What is Reserved Housing under the 2005 Mauka Area Rules?
On Oahu, the Kaka`ako district in Central Honolulu is becoming an attractive and convenient residential community that represents a unique housing opportunity for Hawaii residents trying to relocate closer to the Honolulu business district and Waikiki and substantially reduce their daily commute time to work. Reserved housing is designed to provide affordable housing in the Kaka’ako area for buyers earning less than 140 percent of Honolulu area median income (AMI) established on an annual basis by the United States Department of Housing and Urban Development (HUD).
What are the qualifications for a buyer of reserved housing units?
- Is a citizen of the United States or a resident alien;
- Is a bona fide resident of the State;
- Is at least of legal age;
- Does not have a majority interest in a principal residence or a beneficial interest in a land trust on a principal residence within or without the State for a period of three years immediately prior to the date of application for a reserved housing unit;
- If married, whose spouse does not have a majority interest, in a principal residence or a beneficial interest in a land trust on a principal residence within or without the State for a period of three years immediately prior to the date of application for a reserved housing unit;
- Shall be the owner and occupant of the reserved housing unit; and
- Has never before purchased a reserved housing unit
What are the income requirements for reserved housing?
The buyer’s “adjusted household income” may not exceed 140% of the Average Medium income. The “adjusted household income” refers to the total income, before taxes and personal deductions, received by all members of the eligible borrower’s household, including, but not limited to, wages, social security payments, retirement benefits, unemployment benefits, interest and dividend payments, but not including business deductions. In addition, the buyer’s assets (mutual funds, 401K, etc) may not exceed 125% of the Area Medium Income.
What is meant by HCDA shared equity requirements?
The share of the equity in the reserved housing unit shall be the higher of:
An amount equivalent to the difference between the original fair market value of the unit and its original sales contract price, not to exceed the difference between the resale fair market value and the original sales contract price; or
An amount equivalent to the authority’s percentage share of net appreciation calculated as the difference between the original fair market value of the unit and its original sales contract price, divided by the original fair market value of the unit. “Net appreciation” means resale fair market value less original sales contract price and actual sales costs incurred, if any.
After the end of the regulated term, the owner may sell the unit or assign the property free from any transfer or price restrictions except for applicable equity sharing requirements set forth in 15-22-187 of the Mauka Rules, Chapter 22 document.
What are the lender requirements?
Lenders will require documentation to verify the buyer’s income. Examples are as follows:
- 2 years tax returns
- Pay stubs
- Verification of assets
- Gift letter with verification of funds (if receiving assistance with down payment)
How are the reserved housing units announced to the public and what area the buyer’s procedures?
- There will be a published announcement in Newspaper outlining the following process:
- Application pickup period
- Lender qualification period
- Application submittal period
- Lottery drawing
- Unit selection
What is the regulated term for reserved housing units (i.e.-how long am I required to occupy the unit)?
The regulated term for reserved housing units is established based on unit affordability and will range anywhere from 2-10 years. Reserved housing units affordable to qualified persons with adjusted household incomes:
- Less than one hundred percent of median income shall be regulated for ten (10) years;
- One hundred to one hundred nineteen percent of median income shall be regulated for five (5) years;
- One hundred twenty to one hundred forty percent of median income shall be regulated for two (2) years. HCDA may elect to extend the period on a case-by-case basis. It's important to note that the number of years is determined by units, not by the buyers income. Regardless of your actual income, the unit's term remains the same.
What are the conditions for transferring reserved housing units during the regulated term?
- HCDA or governmental agency approved by HCDA shall have the first option to purchase the unit at a sales price based on the lower of:
- The current fair market value of the reserved housing unit less the HCDA’s share of the equity in the unit
- The original sales price of the reserved housing unit adjusted proportionately to the change in median income computed from the date of the purchase to the date of the sale
How much is the down payment?
The developer can require up to a 10% down payment. The buyer is allowed to put in a larger down payment if recommended or required by the lender.
What is the HCDA?
The Hawaii Community Development Authority (HCDA) is a State agency that was established to supplement traditional community renewal methods by promoting and coordinating public and private sector community development.
Where can I learn more about the Reserved Housing 2005 Mauka Area Rules?
The HCDA website has copies of all current rules and can be found at: http://dbedt.hawaii.gov/hcda/plans-rules/