Building Affordable Housing in Hawaii

In Fiscal Year 2012, the U.S. Department of Housing and Urban Development faces a significant budget reduction. Both the Senate and House Appropriations Committees voted to decrease HUD’s budget by several billion dollars. The result is that state and local governments must find ways to meet significant affordable housing needs with less federal funding. The shortage of affordable housing, combined with the shortage of money, has caused some in the private sector to look for creative solutions of their own.

A story appeared recently on a local Hawaii news station about attorney Tony Locricchio – a Maunawili, Honolulu resident who’s trying a unique approach to affordable housing construction.

Tony is not a professional builder, but with the help of some friends who are, he’s managed to collect enough “used” building material to erect five small homes. When they’re completed, each will have cost less than $5,000 to build. Tony and his crew keep costs down by using unwanted material in creative ways. For example, the walls of one home are actually doors that originally cost $400. Tony bought them for $15.

The recycled and reused material can generally be purchased for pennies on the dollar, and if volunteers build the homes, costs are all but non-existent. Tony is building the homes on his own property and using them as proof that affordable, well-built housing doesn’t have to be expensive.

Hawaii’s Housing Finance and Development Corporation says it will consider any cost-effective building options provided they meet zoning and building code requirements, and other states would do well to follow its lead. In communities across the country, families spend years waiting for low-income housing units to become available. Many cities and towns have closed their waiting lists to new families because the lists are already too long, with families waiting five years or longer for affordable housing.

Hawaii currently has an affordable housing shortage of about 30,000 units. And that’s only counting families currently in homes that they can’t afford; it doesn’t include the state’s homeless population. Once Hawaii officials have seen the finished product, Tony intends to dismantle his homes and take them to Micronesia, where he’ll teach them how to replicate his innovative building model.

Tony’s unique approach to the affordable housing shortage in Hawaii is excellent proof that the private sector can make a significant impact in areas where the government is limited in its ability to help. As HUD and other departments that fund housing-related activities see their budgets reduced, it becomes increasingly important for the private and public sectors to work together.

Regulations Aiming to Turn Around a Sluggish US Housing Market

In interesting news, the US House of Representatives has voted overwhelmingly to reduce some requirements and ease burdens on home loans for certain types of homes. At the height of the financial crisis, homeowners across the country were forced to foreclose home loans due to their inability to pay mortgages and home loans. In the aftermath of the crisis, strict laws were enacted to reign banks and other financial institutions from making home loans easily available to everyone.

The flashpoint of the economic recession of 2008 was home mortgages. Just before the crisis, investors were lured by banks into investing in high-interest mortgages that were risky; this became apparent when the rates of interested went north and the bubble surrounding the real estate industry burst in 2007-08. As default payments by millions of mortgage home owners hit the roof, the value of investments held by banks and institutions went south and hit rock bottom.

The recent legislation is seem as a move to ensure that the consumer public can afford to repay loans; lawmakers insist that it will provide great relief by bringing regulations within reach of the average American with low to moderate incomes who are intending to buy homes. However skeptics still maintain that this will have a very drastic impact on prospective home buyers looking to obtain credit to buy first-time homes. A member of the committee on Housing Financial Services comments that the legislation will end up rolling back consumer protection completely and expose them to predatory practices indulged by some in the financial market which led to the crisis in the first place.

A substantial percentage of first-time home buyers in the US who pick up mobile homes are among the most economically weak and low-income earners. The overrriding fear is that this segment will be subject to tactics used by banks to lend large sums at higher interest rates, luring them to invest in more expensive mortgages by working around regulations even when they qualify automatically for low-cost alternatives.

In the traditional real estate market, home owners are already exposed to risks that are significant and can have serious impact on their earnings and savings; factors like inability to refinance, higher interest rates and depreciation are the prime risks. For example, depreciation is a factor that sets in almost as soon as a home is purchased.

During the financial crisis, it was extremely difficult to get ‘honest data’ from banking circles regarding the state of housing finance and home loans. Piecing together information from bank reports was certainly not providing an accurate picture because banks for one were delaying from showing home foreclosure filings in their monthly reports. On the other hand, home owners were simply unable to meet mortgage payments and stopped paying altogether, perhaps even using it as a strategy for foreclosure. That said, the real picture of the US housing market may still not be completely understood.

It is however, pertinent to say that a home foreclosure filing is one of the worst problems of home financing. If the new regulations can stave off further crisis, then we can assume that the housing segment is well on its way to recovery.