It's no secret there is a huge demand for affordable housing on Oahu where median home prices are the highest in the state. Understanding where to look for these projects and the different eligibility requirements are important when considering which project is the right fit for you. In this post we'll take a look at some of the different options available to you, where these projects are located, and what are the different eligibility requirements.
What are Affordable Housing eligibility requirements?
- 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.
The last one is probably the most overlooked requirement in the entire list and is the single most reason why most buyers can't qualify for an affordable housing unit, in my opinion. I talk to a lot of buyers everyday and most assume that because they don't make a lot of money they are eligible for affordable housing. Sure, they may make less than the 120% or 140% of area median income which is part of the eligibility equation but they also have to be able to qualify and afford a mortgage for their unit.
Purchasing an affordable housing unit is almost no different from purchase a regular condo unit. You still need to contact a lender, most times it's a specific developer approved lender, and you still need to prove to them that you can afford the monthly mortgage, taxes, and maintenance fees.
Please keep in mind because of the limited availability of these affordable housing units the government has strict eligibility requirements to make sure these units are going to people that have the need for it. All of the affordable housing units have a designated term which means a term that the unit must remain an affordable housing unit.
What is a designated term?
The designated term for any affordable housing unit is the length of time that the government requires that specific unit to remain in the program. What does that even mean? For example, most units that have been sold as an affordable housing unit in the past few years have a 10 year designated term. This means that if Sam buys an affordable unit he can't sell or rent it out for 10 years. If Sam decides to sell it in 5 years then he must sell it to someone else that also qualifies under the affordable housing guidelines similar to how Sam did when he purchased the unit. This means the price will be at a fixed lower priced. If Sam decides to rent the unit out during the 10 year period and gets caught, Sam will be in big big trouble.
There is a shared equity component!
When you get to purchase a unit well below market value there has to be someone helping to subsidize that cost for you. That someone is the HHFDC. They help the developer build their project and aid through tax credits that keeps costs low for developers so they can pass that savings on to you the buyer. In return, you pay back some of the profits you make from the sale of your unit, after the designated term is up. This number is different for every project but it's typically somewhere in the range of 20% of your net profits. This is also a tricky topic so please email me for specifics Holden@Kakaako.com.
What is the downpayment requirement?
The downpayment requirements vary from project to project but normally its no more than 10% of the purchase price. Please keep in mind that your lender may require you to bring in additional funds to qualify. This is why speaking with a lender early in the process is super important!
Eligibility for an Affordable Housing unit on Oahu
Whether you're buying in Downtown Honolulu or in Ewa the eligibility requirements are more or less the same. Sometimes we'll see the percent of area median income change from project in Honolulu that can go up to 120% of the area median income to 80% of area median in projects in West Oahu. Here are some general requirements:
Affordable Housing in Honolulu
Let's start by taking a look at some of the different types of affordable housing programs available in the heart of Honolulu. Demand is high for affordable housing across the island but I think it is the highest in Honolulu where a majority of jobs are located.
Reserved Housing is term designated for affordable housing units in the Kakaako area. Reserved Housing and Affordable Housing are not the same thing although they have many similarities. Reserved Housing is a term used by the HCDA which is a government agency that oversees development in Kakaako. To provide some background, in Kakaako the HCDA requires all developers to allocate at least 20% of the total units in a building to be designated towards Reserved Housing. In the case for Ke Kilohana which is roughly 80% affordable housing, the HCDA approved Howard Hughes' proposal to take 20% from Waiea, Anaha, and Ae'o and put it all into one building, which is Ke Kilohana.
If you're looking for more information specifically about reserved housing in Kakaako click here.
Affordable Housing is the terminology that everyone, including the government outside of Kakaako, uses to describe the below market priced housing opportunities on Oahu. The Affordable Housing guidelines were put in place by the HHFDC (Hawaii Housing Finance & Development Corporation) which is a government agency that overseas the development and financing of affordable housing projects in Hawaii. When we look specifically in the Honolulu area we will see affordable housing projects like Ililani that is in Kakaako but falls under the HHFDC guidelines and not HCDA. Confused yet? I know it's very weird to have the HCDA and HHFDC both overseeing these issues but it is what it is.
We have a page dedicated to affordable housing in Honolulu so please click here to learn more.
Affordable Housing West Oahu
There are a handful of affordable housing opportunities in West Oahu in projects like Hoopili. Hoopili is a brand new masterplanned community coming up between Ewa and Kapolei. The main difference between a masterplanned community and a condo project is that the affordable housing in a masterplanned community will be launched periodically throughout the year until the entire project is completed. Hoopili will take 20 years to fully complete which means that you'll have a chance at one at least a couple of time a year, every year until the project is completed.
Koa Ridge is another project that will have Affordable Housing opportunities when it launches which is still unknown, stay tuned for more about this project.
What about resale affordable housing units from buyers that don't end up staying their entire designated term? I think these are excellent buys if you're both eligible and can qualify for the monthly payments. You have to be checking the MLS constantly for units like these to come on the market because they come on like any other condo would. It's hard to know if the unit you're looking at is a market unit or a resale affordable housing unit. The best way to get the latest on affordable housing resales? Get on my email list. I can send you auto-emails with listings that match your search criteria. No more searching Zillow hoping to see something you like, these units just pop up in your email voila!
What else do you need to know if you're in the market for an Affordable Housing unit?
My advice would be to meet with a real estate agent who knows the program well and connect with a loan officer who can get you pre-qualified. These two people are very important whether you're buying a market unit or an affordable housing unit. Maybe you need to save more money for a downpayment or you need to improve your credit both your agent and your loan officer can help set you up on a plan and a path towards homeownership.