Honolulu—The City and County of Honolulu has selected CBRE Group to market its entire portfolio of affordable rental housing communities, with the intention of transitioning ownership of the housing to private ownership.
“The initial idea of the city selling off to the private sector occurred a decade ago,” Honolulu-based CBRE Group executive vice president Scott Gomes tells MHN. “At the time, they thought they’d convert the housing to condominiums and sell them to residents. That didn’t go anywhere. Then it was decided that rather than sell them off as separate condominiums, they would sell the buildings off to private companies. That also didn’t go anywhere.”
More recently, however, CBRE Group was hired to package and market a dozen Honolulu properties, featuring a total of 1,257 units, Gomes says. Half are located in the urban core of Honolulu, and the rest in outlying areas of the island.
CBRE Group will sell the properties under a 65-year lease. “All the different unit-type gaps have to be preserved” over the entire 65-year period, Gomes says. Currently, 222 of the 1,257 units are offered to residents at 50 percent of Area Median Income (AMI), which stands at about $84,000. Some 285 are marketed to those at 60 percent of AMI, 343 to those at 80 percent of AMI and 189 to those at 120 percent of AMI. Another 218 units rent at market rates, Gomes says.
The shortage of rental housing in Hawaii is particularly acute in the category of affordable housing, Gomes says. The city of Honolulu’s approach to managing the housing has not helped.
“Essentially, the city has not been a good operator,” Gomes says. “The city has acknowledged it has not operated [the units] as well as it should have, or as well as a private ownership could have. As a result, most of the people in these units pay significantly less than what they could be charged under HUD affordable rental guidelines. There will be restrictions on how much rents can be increased per year.
“But that’s not the story. Private ownership will be able to recapitalize these properties, and people will get more for the rent they will pay in the future.”
The city of Honolulu is current building about 1,000 units of affordable housing, he says. The sale of the 12 existing affordable buildings will replenish housing funds, and pay off the debt used to build those 12 affordable communities. This will enable the city of Honolulu to develop new affordable housing, Gomes says.
This additional affordable housing is essential in the city and county of Honolulu, where depending on income level, applicants can encounter two to seven-year waits to land an apartment in an affordable housing development.
The effort to market the city-owned affordable housing is off to a very good start, according to Gomes. “We’ve had tremendous interest in the project among for-profit and non-profit entities,” he says.