HONOLULU (HawaiiNewsNow) - Developers plan to break ground this year on a 43-story, 424-unit highrise in Kakaako geared toward first-time homebuyers.
Prices in Ke Kilohana, being developed by the Howard Hughes Corporation, will start in the $300,000s and most of the units will go to Hawaii residents.
But there's some important small print to consider.
Some 375 of the building's units will be priced below market, but they'll be subject to the "reserved housing program," set up by the Hawaii Community Development Authority to address the explosive growth in Kakaako and ensure a mix of family incomes.
For Ke Kilohana, the reserved housing program:
- Caps household income at 140 percent of area median income. Using 2015's median area income, that means a couple could earn no more than $97,300 and a family of four could earn no more than $121,650.
- Puts restrictions on who can buy. The program is meant for families who haven't owned property in the last three years.
- Constrains profit-making. Because the units are being sold below market, homeowners have to participate in profit-sharing if they sell. That "shared appreciation" is the spread between the original market price and the original purchase price.
"It's a way into homeownership. It's a way into this new urban community that's being developed here at Ward Village," said Todd Apo, vice president of community development at the Howard Hughes Corporation.
"It's got all the amenities of a normal market price unit, but ... it's going to be a price that's for Hawaii residents that really makes it affordable," he said.
The structure of the program allows for affordable units to be built amid the luxury condos. And while the program facilitates purchases, it constrains profit-making. That's all due to the shared equity provisions, which stipulates homeowners must kick back a portion of their profits when they sell their units.
"When they sell the unit, they get an appreciation for themselves from the original investment, but they share part of that appreciated value with the HCDA," said John Whalen, chairman of the HCDA board.
"We can use those funds to reinvest in future affordable housing projects," he said.
Here's an example of how it works: If a unit's market value is $500,000 and it's sold for $300,000 under the reserved housing program, the "shared appreciation" spread is $200,000.
If the unit is sold for $800,000 a decade later, the homeowner has to pay that $200,000 back to the Hawaii Community Development Authority. The unit's sellers walk away with the remaining profit.
So far, the "reserved housing" stipulations haven't affected demand.
Howard Hughes Corporation has been hosting free seminars to educate people on the reserved housing program as well as the development's income qualifications. Supporters of the "reserved housing program" say while the program may prevent people from profiting as much on the back end of the transaction, it's also allowing them to get in on the front end.
"Because of this HCDA program and the formula they have, it's going to provide affordable units for Hawaii residents" said Apo.