Addressing the Affordable Housing Need in Maui

Addressing the Affordable Housing Need in Maui

In January 2014, Imi Ikena Housing Partners and EAH Housing officially opened Imi Ikena Apartments, a 28-unit affordable housing development in Wailuku, Hawaii. Credit: EAH Housing Like most of Hawaii, the county of Maui faces a shortage of affordable and market-rate housing. A 2011 state housing planning study estimated that 28,000 housing units (including 19,000 affordable units) would need to be built between 2012 and 2016 to keep up with demand throughout the state. The study also estimated that Maui would need to add more than 3,400 housing units, including 2,400 units for households earning 80 percent or less of the area median income (AMI). To address this need, Imi Ikena Housing Partners and EAH Housing opened a 28-unit development in Wailuku, the county seat, in January 2014. All of the units in Imi Ikena Apartments were occupied within 10 days of the building’s opening and more than 500 households are on the waiting list, demonstrating the community’s acute need for affordable housing.

Meeting Community Needs

Although Maui adopted a workforce housing policy in 2006, little housing has been constructed since then; in fact, the number of building permits issued annually for multifamily and single-family housing has fallen. According to Kevin Carney, vice president of EAH Housing, the workforce housing policy’s requirement that up to 50 percent of units in residential developments must be affordable helped cause this decline. According to a 2006 study, developers reported that the policy had added uncertainty and another costly step to Hawaii’s three- to eight-year approval process. Developers were also concerned that reduced revenues resulting from the policy’s requirement to build affordable units would make residential development, especially smaller projects, financially unfeasible.

Imi Ikena Apartments was built to address this housing shortfall by offering affordable housing for families working in the Wailuku area. The development consists of 24 two-bedroom units and 4 three-bedroom units. Households earning 50 percent of AMI are eligible for 25 of the apartments, 2 are reserved for households making 30 percent of AMI, and the remaining unit is reserved for staff. Monthly rents range from $417 to $913, well below Maui’s 2014 fair market rents of $1,262 per month for a two-bedroom unit and $1,739 per month for a three-bedroom unit.

Imi Ikina Apartments offer amenities including balconies with views of the Kahului Bay. Credit: EAH Housing Imi Ikena’s four-story building efficiently uses a 0.76-acre infill site located near the Kahului Public Library, Maui Community College, the Maui Family YMCA, the Maui Nui Botanical Gardens, and other services and amenities. The small site also accommodates a picnic area and play lot for residents. Among each unit’s amenities are a lanai, or porch; a washer and dryer; and a garbage disposal. Imi Ikena also offers sustainable features such as a solar water heating system, ENERGY STAR®-rated appliances and light fixtures, and paint with low levels of volatile organic compounds.

Building Partnerships

DBR Development, a California-based affordable housing developer, purchased the property and formed Imi Ikena Housing Partners in 2008. The developers saved time and money by using the previous owner’s plans for a market-rate condominium that had been approved just before the demand for condominiums softened. From the start, Imi Ikena Housing Partners was dedicated to developing the site as workforce housing. The group brought on EAH Housing, a nonprofit housing developer based in Hawaii, as the property manager and co-developer. EAH’s experience working with Maui officials was helpful in navigating the development process, and its status as a nonprofit organization helped make the project more competitive for federal 9 percent low-income housing tax credits (LIHTCs).

Financing

The total development cost for Imi Ikena Apartments was $13.4 million, including $7.5 million in LIHTC equity from Hunt Capital. Additional funding came from a $2 million loan through the state's low-income housing tax credit program. Administered by the Hawaii Housing Finance and Development Corporation, the program provides gap financing for projects that receive LIHTC funds; Imi Ikena was one of the first developments to take advantage of it. The project also received a $2.7 million second mortgage from the county’s Housing Trust Fund; the residual receipt loan terms set the interest rate at 3 percent, required payment only after other debt and operating expenses are paid, and ensured that the development will remain affordable for 61 years.

Growing Need

According to a HUD market analysis, 1,135 single-family and multifamily units were developed in Maui from 2012 to 2014, only one-third of the 3,400 units that the state housing study projected the county would need to add through 2016. Imi Ikena’s 28 affordable units provide Maui County with desperately needed high-quality, affordable units at a time when residential development in the area has slowed. David Billings, director of DBR Development, states, “We were able to create affordable rental housing on underutilized land…. [N]ow 28 families have a great place to call home at rents that are far below market rate.” Building on the success of the Imi Ikena apartments, EAH Housing is continuing to identify opportunities to expand affordable housing throughout Maui County.