Increase apartment floor-area ratios to boost housing stock

RE: Resolution 25-105 — RELATING TO THE DEVELOPMENT STANDARDS FOR THE APARTMENT AND APARTMENT MIXED-USE DISTRICTS

Aloha Chair Meatoga, Vice-Chair Kamo and other commissioners,

The Grassroot Institute of Hawaii supports Resolution 25-105, which would amend development standards for the apartment and apartment mixed-use zoning districts.

Grassroot believes this bill could unlock a range of new housing opportunities for Honolulu residents and would result in more plentiful, affordable housing.

In particular, the draft bill would reduce the minimum lot sizes for these districts and increase floor-area ratios. The floor-area ratio for a property is currently calculated using a complicated formula tied to the size of the lot and the zoning district. Table 1 below shows the current maximum FARs by zoning district compared to the new ratios proposed in the bill.

Table 1: Current and proposed maximum floor-area ratios

A greater floor-area ratio means more building square footage can be built on a parcel. Increasing these ratios is critical because Honolulu needs more housing units.

According to the 2019 Hawaii Housing Planning study, Honolulu needed 22,168 new units between 2020 and 2025.^[1] A 2024 update to the Hawaii housing planning study estimated that Honolulu needs 27,710 new units built between 2023 and 2027 to meet demand.^[2]

Grassroot analyzed the potential impact of this bill by identifying apartment and apartment mixed-use parcels that have buildings 50 years old or older, none of which is designated as a condominium unit.^[3] We identified 1,230 such parcels in the A-1, A-2, A-3 and AMX-2 zones, and the results are shown in Table 2.

Table 2: Current actual and legal average floor-area ratios

Clearly, the floor-area ratio figures proposed in this draft would legalize many more housing units than are currently built on those lots or that could be built on them under current standards.

For homebuilders to justify buying a property and replacing aging buildings, they must be sure the project can be profitable.

Increasing the allowable floor-area ratios could move some projects from questionably to realistically profitable. Consider a 10,000-square-foot A-2 lot where a 1,500-square-foot, 70-year-old single-family home now sits. The land value of that property could easily be $1 million.

If a homebuilder acquired that property, current FAR limits would allow them to construct up to 13,000 square feet of building area,^[4] with a land cost per square foot of $79.

On the other hand, increasing the allowable FAR to 3.0 would increase the amount of building area to 30,000, which would lower the land cost per square foot to $33 — a more than 50% reduction that could help the project pencil out.

A-2 parcels with older, non-condominium dwellings make up 80% of the properties Grassroot reviewed. Allowing more density in those areas would help ensure that new housing comes on line at a quicker rate.

The Honolulu Department of Planning and Permitting has proposed amendments to this measure that would create a 5,000-square-foot minimum lot size for all apartment districts; require a minimum lot width and depth of 60 feet; and standardize the maximum building area for apartment zones at 60% of the lot area.

Grassroot agrees with DPP’s suggestion relating to the maximum building area, but we would recommend the commission retain the current draft of the bill as it relates to lot sizes and lot width and depth. This would avoid limiting the ability of homebuilders to respond to the specific geographic realities of each lot.

Thank you for the opportunity to testify.

Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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^[1] “Hawai’i Housing Planning Study, 2019,” prepared for the Hawai’i Housing Finance and Development Corporation by SMS Research and Marketing Services, December 2019, p. 56.
^[2] “Hawaii Housing Planning Study 2024,” prepared by SMS Research and Marketing Services, FSR Consulting LLC and Ward Research for the Hawai’i Housing Finance and Development Corp., Table 39A, p. 124.
^[3] Data from Hawaii Information Service’s Multiple Listing Service, which requires a subscription to access. Reviewed tax year 2024 parcels with condominiums and properties without year built information excluded.
^[4] Calculated by multiplying the lot size (10,000 square feet) by the current A-2 FAR calculation (FAR = 0.00002 x lot area + 1.1).