A rural Windward Oahu community where physical standoffs occurred five decades ago between a private landlord and tenants is once again the scene of intense discord over rent, though this time the landlord is the state.

About 100 households, including some farmers, who live on land leased from the state in Waiahole Valley are mired in an effort to reset “ground lease” rents, which are at below-market rates subsidized by taxpayers and haven’t increased in the the past 10 years for house lot lessees and 25 years for farm lot lessees.

Many tenants argue that their ground rent, which for a median-size 0.55-acre residential lot is $98 a month, should stay low as a form of state-supported affordable housing, and that a proposed roughly sixfold increase is outrageous.

The Hawaii Housing Finance and Development Corp., a state agency that owns the land but primarily exists to help private developers finance new affordable-housing projects, claims that its proposed higher rent is 50% below market and is needed to reduce financial losses from maintaining the community’s infrastructure.

HHFDC and the Waiahole-Waikane Community Association, which represents about half the tenants in negotiations, have each retained private law firms for what has become a sometimes acrimonious dispute after more than three years of trying to collaborate on a mutual resolution.

Other possible influences on the outcome include state lawmakers, who are being asked to consider a pair of bills proposing to freeze Waiahole lease rent for five years, and Nani Medeiros, who became the state’s chief housing officer when recently elected Gov. Josh Green created the new position.

A dozen tenants have agreed to higher rates offered by HHFDC, but the rest have not.

If HHFDC and any remaining holdout tenants can’t agree on new rent by April 1 for a 15-year term commencing June 30, the matter by law is to be decided by an arbitrator whose proceeding must be paid for equally by both sides and could result in higher rent than what the state is offering.

“There’s a lot of tension in the valley,” Kaanapu Jacobsen, a Waiahole resident and farmer, said in October at an HHFDC board meeting.

In and around the valley, signs of resistance are posted, including one on the fence of a home that states, “People United Will Never Be Defeated.”

Historical dissonance

HHFDC represents a reluctant landlord as the result of a long-ago state move to preserve the community on agricultural land from a developer’s urbanization plan for the area and neighboring Waikane Valley almost 50 years ago.

Elizabeth Loy McCandless Marks sought state approval in 1974 to urbanize 1,337 acres and develop 6,700 homes in the two valleys she inherited from her father.

Marks failed to obtain a state land-use change, but local developer Joe Pao pressed on after buying the Waikane land with an option for Waiahole.

Valley residents, city planners and state leaders opposed Pao’s “new city” project, which was to include affordable homes for the roughly 100 households in Waiahole and land for farming.

While Pao worked to get approvals, Marks raised rents for Waiahole tenants, who in turn fought eviction proceedings that simmered in court for three years and led to public protests as well as a clash in 1977 where more than 200 residents and supporters blocked Waiahole Valley Road to prevent a sheriff from delivering eviction orders.

Following subsequent blockades on Kamehameha Highway, then-Gov. George Ariyoshi resolved the immediate conflict with a $6 million purchase of the Waiahole land, a 795-acre deal that included Waiahole Elementary School, some lots later taken over by the Department of Hawaiian Home Lands and a lot now leased to Waiahole Poi Factory.

Residents got to stay, but problems have festered with the state as landlord. It took two decades to create leasehold contracts — 55-year leases that HHFDC’s predecessor initiated in 1998.

Tenants in the valley today include some who received initial leases, and their descendants. Some lessees also have sold their homes and assigned ground leases to others. As part of providing regulatory waivers to the state for the rural subdivision, the city in 1986 required that lessees have low or moderate incomes, but did not put parameters on ground rent.

Lease rents were fixed for an initial 10-year term and a following 15-year term, but are subject to renegotiation for two additional 15-year terms through 2053. The lease also can be extended another 20 years to 2073 if most tenants agree.

If no agreement on rent is reached for the upcoming term, an arbitrator could set rent up to 4% of the land value, which is roughly estimated to be far in excess of HHFDC’s offer.

For some tenants the predicament is a throwback in time.

