Thursday, October 11, 2007

Maui County Council Kills Affordable Housing Project

Under HRS § 201H-38, the state legislature encourages affordable housing projects by allowing developers to be exempt from all statutes, ordinances, charter provisions, and rules of any government agency relating to planning, zoning, construction standards for subdivisions, and development and improvement of land. Still, the project must comply with safety standards, tariffs, or rates and fees approved by the public utilities commission and the board of water supply. And, before the project can be approved, the developer needs approval from the Hawaii housing finance and development corporation (“HFDC”), the county council, and sometimes the state land use commission.

Under the original version of the law, after the project was approved by HFDC, the counties were allowed to either approve or disapprove the project. Counties were not allowed to modify. However, in the 2006 legislative session, the law was amended to allow the counties to modify proposed 201H projects. I discussed the amendment here. The outcome of the above amendment is that the counties are allowed to fiddle with 201H affordable housing projects approved by the HFDC.

As the Maui News reports today, such fiddling can kill a project. Maui Lani Partners were forced to scratch their affordable housing project under 201H because the county council wanted the developer to maintain low rents on at least half of the units in the project for 25 years. Low rents are defined as rents affordable to families below 80 percent of median income. In its original proposal, Maui Lani Partners proposed to keep rents affordable for the 80 percent of median group for 15 years. After 15 years the developer wanted to provide the units for sale or rent to those making between 120 percent to 160 percent of the median income.

Perhaps the legislature shouldn’t have made the amendment to 201H. As the old adage goes, too many cooks ruin the soup. In any event, as the housing market declines, regulators will need to show more restraint since the market will tolerate less regulatory burdens.

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