The state agency in charge of managing development in Kakaako held a public hearing Tuesday to take testimony on highly criticized proposed rule changes that seek to make housing in the urban district more affordable.

There was just one problem: Not a single board member showed up.

Instead, the hearing was led by Curtis Tabata, an attorney at a Mililani-based firm and a hearings officer paid $150 per hour to oversee the meeting and write up a report.

After the hearing, a clearly upset Stanford Carr confronted Deepak Neupane, Hawaii Community Development Authority‘s planning and development director.

Why was Tabata running the hearing, the well-known developer wanted to know. Why weren’t any of the agency’s 10 board members there to listen to testifiers or ask questions?

“You’d better tell the governor, this is not the way,” Carr told Neupane.

Anita Hofschneider/Civil Beat

Carr wasn’t the only one who was unhappy.

“Everybody was shocked that they weren’t there. We got emails using all kinds of adjectives that we don’t want to repeat,” Marshall Hung, developer of two towers at 801 South Street, told Civil Beat after the hearing. “This is a low point for Hawaii democracy.”

Developers, landowners and construction industry experts have been hoping to convince HCDA not to enact a slew of changes to the rules regulating development in Kakaako. Meanwhile, housing advocates and local residents have been pushing the agency to make its proposed rules even more stringent.

Anita Hofschneider/Civil Beat

Kakaako has changed a lot over the past four years. Drivers heading makai down Ward Avenue are greeted by the reflective light shining off of the tall Symphony tower, complete with a luxury car dealership on the ground floor.

Across the street from the Star-Advertiser is a new high rise and townhomes, now selling for as much as $1.8 million. Blue and green glass towers are common along Auahi Street, along with trendy shops and restaurants. Parking has gotten harder to find.

A previous version of this story incorrectly said a high rise and townhomes replaced the old Star Advertiser building.

There’s no doubt HCDA’s efforts are revitalizing the neighborhood and boosting the state’s economy. But the agency has been highly criticized for permitting the construction of high-end homes that most Hawaii residents can’t afford. Meanwhile, Honolulu home prices have been steadily rising and the city has struggled with how to reduce homelessness when there are so few affordable homes available.

Former Gov. John Waihee says Kakaako was originally envisioned as a place where young couples could buy starter units before upgrading to single-family homes.

“This idea of high-end housing is an abomination,” he says, adding that they’re all subsidized by hundreds of millions of taxpayer dollars that went into upgrading the area’s infrastructure.

Anita Hofschneider/Civil Beat

Concerns about the rapid gentrification of the district reached peak fervor four years ago when residents protested on the street and in the state Capitol, convincing the Legislature to get rid of HCDA’s board and replace it with new members.

That’s when HCDA’s board created an investigative committee to review its affordable housing rules and figure out if they needed to be changed. In November 2014, the HCDA executive director presented a report to the board proposing the amendment.

Jesse Souki, executive director of the authority, says that over the past three years there’s been a lot of back and forth and the proposed rules have evolved.

The 2014 report recommended keeping housing affordable longer by extending the regulated period for reserved housing units up to 30 years. The report also suggested that HCDA encourage more rental housing in Kakaako, and require that developers of commercial projects that pay employees less than 60 percent of area median income ($34,692 or less) provide low-income housing units or cash in lieu.

The latest draft of the rules is significantly less stringent. Developers of most large projects still must set aside 20 percent of their buildings for reserved housing and would still be able to build homes affordable to someone earning up to about $86,000 or $123,000 for a family of four. But they would have to build enough less expensive homes that the average unit would be affordable to someone earning no more than about $78,000, or $105,000 for a family of four.

Anita Hofschneider/Civil Beat

The rules for workforce housing projects, where 75 percent of units are affordable to people earning less than $86,000, would be changed to give HCDA the first right of refusal to buy a unit when it’s sold. Developers would still receive benefits like density bonuses and park fee waivers.

“The overall concept is that the board wants to keep these units affordable for a long period of time,” Souki said. “Without the buyback, without the shared equity, it’s more of a likelihood they’ll become investment properties or sold for more than they should.”

Developers Push To Stop Regulations

But developers aren’t happy, particularly Hung and his business partners. At HCDA’s last hearing, 801 South Street project manager Derek Lock waited six hours to testify. Some unit owners had left by the time the issue came on the agenda.

He had been looking forward to the opportunity to try to persuade the board on Tuesday — with an agenda dedicated entirely to the issue — and encouraged industry experts, developers and 801 South Street owners to attend.

“They all wanted to voice these opinions on how these rules would affect them and their businesses and they’re speaking to empty chairs,” Lock said.

Anita Hofschneider/Civil Beat

Garett Kamemoto, spokesman for HCDA, said that at a public meeting in October, the board voted to hire a hearings officer to conduct the meeting. He said it can be difficult for volunteer board members to make quorum, and that a hearings officer led a public hearing on proposed park rules in December.

Tabata, the hearings officer, will write up a report and give it to the board, which will review the testimony before a decision-making hearing in May.

Tuesday’s meeting aside, Hung says that the agency’s new rules will prevent him from building more workforce housing projects.

Anita Hofschneider/Civil Beat

“You can talk to anyone in the industry and I believe they will tell you they have no faith in the government solution and that’s what’s really at play here,” he said, adding that the new rules would “shut down the market opportunity” to build more units.

That’s similar to what Carr said at Tuesday’s hearing when he referred to the proposed rules as “socialized housing.”

“The unintended consequence is that no projects will actually be built,” he said.

A previous version of this story incorrectly quoted Dan Nishikawa from OliverMcMillan instead of Carr.

“Kakaako is thriving,” said Lisa Eveleth, the owner of Coral Commercial Center in Kakaako. “It would be a shame to see the development stop before the vision has been met.”

Not Enough Affordable Units

But many like Waihee believe that Kakaako is heading the opposite direction of its vision. Waihee hasn’t read HCDA’s proposed rules, but supports the idea of a buyback provision.

Still, he argues that the changes won’t be meaningful if the authority doesn’t demand developers set aside more than 20 percent of their units at below-market prices.

Anita Hofschneider/Civil Beat

Galen Fox, a Kakaako resident and member of the community group Kakaako United, pointed out Tuesday that the law creating the Kakaako redevelopment agency specifies that the area should have low and moderate income housing.

“140 percent of area median income is not affordable,” Fox said.

George Massengale, who works at the local Habitat for Humanity, says the rules don’t go far enough.

He says that the amount required for a down payment for a reserved or workforce housing unit shouldn’t exceed 5 percent; the rules would allow up to 10 percent. He thinks that the proposed fee that developers could pay in lieu of producing a unit should be tripled.

Anita Hofschneider/Civil Beat

He says that that maximum allowable sales price for a workforce housing unit should be no more than 100 percent of the area median income, which is $61,550 for an individual or $87,900 for a family of four. To him, the maximum rental price shouldn’t exceed 80 percent of area median income, which is where most of the city’s rental demand comes from.

The proposed rules also give HCDA the right to suspend the rules if they “negatively impact the primary objective of the authority to promote redevelopment” in Kakaako. The lack of clarity is worrisome to Massengale.

He thinks that even if the rules overcome developers’ opposition, they probably won’t make much of a difference in making the neighborhood more accessible to low-income and moderate-income Hawaii residents.

“None of this stuff is affordable. It just isn’t affordable,” he said.