules for Unilateral Agreements to 140% of AMI, transfer/sale of housing credits, and enhancement credits. (Complete)

Fee-based expedited third-party review by private consultants (Complete)

Plan/budget for infrastructure investment with Honolulu High-Capacity Transit Corridor Project and TOD

1.1. Focus on creating mixed-income workforce Focus on creating mixed-income workforce housing opportunities near transit .housing opportunities near transit .

2. Engage employers and employee unions to expand employer assisted rental housing programs;

3.3. Focus on preservation of existing housing units Focus on preservation of existing housing units and; opportunities for acquisition and and; opportunities for acquisition and rehabilitation/adaption of existing structures;rehabilitation/adaption of existing structures;

4. Actively pursue modifications to state and local regulatory policies to reduce impediments to create more affordable, energy-efficient housing.

Strategies

Creating A Transit-Oriented Workforce Housing Strategy for Honolulu

Integrated, Targeted Approach for TOD Housing

Planning and ZoningPlanning and Zoning Financing Financing

Inclusionary Zoning Expedited Permitting

Reduced Parking RequirementsModify Unilateral Agreements

Land Acquisition/Banking Fund Pre-development Financing

Gap Financing Preservation/Rehabilitation

Financing Modify LIHTC criteria

Incentives Incentives Coordination Coordination

Density BonusImpact Fee Waivers Property Tax Waiver

Tax Abatement

TOD Housing Coordinator Public-Private Partnerships

Value Capture Tools For Infrastructure

Programming Capacity

Creating A Transit-Oriented Workforce Housing Strategy for Honolulu

• Enhance impact, funding through collaboration Enhance impact, funding through collaboration

– Use HUD funding for “top loss” or lead equity Use HUD funding for “top loss” or lead equity capitalcapital

– Identify fund manager and define transactional Identify fund manager and define transactional role role

– Provide start-up support while structuring the Provide start-up support while structuring the fund fund

– Create governance agreement to guide fund Create governance agreement to guide fund mission and mechanics mission and mechanics

– Solicit partners to build “capital stack” and Solicit partners to build “capital stack” and mitigate risk mitigate risk

TOD Fund Structure and Activities

• Buy and hold strategic parcels before the real estate Buy and hold strategic parcels before the real estate market heats up to control development later and market heats up to control development later and ensure it meets community development goals ensure it meets community development goals

• Do catalytic projects to help “jumpstart” markets and help transition auto-oriented places into compact, walkable, transit-oriented places

• Ensure that existing affordable housing is preserved Ensure that existing affordable housing is preserved and new affordable housing is created—along with and new affordable housing is created—along with other important amenities—in valuable transit-rich other important amenities—in valuable transit-rich locations locations

• Target small projects where preservation/development of affordable housing units is possible

Land Acquisition/Banking Fund for TOD

Source: Center for Transit-Oriented Development

Case Study:

Portland TOD Property Tax Abatement

Supports TOD by reducing operating costs through a 10-year maximum property tax exemption

Applies to newly-constructed structures, additions or conversions within ¼ mile of transit

Minimum of 10 units, 20% at 60 percent of AMI, 10% at 30 percent of AMI

Sponsor must own or have site control and demonstrate exemption necessary for financial feasibility

Annual cap of $20m for 3 years

Creating A Transit-Oriented Workforce Housing Strategy for Honolulu

Land Acquisition/Banking Fund for TOD

Case Study:

Denver Transit-Oriented

Development Fund

$15m credit facility focused on preserving and creating affordable housing with access to transit

Public-private partnership with Enterprise Community Partners and the Urban Land Conservancy

Provides capital for non-profits to leverage for purchase, operation, and rehabilitation of affordable housing

100% Loan to Value Ratio, 5-year hold on property, and risk mitigation with “top loss” pool

Denver Transit-Oriented Development Fund

Capital

SourcesCommercial

Lenders

Foundations

Local Government

Fund

ManagerEnterprise

Communities

BorrowersUrban Land

Conservatory

Take-out FinancingCHFA

DHA

DURA

Bridging the Gap

City & County

Of Denver

Enterprise

Communities

Housing Finance

Authority

&

Foundations

Senior Debt

CDFI

Capital Stack or Waterfall

City & County ofHonolulu

•Planning & Zoning•Permitting

•Community Outreach•Affordable housing

•Transportation•Infrastructure Financing

CDC• Affordable

Housing Operator/Manager

•Workforce Placement•Social Services

Private developer•Land owner

•Conceptualization•Financing

•Entitlements•Construction

•Operations, Leasing & Management

Joint Venture StructureJoint Venture Structure

Private DeveloperMarket-driven

Infill Mixed-use

Proximity to transit• Return on Investment

• Minimize risk• Create long-term

valueCommunity Needs

•Mixed-income, •affordable housing

•Neighborhood services•Job creation

•Social & economic equity

•Infrastructure

City & County of Honolulu

Maximize community benefitsMinimize environmental impacts

Provide servicesProtect public health & safety

GAP

• The term CDC refers to a type of non-profit entity known as a The term CDC refers to a type of non-profit entity known as a "community development corporation". CDC’s are "community development corporation". CDC’s are characterized by their community-based leadership and their characterized by their community-based leadership and their work primarily in housing production and/or job creation. work primarily in housing production and/or job creation. This is what differentiates them from other types of non-profit This is what differentiates them from other types of non-profit groups.groups.

• CDC’s are formed by residents, small business owners, congregations and other local stakeholders to revitalize a low- and/or moderate-income community. CDC’s typically produce affordable housing and create jobs for community residents. Jobs are often created through small or micro business lending or commercial development projects. Some CDC’s also provide a variety of social services to their target area.

• A CDC is organized under section 501 (c) (3) of the Internal A CDC is organized under section 501 (c) (3) of the Internal Revenue Code like any other non-profit entity . Local Revenue Code like any other non-profit entity . Local residents form the CDC - getting together and developing a residents form the CDC - getting together and developing a set of by-laws, file for incorporation with the state set of by-laws, file for incorporation with the state government and apply to the federal Internal Revenue Service government and apply to the federal Internal Revenue Service (IRS) for designation as a tax exempt non-profit organization. (IRS) for designation as a tax exempt non-profit organization. The IRS designation is necessary in order for the organization The IRS designation is necessary in order for the organization to obtain grants and gifts from any government, corporate, or to obtain grants and gifts from any government, corporate, or foundation sources or from individuals.foundation sources or from individuals.

Creating the Implementing Entity – a Creating the Implementing Entity – a local CDClocal CDC

HUD• HOME• CDBG

• Sec 108

US Treasury•LIHTC•NMTC

City & County ofHonolulu

• Community Services•Economic Development•Planning & Permitting

Consultants•Organization•Development

•Financing

Roles & Responsibilities

Private Entities/Foundations

•LISC•Enterprise Foundation

•NeighborWorks•Living Cities

CDC• Affordable Housing

•Wealth Building•Community Transformation

•Asset Management

Private Lenders•Banks•REIT’s

EDASBA

City & County ofHonolulu

• Community Services•Economic Development•Planning & Permitting

Consultants•Organization•Development

•Financing

Roles & Responsibilities

Private Entities/Foundations

•LISC•Enterprise Foundation

•NeighborWorks•Living Cities

CDC LimitedLiability

PartnershipNeighb

or- hood

residents

VisionManagement

Investment partnersShareholders

ExpertiseOversight