When the Howard Hughes Corp.’s newest luxury condo tower, Victoria Place, opens in 2024, the building will have a private infinity pool, spa, rooftop garden, guest suites, wine room and 24-hour valet service.

All starting “from the low $1,000,000s” for a one-bedroom unit.

But there’s one thing Victoria Place won’t have: any affordably priced units in the building. In fact, the developer has said it might not build any affordable units at all — even off site — but instead might simply pay a “cash in lieu fee,” according to its most recent quarterly report filed with the Securities and Exchange Commission.

While it might not be surprising that Howard Hughes doesn’t plan to offer cheap homes for the masses at its poshest property, one thing is apparent: it’s not exactly what the Hawaii Legislature had in mind when it carved out Kakaako as a special district more than four decades ago.

In 1976, lawmakers created the Hawaii Community Development Authority to redevelop Kakaako. The idea was to meet “unmet community development needs” including “a lack of suitable affordable housing.”

“The district is relatively underdeveloped” and offers “the potential for increased growth and development that can alleviate community needs such as low-income housing, parks and open space,” lawmakers wrote, codifying their vision for Kakaako in Hawaii law.

Decades later, HCDA has ushered in a striking redevelopment of Kakaako, with thousands of new homes built in the area in the last decade alone. But whether this has fulfilled the Legislature’s vision is in dispute.

“I think it’s pretty fair to say now that the mandate failed to produce the kinds of housing that we really needed and what I think it’s done instead is really cement the unhealthy dependence on private developers,” said Tina Grandinetti, who got her master’s degree at the University of Hawaii Manoa and is now researching Kakaako urban development and housing as doctoral research at an Australian university.

Howard Hughes disagrees.

Kaʻiulani Sodaro, Howard Hughes senior vice president of planning and development at Ward Village, pointed to millions of dollars the company has spent building affordable homes according to HCDA’s program, known as its “reserved housing” program.

“Without using taxpayer subsidies, Ward Village provides kamaaina families and HCDA with the potential of shared equity gains of over $160M through the HCDA’s reserved housing program that generates additional affordable housing opportunities,” Sodaro wrote in an email.

One planned project alone will add almost 700 new homes sold below the market rate, with 289-square-foot studios priced at $271,000 to $355,400.

One thing that seems indisputable is the area is almost unrecognizable compared to what it once was. Grandinetti recalls walking through the area with her mentor, a Native Hawaiian former resident.

“She said she felt dizzy walking through Kakaako because that used to be her old stomping grounds, and she couldn’t orient herself at all,” Grandinetti said.

Beautification Or Gentrification?

Adele Balderston, the founder of 88 Block Walks, a walking tour of Kakaako, points to historical papers describing what things once were like in the neighborhood. “Cesspools prevailed in nearly every home,” one account from the 1920s said.

But developers, with the help of a statute designed to promote redevelopment, have completely transformed the neighborhood.

On a Sunday morning in Kakaako, instead of cesspools, expect designer purses perched atop small white tables next to $7 oat milk lattes decorated with edible flowers. Fantastic murals with multicultural themes cover the sides of buildings facing parking lots, the result of an art festival called PowWow, which is now a global phenomenon.

The art gives the area a hip feel in keeping with locally owned boutiques like We Are Iconic, located on the ground floor of Howard Hughes’ Anaha condo tower, where residents can find $148 fleece shorts and $258 blue jeans.

Meanwhile, corporate giants like Whole Foods, Starbucks and T.J. Maxx have brought more shopping options to Kakaako, and, some say, a different energy.

“It feels like that really free artist spirit kind of died, you know, like that creative energy just became very cookie cutter and commercial,” said Emiko Miyazawa, who started a jewelry-making workshop in Kakaako but later moved to Moiliili.

“It was a great jumping off point for my business, but, I kind of just outgrew the space,” she said.

For Juicd Life, one of nearly 10 business that’s left the Salt Kakaako Shopping Center, it was a question of renting in a space that rarely saw customers. After paying $6,000 a month for a 758-square-foot space in Kamehameha Schools’ complex for five years, the company decided to let go of its lease to start a new chapter in Kailua.

“We weren’t super focused on walking traffic,” said Jaguar Clement, Juicd Life’s co-owner. “And we have a humongous amount of Kailua clients.”

Census: More Than 2,000 Units Were Vacant In 2019

Something that makes Kakaako different from most other neighborhoods is that it’s a designated special “community development district.” That means it’s governed by a state agency, the Hawaii Community Development Authority, which establishes administrative rules for developers, who can largely bypass the often-onerous zoning restrictions established by the City and County of Honolulu on the mauka side of Ala Moana Boulevard.

All this is meant to streamline development.

