Mayor Peter Carlisle signed an agreement Thursday clearing the way for the lease of the city’s 12 affordable housing complexes to a private group for $142 million, carrying out the goal of several mayoral administrations to get the city out of the affordable rental management business.
Honolulu Affordable Housing Partners LLC, a partnership led by Arcadia, Calif.-based Highland Property Development LLC, promised to keep rental prices within federal affordable housing guidelines for the life of the 65-year lease. The consortium also promised up to $42 million in renovations.
Carlisle said the city’s taxpayers have been paying $500,000 a month in debt service for the projects.
"Every day we delayed getting this done cost the taxpayers $23,809," the mayor said.
The City Council passed bills approving the agreement by 6-2 votes on Oct. 11.
The company now begins a due-diligence period during which it will inspect and analyze each of the properties. The company is expected to soon make an initial deposit of $1 million against the $142 million "premium lease."
The company is allowed to increase rents by up to 10 percent annually when necessary.
A losing bidder for the sale last week warned City Council members that the HAHP deal would result in the loss of 700 units for gap group or "workforce" families, who earn between 80 percent and 120 percent of median income.
But both the company and city officials said there is language that requires all affordable units to stay within federally established affordable housing rates based on household income, which allows rents of up to 30 percent of a renter’s income.
Gap group residents are currently paying about half of the 30 percent limit. Such renters won’t be paying the maximum 30 percent of income allowed for another seven to nine years, he said.The agreement allows the company to transfer three of the least profitable properties to a nonprofit that would be better able to manage them, a prospect that has bothered some of the tenants there.
HAHP partner Bill Rice said the group is "looking to partner with strategic local nonprofits that can make a transformative difference on these properties."
Even if such a partner cannot be found, Rice said, "Highland and the Honolulu Affordable Housing Partners are committed to making sure that these assets are protected."
City officials have also said there are subsidy programs in place to help those who cannot afford rent hikes.
