Signed, Sealed & Delivered
Promises of tax credits, municipal bonds motivate private developers to build more affordable housing


David Oi

When it comes to planning affordable housing projects or executing renovations or design-builds, municipal bonds are often the catalyst that gets the construction process underway.

“The bonds themselves cannot fund affordable housing projects,” explains David Oi, finance manager of the Hawaii Housing Finance and Development Corporation (HHFDC). “Affordable housing is different from projects that are either market-rate rentals or for-sale projects because the operating income must be subsidized for the projects to work.”

While income from market-rate rentals is enough for operations, funding reserves and paying down construction debt, affordable housing projects cannot rely on rental income alone, given the target population for this type of housing usually has little to no monthly income.

“Therefore, subsidies such as Section 8 project-based vouchers, low-income housing tax credit (LIHTC) equity and sponsor capital must be used in conjunction with bond financing,” Oi says.


To qualify, projects must rent at least 20 percent of units to households with incomes of 50 percent or less of area median income (AMI) or rent at least 40 percent of the units to households with incomes of 60 percent or less of AMI.

HHFDC will soon launch its annual funding cycle for 2024 targeting the Dwelling Unit Revolving Fund, Hula Mae Multi-Family (HMMF) Revenue Bond Program, Low-Income Housing Tax Credit (4 percent and 9 percent LIHTC programs) and the Rental Housing Revolving Fund Program.

Every year through 2025 (July 1 to June 30), HHFDC releases a consolidated plan informational packet that is of interest to those considering or have experience building within this sector. In late August, HHFDC released its 2024 packet — and as usual, it was made available in every county for public review.

The new notice states that 4 percent LIHTC application requests are no longer accepted year-round, but only during the official funding cycle. HHFDC recommends reviewing the 2022 consolidated application for more information about this and other new requirements, and also the 2022 consolidated application and the 2022-2023 qualified allocation plans.

“[LIHTC] provides lower interest rates to borrowers and developers, which lowers the cost of construction and keeps rents affordable,” says Oi. “Subsidies must be maintained or expanded in order to serve those at the lowest incomes. The low-income housing tax credit allocation amounts and the amount of private activity bonds received are administered by the U.S. Treasury Department. Unless those amounts change, we must find creative ways to work within the confines of what we have.”


The Consolidated Plan process is mandated by the U.S. Department of Housing and Urban Development (HUD) to ensure that jurisdictions receiving direct federal assistance develop and utilize a plan for their housing and related needs of extremely low-, very low-, low- and moderate-income families in a way that improves the availability and affordability of decent, safe and sanitary housing within a suitable living environment.

In May 2020, HHFDC adopted the Consolidated Plan for the period from July 1, 2020 through June 30, 2025. The Consolidated Plan established priorities that include:

  • Construction of affordable rental units for both the general and special-needs populations;
  • Provision of tenant-based rental assistance;
  • Development (new construction or rehabilitation of existing buildings) of transitional housing units;
  • Project development and construction of affordable for-sale homes;
  • Provision of down payment/closing cost assistance and gap loans;
  • Housing information and rental assistance to persons with HIV/AIDS; 
  • And support for fair housing education and training.

HHFDC will adopt an Annual Action Plan for the one-year period between July 1, 2024 and June 30, 2025, for programs under its jurisdiction. The state’s Department of Human Services – Benefits, Employment and Support Services Division administers a program called Housing Opportunities for Persons With AIDS.

Individuals may participate in the planning process through public hearings on needs and priorities, through the review and comment period on the Annual Action Plan and any substantial amendments.

As explained by Oi, private activity bonds, such as those issued by the state’s HMMF program, are similar to municipal bonds in that they are both tax-exempt. But they each serve different purposes.

Municipal bonds are securities issued by state or local governments to raise capital for public projects. Private activity bonds (e.g., HMMF, City & County of Honolulu private activity bonds) are issued by those authorized government agencies on behalf of private companies or specifically awarded projects to serve a public purpose, such as affordable housing.

Oi manages HHFDC’s finance branch that consists of multi-family and single-family sections. Oi’s multi-family team works with developers to get the projects to financial closing. In conjunction with all the various investors, other government agencies, lender attorneys and development team members complete all the necessary steps to fund the projects and break ground.

“The team also manages and controls all funding draws off state funds. It is also responsible for awarding, evaluating, monitoring and managing all projects to ensure that the state’s funds are used transparently, efficiently and effectively,” Oi says. “Our goal is to award the most efficient and ready projects to achieve quality affordable housing as quickly as possible.”


Oi’s single-family home team is responsible for administering all federal grant funds within the state of Hawai‘i. The team works closely with the counties to ensure compliance with federal regulations and timely production, and they are the point of contact for required communications between the counties and HUD.

The team also manages the mortgage credit certificate program to assist many local low- to moderate-income first-time homebuyers. The program provides for a federal income tax credit on the homeowner’s annual mortgage interest.

“Among my strategic goals is to work with other housing finance agencies across the country to find creative solutions to the common problem of the shortage of affordable housing. Although the tools remain the same, we must find new creative ways to maximize our available resources,” Oi says. “HHFDC has the best people in the industry to solve this challenge. Working together with various stakeholders and government agencies — I’m proud of the work my team does every day.”

It may be discouraging to some that the demand for projects applying for financing outpaces supply by four to one. But not to Oi.

“It shows how many companies are committed to solving our affordable housing crisis,” he says. “While our funding rounds are competitive, competition leads to innovation and efficiency.”

Related Images:

More articles