As others pull back, Spencer pushes ahead

Aloha,

Please check out the following article from today’s Maui News written by Harry Eagar.

Mahalo,

Gregory P. Smith R(B)

Ken and Jeremy Smith R(S)

Jesse Spencer, who is just finishing up his 412-lot Waikapu Gardens affordable housing project, wants to repeat that success – but more than twice as big – at the project district called Maalaea Mauka.

Other developers may be pulling back, but Spencer said, “I can do this with conditions as they are now.”

Mike Atherton, who is selling Maalaea Mauka to Spencer, thinks so, too.

“Jesse’s unique. He builds true affordable housing,” Atherton said Monday.

Buyer and seller are in a 45-day due diligence period, but Spencer hopes to close in September and break ground within a year after that.

He is sure he will be opposed but hopes to find a sympathetic forum in the County Council, which would have to approve the use of 260 acres of former sugar cane fields above Honoapiilani Highway and mauka of the Maalaea Harbor Village complex.

“I’m going to try for a pricing structure for 60 to 70 percent affordable,” under Hawaii Revised Statues 201H, Spencer said.

The newest version of the state’s affordable housing law allows the Housing Finance and Development Corp. to exempt an affordable housing project from most state and county land-use requirements, although both the County Council and the Land Use Commission would have to review the application.

Waikapu Gardens, approved in 2004 under the previous version of HRS 201G, was planned to be 50 percent affordable, although Spencer Homes sold several designated as market units at affordable prices.

Even if it were to go through the normal rezoning process, Maalaea Mauka would be required to comply with the county’s Residential Workforce Housing Policy, mandating a minimum of 40 percent of new units in a residential project to be affordably priced. The policy applied to the Honua’ula/Wailea 670 project district, which was designated in the community plan and was granted zoning approvals by the council.

“I don’t see how they can not approve it after they approved 670,” Spencer said.

The Maalaea Mauka project district has been in the community plan since 1998, although Planning Director Jeff Hunt has told the General Plan Advisory Committee he wants it removed in the next version of the county’s land-use ordinances. A proposed Maui land-use map excludes Maalaea Mauka from lands within the urban district.

Hunt said Tuesday that he did not know any details of Spencer’s changes in the original project design, but that his advice was based on concerns about Maalaea Mauka’s location, impact on infrastructure and a desire to maintain a green, open-space belt between Maalaea and Waikapu.

“Ideally, I would hope that all development within (proposed) urban-growth boundaries would be affordable,” Hunt said.

He said Spencer’s proposal raises “an important challenge for our community”: whether it will be willing to bend on concepts such as anti-sprawl policies when a project promises some other desirable payoff, like housing.

Spencer faced, but overcame, Planning Department objections to Waikapu Gardens based on its location between Waikapu and Wailuku, erasing the obvious boundary between the communities.

By taking over a project on which a lot of work, both on paper and on the ground, has been done, Spencer hopes to move quickly. His main reason, he said, is that he has had to lay off 50 workers as Waikapu Gardens nears completion and will run out of work for 100 more around September. He wants to keep them working.

He said he also wants to build more affordable housing.

“I’ve never had as much satisfaction on any project as this last one moving people in,” he said.

Atherton endorses the view, noting the hugs Spencer got from local families who were able to buy homes at Waikapu Gardens.

“He would. . . . He wants me to buy his land,” said Spencer.

It’s a bit more complicated than that. Atherton said he, his father and grandfather also built affordable housing (in California), and his grandfather, Warren Atherton, was the author of the G.I. Bill of Rights.

Spencer, who is an Air Force veteran, had a job teaching and coaching tennis at a college in Oklahoma, where he bought a lot – with sewer and water – for $200, courtesy of the G.I. Bill of Rights. (Spencer also got bachelor’s and master’s college degrees with a boost from his veterans benefits and his wife, “who wrote my term papers.”)

Working at night under lights, Spencer built his own house for another $10,000.

He sold it for $14,000, and the profit equaled his annual pay (for a 9-month school year), so he bought another $200 lot and so it goes. Other teachers were out looking for summer jobs, Spencer says, but he looked forward to school breaks as the time to build another house.

He has built hundreds and has enough money in the bank to buy Maalaea Mauka for cash. That’s an advantage in this time of reluctant lenders. If he can get permits, he can start site work without looking for a lender, and he won’t have to go to a bank until he is ready to put up buildings.

He never borrows against his buildings, only against the land, he said. So he is somewhat insulated from slow markets. Spencer says he’s made his best profits by taking over projects where someone had already done a lot of work.

Atherton has drilled three wells, with a capacity of about 2 million gallons a day, which will solve Spencer’s need for water – an infrastructure issue that stalled Waikapu Gardens after it was granted its 201G exemptions.

Atherton’s development firm also has largely completed an environmental impact statement. That will have to start over, Spencer said, but it should go quickly.

Spencer has been looking for land for a project for months. He solicited Maui’s big landowners without success before he matched up with Atherton. Atherton said he asked Spencer, “How do you do it, Jesse?

“And he said, ‘I don’t need to make big money.’ “

However, he did pretty well at Waikapu Gardens, selling into a rising market. Although he sold houses to qualified buyers for as little at $230,000, they were getting appraisals as high as $600,000.

Prices for units sold on market were well above what he had projected when he penciled out that project.

Even though he will not likely be selling into a market rising at 25 percent per year this time, Spencer says he can still swing the deal, because he will own the land clear.

His proposal, now being turned into a master plan, calls for “about a thousand” houses and a central, 10-acre commercial center, for businesses directed at the subdivision residents only – barbershops, doctors’ offices, a food store. He is considering apartments over retail space.

A project that size needs an elementary school, he says, and he would like to build it for the Department of Eduction as part of the project, in the way Everett Dowling pioneered at Kamalii Elementary School in Kihei. Developers say they can build schools much cheaper as part of an overall project.

That might shave a few bucks off the as-developed per lot price, because exactions for schools, parks, highway impacts, water meters and so on add tens of thousands of dollars per lot to costs.

Spencer says the water meters at Waikapu Gardens cost him more than the raw land.

But Spencer Homes cuts much of its land development costs by doing its own work in site preparation. Spencer is a qualified heavy equipment operator.

He’s willing to try lots of things to keep the overall cost of the housing down. He always puts in solar hot water, and he’s exploring putting photovoltaic cells on the roofs. (So far, that looks too expensive for an affordable project.)

If it works out, he said he will employ 200 people for the next seven years. By that time, he will be 85 and prepared to think about retirement.

* Harry Eagar can be reached at [email protected].