The state Department of Hawaiian Home Lands has changed up how it plans to pay for and use a Kauai apartment complex that it aims to purchase for beneficiary use.

Courtyards at Waipouli, the 82-unit complex that DHHL wants to buy despite pushback from existing tenants and some agency beneficiaries, would no longer be reserved for beneficiaries with low and very low incomes as previously planned.

Under the revised plan, Courtyards apartments would be almost entirely for moderate-income beneficiary households.

DHHL Director Kali Watson cast the change as a positive one that can serve beneficiaries with a wider range of incomes.

Still, there is deep division among beneficiaries over the agency spending resources to acquire existing rental apartments for beneficiaries to rent for 15 years with an option to then buy their units at steep discounts to market prices, given that DHHL’s historical purpose has been to create single-family residential as well as agricultural and pastoral homestead lots.

Traditionally, beneficiaries who are at least 50% Native Hawaiian have been awarded such lots with 99-year renewable leases for $1 a year under the more than century- old homesteading program intended to return Hawaiians to their ancestral lands.

About 28,700 applicants are on DHHL’s waitlist for leases.

“This is a bad idea,” Sherri Cummings, a DHHL beneficiary, said about the Courtyards plan during a Sept. 16 Hawaiian Homes Commission meeting. ”Put us back on the land.”

Cummings was one of six beneficiaries objecting to the Courtyards plan at the meeting where commissioners were asked by the agency to approve a new financing plan to buy and fix up the property for $60 million.

Path to homeownership

About twice as many beneficiaries expressed support for the plan at the meeting, including Patti Tancayo, who called the project an innovative pathway to homeownership.

“This rent-to-own program gives people options,” she said. “This program can address different needs … giving people on the waitlist that waited so long a chance to finally be served.”

Jessie Kekiwi-Aweau also urged commissioners to approve the requested change to serve moderate-income beneficiaries.

“If there was a rent-to-own program back in the day, I probably would have owned my own house already with all the rental payments that I made,” she said.

Kapua Keliikoa-Kamai told commissioners that she was saddened by the plan driven by Watson pitting beneficiaries against one another.

Existing Courtyards tenants also have criticized DHHL’s plan, which would displace them but require DHHL to subsidize their rent for replacement housing for up to 42 months if it is more than rent at the Courtyards.

Commissioners approved the revised plan in a 6-2 vote. Voting no were Dennis Neves, the commission’s Kauai representative, and Lawrence Lasua, representing Molokai.

Commissioner Walt Kane­akua was not present for the vote, but expressed support during a discussion phase of the meeting in part because not limiting units to low- income beneficiaries means more beneficiaries can qualify.

“That’s a huge change to what we’re looking at,” he said.

Some of the opposition to DHHL’s prior Courtyards plan was that low-income beneficiaries on the agency’s waitlist would receive subsidized housing before others who have been on the waitlist longer but don’t qualify by income.

However, beneficiaries with low incomes also have been passed up for leases because they cannot afford to buy or build a home as required under the homestead program.

Many beneficiaries have been on DHHL’s waitlist for decades, and more than 2,000 have died waiting.

DHHL’s earlier plan involved obtaining federal and state low-income housing tax credits to finance much of the Courtyards acquisition. Such credits require that units being bought serve households earning no more than 60% of the median income, including a portion for households earning no more than half as much.

The commission voted 5-3 in January to approve that purchase plan, and DHHL executed a purchase option with the Courtyards property owner in February.

Financing

However, the Hawaii Housing Finance and Development Corp., a state agency that allocates the tax credits on a competitive basis for affordable-housing projects, isn’t expected to select DHHL’s project for financing because it didn’t score well against other projects.

So DHHL now intends to seek a roughly $22.5 million loan insured by the federal Department of Housing and Urban Development along with a HUD Native Hawaiian Housing Block Grant. A roughly $10 million loan from HHFDC also would be sought.

Additionally, DHHL intends to use $25 million it has from HUD’s Native American Housing Assistance and Self Determination Act, which was part of the earlier financing plan.

If the funding is obtained and DHHL completes its purchase, income limits for beneficiaries would be the median income on Kauai, and in some cases up to 80% of the median.

Kauai’s median income ranges by family size from $92,900 for a single person to $175,200 for a family of eight. At 80% this range is $74,320 to $140,160.

Under DHHL’s new plan for the Courtyards, income limits for households would be the median for 39 units and 80% for 40 units. There also would be three units for households earning no more than 30% of the median income.

Maximum monthly rental rates would be $1,035 for three-bedroom units for those earning up to 30% of the median income. At the 80% level, rents would range from $1,990 for one-bedroom units to $2,760 for three-bedroom units. At the median level, rents would range from $2,448 for one-bedroom units to $3,450 for three-bedroom units.

Rent would help pay down DHHL loans and reduce purchase prices after at least a decade. DHHL said the biggest benefit for buyers would be purchasing after 15 years of renting, when estimated purchase prices would be $286,600 at 30% of median income, $221,199 to $346,802 at the 80% level and $274,575 to $430,487 at the median income level.

Some things have yet to be figured out with the proposed HUD financing, such as whether a child of an initial tenant who does not meet income requirements could move into the rental unit if their parent dies before buying the unit.

An initial tenant would receive a sort of condominium homestead lease up front effective upon purchase, and can pass such a lease on to descendants with at least 25% Hawaiian blood. But how that would work during the rental phase is unclear and needs exploration with HUD.