Building Affordable in California, Hawaii: High Demand, High Hurdles
Despite political action and funding initiatives, housing insecurity and cost-burdened households are increasing, observes EAH Housing's Welton Jordan.
The cost of housing in Hawaii is among the highest in the U.S. The state’s shortage of affordable housing has become a major issue in recent years, with the high cost of living, limited available land for construction and only increasing demand only adding to its worsening affordable housing crisis. Similarly, California is also among the most expensive housing markets in the country, with a high concentration of cost-burdened renters.
Over the past 55 years, nonprofit EAH Housing has been serving low-income renters in both markets. In 2023, the developer and manager plans to break ground or deliver apartments across 31 communities in California and Hawaii. Furthermore, over the next five years EAH intends to deliver more units than it did in the past 25. How will that be possible, considering persisting volatility in the financial markets and the high construction costs that make it difficult for affordable housing projects to pencil out?
Multi-Housing News asked Chief Real Estate Development Officer Welton Jordan to talk about EAH Housing’s plans to cater to the ever-growing need for low-income housing in both California and Hawaii, highlighting the differences and similarities in these states’ housing markets.
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What do you see as the top challenges in developing affordable housing communities across California and Hawaii today?
Jordan: As a developer of affordable housing communities in California and Hawaii, we are faced with several immediate challenges. In Hawaii, these include the availability of land and infrastructure, limited funding resources and legislative concerns, such as the permitting processes and zoning restrictions, which all create obstacles to timely and cost-effective development.
Similarly, in California, the key challenges revolve around highly competitive funding, competing political priorities, and the rising costs of labor and materials. With numerous organizations and projects vying for limited financial resources, securing funding for affordable housing initiatives becomes an increasingly competitive and challenging task.
In what ways are Hawaii and California’s markets similar, and what sets them apart?
Jordan: Hawaii and California’s housing markets share several similarities, primarily in terms of the high cost of living and the overall shortage of homes. Both states face significant challenges in meeting the demand for affordable housing, and this shortage is particularly concerning in the low- and very low-income sectors. Lastly, both states experience difficulties and complexities in the process of building new housing, due to regional regulations and permit procedures.
Based on reports from the National Low-Income Housing Coalition, 22 percent of renter households in both states are considered to be extremely low income, with at least 70 percent of those households spending more than 50 percent of their income on housing costs. All in all, Hawaii has a deficit of roughly 27,000 affordable housing units, while California—given its much larger population—has a deficit of nearly one million homes.
There are also notable differences between the two states. In California, there is currently a firm commitment from the government to address the housing crisis by taking steps to fund housing and holding localities responsible for the lack of housing in their areas. This has been in motion for several years.
In Hawaii, with a new governor in place, there is an emerging focus on housing. While there is recognition of the need for action, the strength of the new administration and the ability to effect significant change in the housing sector remains uncertain.
How difficult is it to make an affordable housing development pencil out nowadays in Hawaii? How much have developers’ overall costs increased lately?
Jordan: Developing affordable housing communities in Hawaii can be financially challenging, but the difficulty level has not significantly increased compared to previous years. Material costs have started to stabilize. However, insurance costs continue to increase at a rapid pace, adding financial pressure to affordable housing projects.
We use our 55 years of experience to develop where we’re needed most. In the case of Hawaii, we’ve found that there is a growing opportunity for infill development, especially as state governments begin to require luxury developments to incorporate some sort of workforce or affordable housing component. Making sure all land is fully maximized is critical to addressing Hawaii’s housing concerns.
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How do you ensure that your projects are integrated into the surrounding community, and promote economic and social equity?
Jordan: To ensure our projects are integrated into the surrounding communities, we prioritize community outreach and resident services to foster positive relationships and address the needs of the local community. Given that we are both the developer, owner and operator for perpetuity, we take extra care to be good neighbors. We also provide resident services and amenities tailored to the populations we serve at our various developments.
What policy changes at the state or federal levels do you believe could encourage developers to build more and really make an impact on improving the affordable housing shortage in both California and Hawaii?
