Hawaii usually budgets tens of millions of dollars annually to subsidize affordable housing development, but Sen. Will Espero wants to increase that to $2 billion to tackle the state’s severe housing shortage.

As the new chair of the state Senate Housing Committee, Espero has introduced Senate Bill 591 to float general obligation bonds to fund $2 billion worth of subsidies to build both for-sale and rental affordable housing, along with public housing repairs and homeless shelters.

The state considers housing to be affordable if it’s targeted to individuals earning no more than $98,560 per year, or families of four earning up to $140,700 per year.

The latest housing study found Hawaii needs more than 24,500 units over the next five years, and more than 80 percent of the demand comes from people within that income bracket.

“What we’re appropriating now is not enough,” Espero said. “We’re not even making a dent in the housing crisis. We need to think big.”

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He’s got a point. Gov. David Ige’s budget request to spend $50 million on subsidizing rental housing is likely to produce fewer than 400 units.

Hawaii has already committed to building 22,500 affordable rental housing units in the next 10 years.

But progress has been slow. Kent Miyasaki, spokesman for the Hawaii Housing Finance and Development Corporation, said over the past two years, Hawaii has produced little more than 1,000 affordable rental units, and plans to build 3,240 more rentals over the next five years.

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Ricky Cassiday, a real estate analyst, has been studying Hawaii’s housing crisis and says it’s gotten worse in part due to the lack of resources devoted to the problem. He points to the state’s worsening homelessness problem as a symptom of the shortage.

“The housing problem has gotten worse and will get potentially worse with the continuation of the upswing in the real estate cycle,” he said.

He thinks Espero’s bill is a good idea and says the boost in supply of affordable housing would likely be significant enough to bring down home prices for all residents.

“Extra supply would advantage the peripheral parts of the market that aren’t being targeted by it,” he said, adding: “This is the first serious attempt to fund housing over the last decade.”

Developers and housing experts have long said that the way to fix Hawaii’s high cost of housing is a big influx of new units. But that’s been difficult to implement both due to the high cost of building units and resistance by many residents to more development.

Espero’s proposal is likely to get some traction in the Senate, where 20 of the 25 senators — all of whom are Democrats — co-sponsored the bill.

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But it’s a longshot to actually pass the Legislature. Ige’s budget already requests nearly $1.5 billion in funding from general obligation bonds over the next two years. His entire budget is about $28.5 billion, and he crafted it before the Council on Revenues downgraded the state’s revenue forecast, estimating $155 million less in tax revenue.

“It does make it more difficult for any additional money considerations when the actual (tax) collections do not meet expectations,” said Wes Machida, the state budget director.

The governor’s budget proposal also doesn’t include any money for government employee raises, to the frustration of Sen. Jill Tokuda and Rep. Sylvia Luke, the lawmakers in charge of crafting the budget. Neither replied to requests for comment for this story.

Machida said without knowing when the money would be deployed and how much revenue would be expected, he doesn’t have enough information to evaluate whether the bill makes sense financially.

But if all the bonds were to be issued at once, he said the principal and interest payments would likely range from $150 million to $180 million annually.

And while many senators appear to be on board with the idea, the proposal’s House companion — House Bill 869 — has only one sponsor in the House, Rep. Tom Brower. Although he sponsored it, he thinks the bill is unrealistic.

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“It sounds too high,” he said. “I would prefer legislation that has a reasonable chance of passing than something that doesn’t.”

Even if the measure were to pass the House, it would have to get the stamp of approval from Ige, former chairman of the Senate money committee.

Ige said in an emailed statement that it’s too early in the session to comment on specific measures, but he understands that “many people struggle with the high cost of housing, and the limited supply of homes contributes to that cost.”

“I will work with the legislature to maximize state financing tools that help the private sector build more homes people can afford,” he said.

Fiscal conservatives also worry about adding more to the tax burden without getting rid of regulations that slow down housing development.

The House version of the bill is up for a hearing at 9 a.m. on Tuesday. The Senate proposal is scheduled to be heard by two committees at 2:55 p.m. on Feb. 14.

How The Money Would Be Spent

Espero’s proposal calls for $500 million to be used for affordable housing and another $450 million specifically to build rental units.

The bill sets aside $400 million to upgrade public housing at Kuhio Park Terrace and redevelop and expand public housing at Mayor Wright and North School Street.

That’s far more than the governor’s request for $59 million for public housing improvements, but isn’t likely to be enough to pay for all three projects. The Mayor Wright redevelopment alone is expected to cost about $300 million.

Another $200 million would be spent on temporary transitional housing or homeless shelters statewide.

The bill calls for $400 million to be used for infrastructure around planned rail stations, especially near Aloha Stadium, Leeward Community College, University of Hawaii West Oahu and Iwilei.

Some $50 million would be used specifically to subsidize high-rise development on Hawaiian home lands. Espero thinks that’s important given that the houses built on land designated for Native Hawaiians have primarily been single-family homes, despite the long waitlist for housing.

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Espero’s bill sounds good to Catherine Graham, who works with the advocacy group Faith Action for Community Equity and was at the Legislature last week with the Rev. Bob Nakata in part to urge lawmakers to call a hearing for the bill.

To Graham, setting aside $2 billion to build more housing “is a no-brainer.”

She has been renting a house for 12 years that’s “way below market rate rent.” The owner is in a nursing home and when he passes away, she believes his children will likely sell the place or raise the rent.

“When he dies … I’ve got no place that I can afford to move,” she said. “So that’s why I’m fighting for affordable housing.”

She thinks too many people have already been forced to move away from Hawaii, crowd in with relatives or live on the streets.

“I think this is the time for our legislators to be really courageous,” she said. “Interest rates are still low so if we’re going to borrow money this is the last chance we have to do it at low interest rates.”

Money Isn’t Enough

But even supporters of the proposal say that solving Hawaii’s housing problem will take more than just an infusion of cash.

Christine Camp, president and CEO of the real estate development firm Avalon Group, is enthusiastic about the proposal and says it will address the pent-up demand for housing.

“It’s my view that if you build a lot of rental housing at any level, you will glut the market which will dampen the price pressure,” she said. “If there’s more incentive for financing options out there, that takes away the risk (for developers).”

But her company hasn’t taken advantage of government funding to build housing because the process is so long. “Our projects have just died just due to the expensive cost and time,” she said.

Kelii Akina, executive director of the conservative think tank Grassroot Institute, said in a statement that the money won’t necessarily help the housing situation unless “the state develops effective ways for using those revenues and removes unnecessary barriers faced by developers.” Akina is also a trustee on the board of the Office of Hawaiian Affairs.

A draft 2016 study on affordable housing recommended that the state and counties “address regulatory barriers including the lengthy land use entitlement process, lack of consistency and coordination in state and county agency reviews, impact fees and exactions, fiscal policy, and administrative processes that add to the cost of housing.”

Tom Yamachika, who leads the Tax Foundation of Hawaii, doesn’t have an opinion on the bill but notes that provisions to use specific tax revenue to pay off the debt service are a red herring because the money will still come from the general fund.

“The issue is how much debt you want to take on,” he said. “That’s the issue.”

Cassiday suggests that the state be creative in funding mixed-use projects where commercial spaces could help generate revenue to pay for the debt service.

“I think that the problem is so big and the solution is so good that they ought to do something along these lines,” he said of the bill.