“Everything they fought for is coming back,” said Elijah Nuiloa Kane, son of a longtime valley tenant and husband of the daughter of Pat Royos, who participated in the 1977 fight.

“Forty-five years later she’s still facing the same problem,” Kane said of his 77-year-old mother-in-law. “She is facing eviction.”

Rent negotiation

HHFDC in 2017 initiated strategic planning work to address issues with the leasehold arrangement. The issues included operating expenses exceeding tenant payments, home loans being unavailable to tenants, an antiquated water system, cesspools that by law need to be replaced and some tenants who, for reasons including old age, no longer farm on lots where it’s required.

The agency claims that it has a $1.1 million annual deficit managing Waiahole Valley largely due to low lease revenue and water system costs. HHFDC also has had trouble with tenants not paying rent. The agency said 12 lessees are currently in arrears by more than two months.

In 2019, HHFDC’s board received a draft conceptual plan produced by consultant SMS Research and Marketing Services partly based on community surveys, meetings and presentations.

After the association criticized the plan and presented its own vision, HHFCD hired another contractor, Townscape Inc., for additional strategic planning work. Some of this work was disrupted by the coronavirus pandemic, and discussions since have become more adversarial.

The association notified HHFDC in March 2021 that it had retained a law firm to assist with negotiations.

Nine months later a law firm was retained to help state attorneys representing HHFDC.

Negotiations began in February 2022, and in July HHFDC notified tenants that rents would rise by 560%.

For the median-size residential lot in the valley, monthly rent of $98 would rise to $648. Rent for larger farm lots would increase by the same margin.

Lucy Salas, association president, said in a July 29 letter to HHFDC’s board that the agency’s notice to tenants lacked compassion and instilled fear.

“Our residents felt bullied after reading this letter,” Salas wrote. “It has made our residents worry about whether they’re going to be able to afford the ridiculous rent hike amounts or if they should start downsizing their life belongings, pack up and move into the streets to live as homeless people. We hope none take their lives from the fear and anxiety that we believe you should all feel responsible for.”

Paul Zweng, association vice president, said HHFDC’s outside counsel suggested Jan. 20 that the rent proposal is basically a “take it or leave it” offer.

Chris Woodard, HHFDC chief planner, told members of two Senate committees at a Jan. 31 briefing that he wouldn’t describe it that way, but said there really is “not much room” for negotiation.

“We’ve been subsidizing the operation for literally decades, and we’ve offered rents that are approximately 50% below market,” he told the Senate Ways and Means Committee and Energy, Economic Development and Tourism Committee.

Woodard said HHFDC’s proposed rent represents a balance that would cut the agency’s $1.1 million annual Waiahole management deficit roughly in half while keeping rents far below market.

Eviction fears

Some committee members asked whether other state programs could help tenants with rent, or whether another agency or a private nonprofit could step in as landlord. Such options have been previously explored, but to no avail.

The two bills proposing a five-year rent freeze, House Bill 465 and Senate Bill 1195, have not been scheduled for a hearing.

Medeiros, the state’s new chief housing officer, has been exploring options and meeting with valley residents.

“Their message to us is the proposed initial offering is unaffordable to them,” she told the two committees.

Medeiros wasn’t able to offer a solution to the committees or HHFDC at the briefing, but said, “I don’t want anyone to be displaced.”

Kane plans to argue that much of the land in the valley was never lawfully acquired by the father of Marks, Lincoln “Link” Loy McCandless, a tycoon who dug a tunnel through the Koolau Mountains to deliver water from Waiahole to Leeward Oahu sugar plantations. He said descendants of Native Hawaiians whose ancestors held the land long before McCandless can be shown to be rightful owners.

Still, Kane also is concerned that evictions, including non-Hawaiian and seniors’ households with low incomes, are on track to happen.

Jose Royos, Kane’s 84-year-old father-in-law, said tenants need low and reasonable rent that prevents displacement. “The rent increase is too high,” he said. “This is affordable housing for us.”