Jordan: At the federal level, there are several policy changes that could encourage developers to build more affordable housing and address the shortage in both California and Hawaii. One major policy change would be lowering the 50 percent test for tax-exempt bonds to 25 percent. By doing this, developers would immediately have the ability to finance more housing and would be encouraged to take on more affordable housing projects, making a significant impact on improving the affordable housing shortage.
How does EAH Housing work with government agencies and other partners to finance its affordable housing projects in these states?
Jordan: EAH Housing recognizes the importance of partnering with government agencies and understands that support is crucial for the success of affordable housing developments. That is why every affordable development we pursue requires government support, both politically and financially. We also apply to various requests for proposals for government-owned land. When successful, these are true partnerships with said government agencies to provide affordable housing in their local municipalities.
How do you plan to develop more affordable properties over the next five years than you did over the past 25? Why is now a good moment for such investments in these challenging markets?
Jordan: Over the next five years, our plan to develop more affordable properties at a greater pace than in the past 25 years involves several key strategies. First, we prioritized building a strong team of professionals with both expertise and a shared commitment to our mission. With this team in place, we have been able to dramatically increase our geographic footprint and overall pipeline.
We also had to make the hard decision of doubling down on new development. While we recognize the importance of preserving existing properties, we’ve found we can drive greater impact when focused on new construction, as we can create greater density, at a much faster pace. By actively pursuing new construction projects our goal is to contribute to increasing the availability of affordable housing options for those most in need.
As a mission-driven organization, there is no better time than now to lead the charge of providing housing for the families and individuals who need it most.
Tell us more about some of the projects you have planned or in the works.
Jordan: We are excited to share some of the upcoming projects that we have planned for this year.
Nevin Plaza in Richmond, Calif., is a two-phase project. Phase I will completely rehab the existing 138-unit building, which was formerly public housing. Phase II will be on the vacant lot adjacent to the existing building, where 92 new units will be built. Both projects will continue to be for seniors and the disabled. Our main goals for this project include improving the management and operations of Nevin Plaza, expanding the programs to best meet the needs of its residents, and implementing a resident-focused relocation process with effective resident engagement, planning and communication on a regular and timely basis.
Another project we have in California is Mission Paradise, an affordable housing community for low-income seniors in Hayward. The apartment community will provide 76 units, including 11 ‘No Place Like Home’ units reserved for special needs households. Amenities include a community room, exercise room, on-site laundry, outdoor roof deck area, yoga deck, computer lab, on-site parking and 24/7 staff. Additionally, there will be a resource coordinator for all units and case management services offered for the 15 formerly homeless households.
Also in California, we’re working on On Broadway, which will encompass 140 units specifically designed for large families. This development is extremely exciting as it will represent EAH Housing’s first development in the City of Sacramento.
In Hilo, Hawaii, we’re developing Hale Nā Koa ʻO Hanakahi, a brand new 92-unit affordable senior housing community for veterans, surviving spouses, and other income-qualified seniors. The development will serve senior households with a preference for veterans and surviving spouses of veterans. The senior community—62 years or older—will serve households earning between 30 and 80 percent of the area median income. The housing units are arranged within three 24-plex two-story buildings and one 20-plex two-story building.
In the past decades, the affordable housing crisis on the West Coast has only worsened. How do you expect it to evolve?
Jordan: This is definitely a concerning trend. Despite recent political efforts and funding initiatives to meet the affordable housing needs, levels of housing insecurity and percentages of cost-burdened households continue to increase at record heights.
However, I remain optimistic, especially as more communities display increased openness and empathy toward the needs of lower-income families and individuals. Take for instance Los Altos, Calif. For years, this community had no dedicated affordable housing. However, in September of last year, we celebrated the design approval and a conditional use permit for 330 Distel Circle—the city’s first-ever 100 percent affordable housing community. With only 90 units, this project only makes a small dent in the overall need, but it is definitely a start. We need more of these types of demonstrative projects.
The EAH Housing team is not content with the status quo. We take an active role in the future of the housing industry. To address this crisis, we need to continue the momentum and work closely with our partners both locally and at the state and federal levels to address the affordable housing crises.