To that end, in 2009, the HCDA approved Kamehameha School’s master plan to develop 29 acres on nine city blocks in Kakaako, including Salt at Our Kakaako and six completed housing developments. One year later, Howard Hughes Corp. obtained approximately 60 acres of prime property at the Diamond Head end of Kakaako and rebranded the area “Ward Village.”

The result has produced something different from what the statute envisions when it calls for redeveloping Kakaako to “alleviate community needs such as low-income housing.” Median household income ranged from $73,500 to $82,500 between 2015 and 2019 with 50% making over $75,000 a year and more than a third making over $100,000, according to the U.S. Census’ American Community Survey. Some 34% work in high-income professions like banking, real estate, health care, engineering, law and information technology.

“I think it’s pretty fair to say now that the mandate failed to produce the kinds of housing that we really needed and what I think it’s done instead is really cement the unhealthy dependence on private developers.” — Tina Grandinetti.

Thousands of the area’s homes are not being used at all. Almost all of Kakaako’s housing stock — 95% — consists of apartments and condos, the vast majority in large high rises. About 23% — nearly one in four — of Kakaako’s 9,117 units were vacant as of 2019, according to the census. That amounts to 2,096 units. And it compares to a 11% vacancy rate islandwide.

The vacancy rate is so high that former Mayor Kirk Caldwell considered imposing a tax on vacant properties in 2019.

Current Mayor Rick Blangiardi has said he’s largely supportive of urban development in Kakaako and during his campaign endorsed the option of taxing vacant homes as a way to increase revenue.

Central to HCDA’s policy for promoting the development of less expensive housing is a “reserve housing” provision that requires builders to set aside 20% of what they build as below-market-rate housing, or pay a fee.

The company satisfied its 20% reserve housing requirement for three of its condominium towers — Waiea, Anaha and Ae‘o — with the opening of a fourth tower, Ke Kilohana, a workforce tower.

A home is considered affordable housing if the homeowner pays less than 30% of their annual income while “workforce housing” is only for essential workers such as teachers, nurses and government employees. Only “low-income housing” includes federal and state subsidies, according to the city.

The challenge is that even the workforce housing can be expensive.

For example, when Courtney Liu, a Honolulu marketing executive, bought a two-bedroom condo in Ke Kilohana, she ended up paying considerably more that the $300,000 she initially expected.

“I was anticipating paying like in the $300,000 range, but we actually ended up in the $500,000 range, which is not affordable,” she said, noting that her monthly maintenance fee increased $200 right before the pandemic.

To save money, rather than shopping at the nearby grocery stores — Whole Foods and Down to Earth — Liu waits for Sunday to go to dinner at her parents house in Mililani and shops for groceries at stores with more reasonable prices.

And this is anecdotally consistent — after speaking with workers throughout Salt At Our Kakaako and Ward Village, very few seem to live in the area. One barista described Ward Village as having a “young, rich mom vibe.”

Craig Nakamoto, a spokesman for the HCDA, said the authority has been successful at developing a mixed use community of “not just residences, not just commercial, not just retail, and not just industrial, but all those things.”

Asked about HCDA’s track record, Nakamoto pointed to a neighborhood map indicating a mix of market-rate housing developments and others defined as lower-cost workforce and “reserve” housing, which is priced to meet HCDA’s requirements that 20% of new units be priced for residents who meet certain income and net worth requirements.

“We don’t dictate affordable housing,” he said. “I want to make that really clear.”

Affordable housing is not just a Kakaako problem; rather, it’s a statewide issue, according to Nakamoto.

When the market is right, developers will take advantage of the opportune moment, he explained. And if the agency took a more aggressive stance, like upping the residential unit requirement from 20% to 50%, Nakamoto said it wouldn’t be incentive enough for developers to build because residential buyers might not be able to pay the desired market-rate value.

Grandinetti agreed that the issue is complex.

“It’s such a systemic issue, housing and urban development are so hyper-commodified,” she said. “You can’t point a finger at just the developers or just the HCDA or the planners or the people who buy investment properties, it’s all working together and it’s also related to national policy around public spending, so it gets really complicated.”

Growth Begets Growth

Regardless, more workforce housing is coming soon.

In the works for Howard Hughes is Ulana, a 41-story, mixed-use condominium “designed for a person or families who make too much to qualify for Federal Assistance programs but not enough to purchase a market-priced unit residence,” according to the project’s reserved housing fact sheet.

Buyers will have to be Hawaii residents and live in the properties. One-bedroom condos will start at $400,500.

Overall, Howard Hughes says it has done more than HCDA requires in the way of low-income housing. Counting Ulana, it will exceed its reserved housing requirement by about 300%, company spokeswoman Catherine Coleman said.

Howard Hughes’ Sodaro said the company embraces the Legislature’s original vision.

“As one of many stewards in Kakaako, Ward Village embraces the need for sustaining community development and mixed use in Honolulu,” she said.

Civil Beat reporter Stewart Yerton contributed to this report.