The outcome of Honolulu’s Charter Question No. 1 on last week’s election ballots raises a question for public officials trying to provide more affordable housing in Hawaii. Even as the public and politicians clamor for more housing for people struggling to get by, are people willing to pay for it?

A majority of Oahu voters, apparently, are not.

The charter amendment rejected by Oahu voters last week proposed to increase the percentage of real property tax money that the city would deposit into the city’s Affordable Housing Fund. Instead of getting 0.5% of the total property taxes Honolulu collects each year, the fund would have gotten 1%. That would have amounted to an estimated $8 million more a year.

Proponents noted that taxpayers wouldn’t have to pay more in taxes under the amendment, while opponents noted the extra tax money steered to the fund would mean less money for other city services.

In the end, voters opposed the measure 129,097 to 120,770, a 3.1 percentage point difference. Does that mean people didn’t understand the proposal and mistakenly thought it would increase their taxes? Or does it show something more basic: the economic equivalent of NIMBYism.

Like NIMBYs who want affordable housing, just “not in my backyard,” do economic NIMBYs want affordable housing, just not if they have to pay for it?

State Sen. Stanley Chang, who chairs the Senate Housing Committee, says the vote shows that people simply don’t want to pay.

“There is no appetite to increase taxes to subsidize housing,” he said. “We can be unequivocal about that.”

Others aren’t convinced.

“I think it’s a little bit of both,” said Tyler Dos Santos-Tam, who last week was elected to the Honolulu City Council.

The measure’s failure was the result of people not wanting to pay higher taxes for housing and not understanding that the ballot measure didn’t raise their taxes, he said.

Brandon Elefante, a former Honolulu City Council member who introduced the ballot measure, said that timing could be one factor in the role that economic NIMBYism might have played in the measure’s defeat.

With prices for food, electricity and gasoline on the rise, and the economic stress of the Covid-19 pandemic still on peoples’ minds, now might not be the best time for voters to embrace something that even hints of a tax increase, Elefante said.

But that could change, he said. And the closeness of the vote shows it could be worthwhile for the City Council to put the measure on the ballot again.

“How would people feel at a different snapshot in time?” Elefante asked.

Voters must approve increasing revenue for the housing fund through a ballot vote because the change requires amending the Honolulu City Charter.

Gap Financing For Developers Is Critical

Aside from fears the measure would increase their property taxes, Elefante and Dos Santos-Tam said another issue is that many people might not know what the Honolulu Affordable Housing Fund does.

“I don’t think people see the city’s affordable housing fund in a clearly visible way, and that adds to the difficulty here,” Dos Santos-Tam said.

Like the state’s Hawaii Housing Finance and Development Corp., the city’s Department of Community Services doesn’t generally build or manage projects but instead provides money to developers who cobble together financing from various sources, including private investors, to build housing which they rent at below market rates.

Developers say “gap financing” like the money from the city’s Affordable Housing Fund represents a key piece of capital that enables developments to pencil out while charging rents below the market rate.

In August, the Department of Community Services announced it was distributing nearly $30 million from the Affordable Housing Fund to six affordable housing projects planning to build just under 1,000 affordable units across Oahu in the next five years.

These include projects like Kailua Lofts, a $33.1 million, a 62-unit development that will be Kailua’s first new affordable housing development in nearly 30 years and the first ever for families. The fund is contributing $4.8 million for that project. The fund is also providing $4.9 million to help build Ohana Hale, a $77.8 million, 21-story 180-unit project in Moiliili.

The fact that the housing fund is playing only a supporting role in such projects could mean voters simply didn’t know what they were voting to support on the ballot, Dos-Santos Tam said.

“When it’s gap financing it’s much less visible,” he said.

Chang says there are other issues at play.

One basic problem with the current system, he said, is that taxpayers are asked to provide money for affordable housing at all, which he said is not necessary. Worse, he said, is that public money in the form of gap financing goes to developers to build housing projects that the developers, not the public, will own.

Chang points to models in places like Singapore and Vienna, where the government supports affordable housing that’s revenue neutral. In other words, taxpayers don’t have to fork out cash to subsidize it.

“Socialist Vienna — red Vienna — do you know how much the government puts in to construct new housing each year?” Chang asked in an interview. “Zero.”

But perhaps more important when it comes to gaining popular support to subsidize housing, Chang says, is that affordable housing in Hawaii is typically available only for people earning far less than the average person or family. It’s often 60% or lower than the area’s median income.

Chang says one way to get more people to buy in to subsidizing housing is to make government housing similar to public schools: available to everyone, regardless of income. He calls such housing “income blind” and “social housing.”

The ballot measure’s demise hardly mean the city’s housing fund is out of money. The fund still receives about $8 million annually from property taxes, under the current City Charter. Plus the City Council can allocate money to the fund through the standard budget process.

Aedward Los Banos, deputy director of the Department of Community Services, said the City Council did that recently by directing $20 million in federal Covid-19 relief money known as Fiscal Recovery Funds to the Affordable Housing Fund.

By the end of the month, Los Banos said, the city plans to put out a solicitation for proposals from developers who will be able to tap into a total of $26 million in funding for affordable housing.

In the meantime, Los Banos said, he couldn’t say whether voters had rejected the ballot measure because of confusion, economic NIMBYism or something else.

“I really don’t have a crystal ball as to what was going on in their minds,” he said.

“Struggling To Get By” is part of our series on “Hawaii’s Changing Economy” which is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.