The Ins and Outs of Affordable Housing

By Karen Nakamura Posted in: BIA

This is the first of a three-part series.

Today is the first of a three-part overview on affordable homes in Hawaii, what barriers are presenting challenges and what actions can break down these barriers for future generations.

Honolulu ranks third in the nation for the highest median price of homes among 225 metropolitan cities according to the NAHB/Wells Fargo Housing Opportunity Index (HOI) 3Q 2011.

As home prices have fluctuated widely in recent years, jobs have disappeared and wages have stagnated or declined, homeowners are struggling to stay in affordable homes. Given the current economic climate, the issue of housing affordability has spread to those not traditionally perceived as seeking “affordable housing.” More importantly, these households receive little or no public assistance.

A new term has been coined to address these emerging households: workforce housing. This group includes teachers, police officers, fire fighters as well as health care workers, retail clerks, administrative personnel and service providers.

All of these workers are essential to the economic vitality of an area and the key to workforce housing is that it must meet the needs of the people who provide the services we depend on — teachers, police officers, nurses, firefighters and other public servants, as well as the service and retail industries.

While many of our leaders and politicians espouse the need for affordable housing, a small vocal group of opposition to affordable and workforce housing has created a major barrier to the supply of homes that are accessible to low and mid-income families. We are the silent majority, the victims of the no-growth practices that have prevailed in controlling the supply of homes which causes outcomes such as high cost of rental units, homelessness and the great need for multigenerational homes.

We will discuss these major barriers that no one talks about or even knows about in the next two weeks and I will focus on the top six barriers:

1. Time.

Did you know it takes about seven to 10 years to get approvals to build? We will be discussing how time is a major cost driver.

2. State Extractions.

Did you know that the land for schools and the vertical construction of schools are now part of the cost of the project?

3. County Extractions.

Did you know that on and off ramps to freeways, sewage treatment plants and water pumping stations are developed, built and dedicated to the city after completion by the project?

4. Building Codes.

Did you know that building codes are mandates that drive up the cost of construction? This is a vehicle that can make it impossible for selective sectors of our population to be able to afford a home.

5. Cost of Labor.

Did you know that the prevailing wages, plus FICA, SUTA, FUTA, TDI, medical and vacation benefits drive the average cost per man hour to between $50 and $77 per hour?

6. Cost of Goods.

Did you know that our cost of materials rank as the highest in the nation? The Rider Levett Bucknall Materials Price Index tracks the cost of lumber, structural block, sand/gravel, cement, concrete ready-mix, iron and steel and gypsum wall board in the 12 largest cities in the nation. Hawaii ranks at the top with New York and San Francisco.

Karen Nakamura is executive vice president/CEO of the Building Industry Association of Hawaii.