The problems with Hawaii’s subsidized rental housing for lower-income residents began decades ago, underscoring a fact that the state is now acting to address.
And that is: Government may have the means and the will to build housing for those earning below-market wages — but falls far short of the mark where maintenance is concerned.
That’s why it made sense for the deal to be sealed about a week ago between the state’s Hawaii Housing Finance and Development Corp. and a private limited partnership. Komohale LP is taking over a portfolio of six mainly low-income apartment properties, 1,221 rental units in all.
Otherwise, the state would not have had the money to bring these residences back up to a decent condition.
But serious imperative still falls upon the state. HHFDC must fulfill its pledge to add apartment inventory for those at the lower income scale — many of whom will need help staying housed.
The private partner is paying $130 million, along with a capital improvement budget of $85.1 million for deferred repairs, plus
$1 lease rent annually for 75 years. After paying off debt on the properties, the deal is expected to net $40 million for the state to produce more low-income housing.
Komohale unites local developer Stanford Carr and Standard Communities, based in Los Angeles. The partners, both of whom have a record of success in affordable developments, now own Kauhale Kakaako, Pohulani Elderly and Kekuilani Courts on Oahu; La‘ilani Apartments on Hawaii island; and Honokowai Kauhale on Maui, all on state-owned land.
Ownership of the buildings will revert to the state after the
75 years, or terms are renegotiated, said Kent Miyasaki, HHFDC housing information specialist.
The 226 units in Oahu’s Kamakee Vista are part of the deal but won’t be transferred until around July 15. It is on land leased from the Atherton Family Foundation through 2056.
When the partners were named in 2017, the price had been set at $170 million, with $53.9 million budgeted for capital expenditures, Miyasaki said.
But in the due-diligence inspection that followed, Komohale identified additional needed repairs, requiring the extra costs to be deducted from the overall sales price, he said.
How did the projects fall into such disrepair? Rents were not sufficiently increased incrementally, which left little money for maintenance. This is a pattern that must not be repeated over time, to prevent further erosion of Hawaii’s already limited stock of affordable rentals.
Most of these complexes were targeting those earning no more than 80-100% of area median income (AMI). But now, said affordable-housing advocate Gavin Thornton, a majority of the tenants fall significantly below that range.
The tenant mix has made the financial upkeep of the projects increasingly unsustainable — and unaffordable for some, over time.
For most of the existing tenants, the terms of the sale bars the new owner from raising rents more than 2% annually over the first five years and then 5% annually for another 30 years. The exception is Pohulani Elderly, where its existing tenants will have rent increases capped at 2% as long as they stay.
With the infusion of funds, the state should be able to improve options for this lower-income group, which, statewide, faces a dire shortage of affordable housing. Miyasaki said the money would replenish the rental assistance fund to help existing tenants bridge the gap as the rents slowly rise.
Additionally, much of the funding will be invested in new-start construction of projects filling some of that need, he added.
Craig Hirai, HHFDC executive director, said that preserving this rental stock for its intended tenant group while investing in new units for the lower-income end would serve residents with a broader range of incomes.
But that hasn’t completely eased the worry for Thornton, executive director of Hawai‘i Appleseed Center for Law and Economic Justice, who asserted that replacing the stock for the neediest tenant class will be even harder.
Good point. The state has not had much recent success providing for the low end, which has to be seen as a factor fueling Hawaii’s persistent homelessness crisis. Nobody wants to see an additional cohort of low-income residents adding to the population living on the streets.
There’s some encouragement in noting that lawmakers in 2018 allotted $200 million to finance affordable rentals, with $100 million more coming over the next biennium. The money, HHFDC spokesmen have said, is being committed in timely fashion, which yields hope that construction will begin soon.
More private partners should follow Komohale’s lead by stepping up to claim the available tax incentives for affordable-housing development.
And let’s hope that state officials have learned the key lesson from past mismanagement: Producing rentals that are then properly maintained is the only way Hawaii’s low-income population will find a place to call home.
