Honolulu Affordable Housing FAQs
Let's take a look at the Honolulu affordable housing requirements. Affordable housing in Honolulu is certainly in short supply. When developers offer them for sale, often because they are required to by state law, hundreds and often thousands apply for the very limited supply. The Ala Moana neighborhood will go through a high-rise boom over the next five years where we could see four or five residential towers along with some rentals and possibly even a condo-hotel. Each of these projects will offer some sort of Affordable Housing whether it be in the form of rentals or for sale units. Some of the projects with affordable housing coming on the market can be found on the right side sidebar.
To be clear, the affordable housing program is not the same as the reserved housing program that you may be familiar with. The reserved housing program is overseen by the HCDA which is another government agency that oversees all development in the Kakaako neighborhood. They have some similar eligibility requirements but the programs are different.
To see if you're qualified, take a look at some of the FAQs for affordable housing below.
What is HHFDC?
The HHFDC or Hawaii Housing Finance and Development Corporation is the agency that oversees all of the affordable housing in Hawaii. They also oversee the financing and development of the actual affordable housing units as well.
What are the benefits of HHFDC's Affordable Housing?
- The program allows eligible and qualified applicants to purchase below market pricing
- The opportunity to own and live in a new construction project in town
What are the income limits for Affordable Housing?
Buyers must not have income greater than 140% of the AMI for their respective household size. See below for 2018 AMI. Find your household size at the top of the chart. Please be aware that some, not all, affordable housing projects have a minimum income requirement.
Are you eligible for Affordable Housing?
This is a loaded question and one not easily answered. There are various components that go into determining a buyer's eligibility status as well as understanding if the developer has any specific requirements for their building.
Ultimately it's at the discretion of the HHFDC to determine one's eligibility. Some of the basic requirements are:
- U.S. citizen of permanent resident alien with a valid government issued ID.
- At least 18 yeas old.
- Resident of the State of Hawaii and currently residing in the State of Hawaii.
- Shall physically occupy the unit.
- Does not own a majority interest in a fee simple or leasehold property anywhere in the world.
- Has sufficient gross income to qualify for a loan to finance the purchase of a unit.
One example of developers introducing their own requirements beyond what the HHFDC requires happened recently with Korean developer Sam Koo's two Honolulu Projects, Kapiolani Residence and The Central Ala Moana. With Kapiolani Residence (his first project) as long as you made under the maximum income you were eligible. With The Central Ala Moana you had to be under the maximum income, but also over a minimum income requirement. This eliminated a lot of buyers who are getting help from a family member because if you didn't make a certain amount of money, you couldn't purchase regardless of how much help you could get.
What is the deposit required?
Some projects are 10%, while others only require 5%. Please keep in mind this is only what the developer requires, your loan officer may require a larger downpayment in order to secure a loan. For the project Ililani, only 5% downpayment is required.
What is the buyback program?
The buyback program is one of two programs that are imposed on all new HHFDC sponsored projects. In short, the program requires the owner to occupy the unit as their primary residence for 10 years or the duration of the program. The buyback program allows the HHFDC the first right to purchase the unit back in the event the owner no longer can occupy the unit or chooses to sell or transfer unit in the first 10 years of ownership. At the end of the 10 year period, the buyback program goes away.
If you decide to sell the property within the first 10 years you will get 1% appreciation plus any improvements that you've done to the property.
Please keep in mind that not every project has a 10 year buy back restriction. Some projects can be much longer like Sky Ala Moana which I've heard will be 30 years.
What is the SAE program?
The SAE program or Shared Appreciation Program is designed to help fund future HHFDC affordable housing projects. The affordable housing program is providing you the opportunity to purchase a unit at below market prices and to help perpetuate the program, a percentage of your profit will be returned back to the state when you sell.
The sale of your property can only take place after the 10 year buy back period is over. If you're selling within the first 10 years the SAE program does not apply.
The SAE percentage is calculated prior to closing and doesn't ever change. The SAE is due when the unit is sold, transferred, or rented.
How is the SAE amount calculated?
Original fair market value (determined by HHFDC's appraisal prior to closing) minus the purchase price, divided by original fair market value, rounded to the nearest 1%.
$500,000 (FMV) minus $400,000 (PP) equals $100,000.
$100,000 divided by $500,000 equals 20%
20% is the SAE percentage when you sell. So regardless of what you sell for you'll pay 20% of your appreciation to the HHFDC.
Are you ready to buy?
The next couple of opportunities to purchase affordable housing will be with Sky Ala Moana located in the Midtown Ala Moana neighborhood and Ililani in Kakaako. Sales for this project has not started yet, my advice to get the process started? Reach out to a reliable loan officer and figure out what you're qualified for. Perhaps you need to save a little more or that raise you've been waiting for will take you over the maximum income limit. Having a plan and being prepared will make this entire buying process less stressful and more enjoyable.
Need a loan officer recommendation? Reach out to me and I'd be happy to put you in touch with one!
Contact me if you have any questions.