Units in Kakaako 'workforce housing' condo being flipped for big profits

Units in Kakaako 'workforce housing' condo being flipped for big profits
Published: May. 26, 2016 at 10:14 PM HST|Updated: May. 26, 2016 at 10:28 PM HST
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KAKAAKO (HawaiiNewsNow) - A Kakaako development designed specifically as workforce housing could soon become home to a far different clientele.

Just a year after opening, a handful of units at the 801 South Street development have already been sold at prices that don't meet "workforce" budgets.

Unlike other affordable housing developments that may come with back-end or buy-back restrictions, 801 South Street in Kakaako had only one requirement of most homeowners -- they need to live there for a year, and can then sell if they choose.

And that's exactly what some owners are doing. And they're making a big profit along the way.

"The sales have been about 30 to 40 percent higher than the original price and that's a windfall profit," said  Stephany Sofos, a Realtor.

One homeowner made $102,000 after just six months in one-bedroom unit at 801 South Street.

"What used to be affordable is not affordable, if you want to buy into 801 -- it's not affordable. It's market price," Sofos said.

A real estate search turned up at least one unit that was resold twice in the last year. The two bedroom was originally purchased for $483,000 last February. It was bought in August for $541,000, earning the homeowners nearly $60,000. It was sold again just this month for $656,000 -- that's a profit of $115,000.

Hawai'i Community Development Authority Chairman John Whalen acknowledged the situation is problematic, and that homeowners flipping the units for big profits are defeating "the intent of providing workforce housing."

Workforce housing is supposed to be for the solidly middle class -- teachers, firefighters, and hotel workers.

HCDA, the agency in charge of overseeing development in Kakaako, refers to 801 South Street as an experiment intended to provide a large infusion of workforce housing in the urban core, without many of the limitations that had previously prevented developers from building in the area.

"We're trying to preserve an affordable housing market in an area where land values are increasing," Whalen said.

Hawaii News Now toured the condominium with the developer's broker last fall, who defined workforce housing as meant for individuals who make up to $85,000 a year or families of four with a combined income of no more than $121,000.

"The need is tremendous. Anyone who is looking for a home in town will tell you that it's very difficult," said Jason Nishikawa, the broker in charge at Marcus & Associates.

At the time, he said developers weren't worried about 801 South potentially becoming a "market value" building.

"We don't have the fancy amenities that some of the other projects do have, such as pools gyms and theaters. It's really just what the buyer is looking for and really what they can afford," he said.

Developers believed unit sizes and limited features would ensure the condominium stayed within the targeted market it's meant for, but Realtors say that hasn't been the case.

"They built it so that the quality of construction was not luxury pricing, but the average price now is at luxury levels," Sofos said.

It's a concern HCDA plans to address next week.

"We're going to be looking at the workforce housing rules as well as reserved housing rules to see how we might adjust those to ensure greater affordability
over a longer period of time," Whalen said.

It's unclear exactly how many units have been re-sold or are listed for re-sale. Hawaii News Now has confirmed that at least 10 of 600 went on the market.

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