Karen Seddon has taken the helm at the Hawaii Housing Finance and Development Corp. (HHFDC), the agency that awards low-income housing tax credits (LIHTCs) and other financing for affordable housing in the state. She joined the agency in 2006 as its development branch chief. Prior to that, Seddon served as the director of land development at homebuilder D.R. Horton- Schuler Division. Stepping into the top post at HHFDC in July, Seddon replaced Orlando "Dan" Davidson, who was named executive director of Hawaii's Land Use Commission.
Q: What are your top priorities as the new executive director?
A: Since its creation in 2006, HHFDC has boosted the state's production of affordable housing to the highest level in more than a decade. We are committed to maintain this positive momentum generated over the past two years with a production plan in place to facilitate the development and preservation of over 5,000 affordable units over the next five years.
Q: What is the biggest challenge that the agency faces, and how is it addressing that challenge?
A: The surge in construction costs, coupled with decreasing funding, will challenge us to look beyond this crisis to different models. Developers have cited large increases in labor and material costs in the past two years, some as high as 100 percent, while funding for the Rental Housing Trust Fund decreased from 50 percent to 30 percent of real estate conveyance taxes in an already soft real estate market.
This downturn, however, may offer opportunities as well as threats. With the right vision, we can look for ways to improve our systems. Rising energy costs will force us to rethink what we build and where we build it. We need to continuously seek ways to engage proactively with market conditions, rather than simply react. Call it a paradigm shift or tipping point, but wouldn't it be ironic if market forces ultimately bring about the changes long sought by urban planners?
Q: How are housing needs changing in Hawaii?
A: Demand for affordable housing in Hawaii has always exceeded the supply and kept upward pressure on pricing. Since 2000, housing prices have increased 103 percent while incomes have increased a mere 23 percent. A recent study showed that over 50 percent of dual-income married couples cannot afford the median home. According to a 2006 Hawaii Housing Policy Study, the state needs an estimated 16,400 rentals and 6,400 forsale affordable/workforce units by 2011, while the median price for an existing single- family home (average 1,500-1,700 square feet on a 5,000-square-foot lot) sold in 2008 on Oahu was $629,000.
Q: What new programs or special initiatives is the agency working on for multifamily developers?
A: We will seek legislative approval to shorten the period over which state LIHTC credits can be taken from 10 years to five years in an effort to make the housing credit more competitive with other non-housing tax credits. This change is anticipated to enhance the value of the state LIHTC and generate more equity for multifamily projects.
Another avenue is to award additional project-based Rental Assistance Program (RAP) subsidy commitments. This existing program provides up to $250 per month to qualified tenants to help with rental payments for over 1,500 units in 16 projects. Due to a lack of funding, no additional commitments have been made since the mid-1990s, but with the rising cost to construct and the challenges faced by the reduced pricing in the LIHTC market, a program such as the RAP subsidy would be another tool provided by the state to address financing challenges faced by multifamily developers.
Q: What effect have the general economic conditions and the drop in LIHTC prices had on deals this year?
A: The combination of escalating construction costs and decreased demand in LIHTCs has resulted in shortfalls on projects across the board. Developers are looking for ways to decrease costs and restructure their financing and in some cases have or will return their LIHTC allocations to reapply with a different financing structure. Others have been successful in filling gaps with other subsidies.
Q: What trends are you seeing in your LIHTC program?
A: In recent application rounds, we have seen an increase in the LIHTC per unit requested due to the increasing construction costs and pricing of the LIHTC. We also show an increase of non-volume cap (4 percent) LIHTC applications submitted in conjunction with applications for tax-exempt bond financing and financing from the Rental Housing Trust Fund.
There has also been an increase in applications using the LIHTC for the preservation of existing affordable units.