Making Housing More Accessible: How LIHTC is Addressing Hawaii’s Housing Needs

Hawaii is facing a significant housing affordability crisis. Studies show that the state needs over 50,000 new housing units by 2025 to meet the growing demand for affordable housing. For many local residents, homeownership feels increasingly out of reach.

One program helping to address these challenges is the Low-Income Housing Tax Credit (LIHTC) program, which plays a vital role in creating affordable rental housing – a key steppingstone toward long-term housing stability and future homeownership.

What are Low-Income Housing Tax Credits (LIHTC)?

The LIHTC program was established by the Tax Reform Act of 1986 to encourage private investments in affordable rental housing. It provides federal tax credits to private investors, such as banks, in exchange for capital to help develop affordable housing projects.

Nationally, the program has been incredibly successful, creating or preserving over 2.3 million affordable units across the U.S. In Hawaii, LIHTC projects account for 20-25% of new multi-family housing, ensuring long-term affordability by keeping units accessible for up to 30 years.

While LIHTC projects primarily support affordable rental housing, they indirectly benefit local residents by allowing them to save on rent and stabilize their finances – which can ultimately help them pursue homeownership in the future.

How LIHTC Works in Hawaii

In Hawaii, LIHTC projects are awarded through a competitive process led by the Hawaii Housing Finance Development Corporation (HHFDC). Developers apply for tax credits to finance affordable housing projects, often partnering with banks like Central Pacific Bank (CPB) to secure financing.

“LIHTC has widespread support because it addresses a critical need for affordable rental housing in a way that engages both the private and public sectors,” says Cathy Camp, Executive Vice President of Real Estate at CPB. “We’re proud to invest in LIHTC projects that help local residents find affordable homes.”

CPB’s Commitment to Affordable Housing

At CPB, we are dedicated to supporting affordable housing through investments in LIHTC projects. These projects, especially those utilizing 4% tax credits, are prevalent in Hawaii, making a significant impact in providing affordable rentals. While these units focus on rental affordability, they are part of a broader ecosystem that promotes housing stability.

“Financing and structuring a LIHTC deal requires multiple partners, including private investors, federal and state agencies, and banks,” explains Camp. “CPB plays a key role by providing both equity investments and construction financing, helping these important projects come to life.”

Overcoming Challenges in LIHTC Projects

While the LIHTC program has made significant strides, it’s not without its challenges. The availability of tax credits is limited and securing them is highly competitive. Developers also face high construction costs and other regulatory hurdles in Hawaii.

“Despite the challenges, CPB is committed to supporting affordable housing development,” adds Camp. “Our goal is to continue investing in LIHTC projects and partnering with developers to help create more affordable homes for local residents.”

How LIHTC Helps Create Pathways to Homeownership

Although LIHTC focuses on affordable rentals, the program indirectly supports local residents' ability to work towards homeownership. By lowering housing costs for renters, projects supported by LIHTC allow families to save money and build financial stability, which can help them eventually transition to owning a home.

CPB’s involvement in these projects not only addresses the immediate need for affordable housing but also supports the long-term goal of expanding homeownership opportunities for Hawaii’s residents. As more affordable rental units become available, it relieves some of the pressure on the housing market, allowing more local families to plan for their futures.

Looking Ahead: Legislative Support for Affordable Housing

Recent legislative changes, such as the passage of SB 764, have made it easier for CPB to invest in LIHTC projects. The bill aligned Hawaii’s banking laws with federal regulations, enabling CPB to increase its investments in affordable housing initiatives.

“These changes have allowed us to do even more to support affordable housing in Hawaii,” says Cathy Camp. “We’re excited to continue working with our partners to create solutions that benefit our local community.”

By making affordable rentals more accessible, the LIHTC program lays the groundwork for greater financial stability for Hawaii’s residents, which is an essential step toward homeownership. CPB remains committed to supporting these projects and helping more families find pathways to sustainable, affordable housing.