Committee delays overhaul of city down-payment loan program amid funding questions

The Honolulu City Council Committee on Housing, Sustainability, Economy and Health on March 4 postponed action on Bill 64, a proposal to amend Revised Ordinances of Honolulu section 6-34.2 to expand eligibility for the city's down-payment loan program.

Committee members and city officials said they support the bill's intent to help lower-income households buy homes but disagree on funding sources and program details, prompting the chair to delay final action so staff can draft implementing rules and resolve budget questions.

The measure would give the Department of Community Services director rulemaking authority to design program details. Anton Kruky, director-designate of the Department of Community Services (DCS), told the committee that DCS is "in general support of this measure" but that the existing HUD-backed program has eligibility and loan limits that make it impractical in Honolulu's housing market. "The maximum price of the house is well below the median price of a house," Kruky said, and the HUD loan "maximizes out at 40,000," a sum he said is insufficient for the local market. He added that DCS can draft rules to address federal restrictions if the council provides the authority.

Budget and funding emerged as the key unresolved question. Andy Kawano, director of Budget and Fiscal Services, and Kruky discussed possible funding sources including HUD funds, general fund appropriations, bond proceeds and a city revolving loan fund. Kawano said the administration prefers funding flexibility and suggested the city should not duplicate state efforts. Kruky told the committee his preference is general funds because they provide the most flexibility for rulemaking but acknowledged that general-fund lending would raise city risk and raise questions about foreclosure and asset recovery.

Council members discussed a range of income eligibility, or area median income (AMI), targets. Vice Chair Cordero urged AMI above 80%, suggesting 100% to 140% AMI as potential targets and noting pilot approaches (e.g., starting with a small number of loans and growing a fund). Council member Tupala asked whether a revolving fund would allow the program to be replenished and limit repeated general-fund appropriations; Kruky said a revolving fund could work but recommended general funds for initial flexibility.

Committee members also raised private-activity bonds and other statutes that might permit loans tied to affordable housing; Kruky said that option requires further research.

After discussion, Chair Weier recommended postponing the bill "to date and time to be determined by the chair" to allow continued rulemaking work, budget conversations and coordination with state programs; the committee had no objections and the postponement was ordered.

The committee indicated it intends to continue collaborating with DCS, Budget and other city staff on funding sources, AMI targets and specific rule language before bringing the bill back for action.

Votes and formal actions in the committee on March 4 were procedural: the chair recommended postponement and, with no objections, the committee ordered the bill postponed for later consideration.

The chair's postponement leaves open an expected next step: DCS will prepare proposed rules and the administration and council budget staff will evaluate funding options (general funds, bond proceeds, revolving-fund structures or federal/state funds) and return language to the committee for a future meeting.

Clarifying details from committee discussion include the HUD program's current loan cap "40,000" cited by DCS, a proposed 20-year loan term in the existing ordinance the administration said is impractical for Honolulu's market, and multiple AMI ranges floated by council members (80% and higher, with suggestions ranging 100% to 140%).