Front Street evictions show downside of ‘affordable’ housing

At this very moment, 142 Lahaina families are in danger of losing their apartment homes.

And we have misguided government housing programs to thank for that.

Built in 2001, these Front Street residences were supposed to remain “affordable” until 2051. However, the apartments are allowed to be sold 35 years earlier because of certain conditions in the law.

As community members mobilize and legislators explore their legal options to keep the apartments at below market rate, there is little talk of the program that bankrolled these apartments: a federal subsidy called the Low-Income Housing Tax Credit (LIHTC). The IRS program is funded with federal tax dollars to the amount of $9 billion per year nationwide. Hawaii’s program is managed by the Hawaii Housing Finance and Development Corp.

The LIHTC is a complex program with thousands of pages of rules and regulations, but it works something like this: developers build housing and rent it to low-income individuals at “affordable” (below-market) rates for a set number of years. In return, they receive tax credits in an amount determined by construction costs. In other words, the more money developers spend building these temporarily affordable dwellings, the more money they receive from the federal government.

Often these homes remain affordable for only 15 years, because after that developers no longer benefit from the tax credits. However, it varies based on the individual contracts.

The program was designed to provide homes to the impoverished, but a recent study by the Cato Institute revealed that developers tend to be the real winners. And as is the case with Lahaina’s Front Street apartments, the program isn’t very effective at increasing affordable housing in the long run.

A major flaw with the program is due to its design; developers may be tempted to lie about construction costs, as they receive more money if they spend more. This was the case in Miami and Los Angeles, where taxpayers were robbed of $33 million and $16 million, respectively.

In addition, an expos by NPR revealed that there is little oversight involved in the program. There have been only seven audits throughout the program’s 30-year history, so it could be that many more developers have submitted inflated construction costs in order to receive increased subsidies.

But it’s even a problem when developers don’t falsify their construction costs. Michael Eriksen, an economist at the University of Georgia, found that LIHTC developments are 20 percent more expensive to build than market housing. This is probably because developers receive more tax credits if their project costs more, so there is no incentive to find good deals on construction. This leaves taxpayers subsidizing inefficient projects that remain affordable for only 15 to 50 years.

To make matters worse, most of the money awarded for these projects doesn’t benefit the people it was intended to help. In 2008, when the Missouri state auditor looked at the state’s LIHTC developments, she found that only 35 cents of every dollar was “actually used to build low-income housing.” The rest of the money ended up in the pockets of investors and syndication firms.

If that figure is similar nationwide – which we don’t know due to the lack of oversight – then only $3.2 billion of the program’s $9 billion annual budget is being spent on affordable housing.

All in all, the LIHTC has failed to provide much value to anyone other than housing developers and a small amount of low-income citizens.

On Maui, a better way to increase the county’s affordable housing stock would be to reduce the number of zoning regulations. A federal report published in 2016 by the Obama administration found that “zoning, other land use regulations, and lengthy development approval processes” over the past 30 years had “reduced the ability of many housing markets to respond to growing demand.”

Removing such barriers would not only help increase Maui’s affordable housing but also decrease the county government’s costs related to maintaining and enforcing such regulatory impediments.

The residents of Maui’s Front Street Apartments are not the first victims of the LIHTC program, and they won’t be the last.

Instead of throwing money at a few “affordable” developments, which leaves us with bloated projects that are only temporarily affordable, the root causes of the housing shortage need to be addressed.

Maui entrepreneurs don’t need subsidies or tax benefits to build more houses; they simply need the freedom to build.

AARON LIEF

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Many factors impact mental health services

Ms. Rasmussen. I agree with your overall statement and urgency about the long cry for needed mental health care in rural areas of the United States. First, I believe before we enter into any type of conversation, we should always: 1) Know our audience; 2) Introduce yourself to our audience; and 3) Have some general knowledge about the information we are speaking about.

My name is Jahanna Naganuma and I live in Lahaina, Maui. After reading your well-written letter and agreeing, I looked you up and found out you live and work in Nebraska for an organization called “Center of Rural Affairs.”

I have a work history in the U.S. in rural and city areas with mental health, as well as in Hawaii. I have worked in community-based services and agree with your position; however, in Hawaii, there is also a significant homeless population, substance abuse problem and housing crisis among constant social struggles for Hawaiian Sovereignty, resources such as water and land, and families striving to not lose their Hawaiian Identity but nurture Hawaiian culture.

I don’t know if you live here part-time or just were visiting, but you’re right that people who live in “more rural areas” like “the valley” or our rural areas or outer islands (not connected to our Mainland, and accessibility is more difficult), Lanai or Molokai, will have less services and shortages of workers.

Ms. Rasmussen, there is more than that reason here in Hawaii. We also experience “brain drain,” where many of our local kids go off to college and don’t come back anymore once they get degrees. It’s too expensive to live here anymore. The cost of living is one so high that most people work two, sometimes three jobs, to survive.

A $35,000 salary is considered acceptable as a single individual income for HUD housing. In the U.S., most places, that is a decent salary. So, we lack professionals wanting to move here or stay.

Lastly, with state and federal cuts, many mental health workers are limited in the hours available to work with consumers and provide services. Anyway, you had a lot of wonderful points of view. Mahalo for your words of wisdom and spreading your aloha for mental health, as well as the people we serve. We continue to climb the mauna together. Akua Ho’omaika’i Oe! God BlessYou!

JAHANNA NAGANUMA, Lahaina