The nonprofit Steadfast Housing Development Corp. and ‘Ohana Health Plan have teamed up for the first time on a $554,000 federal grant to fund Housing First, market-rate rental units for at least 32 of Oahu’s most chronically homeless.

The first 10 people — including 60-year-old Navy veteran Keith Mitchell — moved into their new homes starting July 1, according to Linda Ahue, executive director for Steadfast Housing Development Corp., which does business as Steadfast Pacific Corp.

Depending on the cost of each unit and when they’re rented, “We can potentially serve more clients,”Ahue said. “We could go up to as many as the funding would allow. It could be 41. It could be 34.”

The partnership made sense to ‘Ohana Health Plan, which oversees care services for 5,000 Hawaii adults with serious mental illnesses but does not specialize in housing, according to Theresa Lyons, behavioral health director at ‘Ohana Health Plan, which has offices in Kapolei, Honolulu, Hilo and Kahului.

The organization serves an estimated 42,000 Medicaid members, 5,000 Medicare Advantage members and 1,000 Medicare Prescription Drug Plan members across the islands.

“We’re highly specialized in what we do,” Lyons said. “We deal with mental health and health care needs, but our direct experience with managed care with Housing First is limited. So Linda approached us to partner to apply for this funding for permanent housing.”

Both organizations are now working on a second grant through the U.S. Department of Housing and Urban Development to continue the funding for a second year.

The money is aimed at housing some of Oahu’s homeless who have been on the streets the longest, such as Mitchell, who said he’s been homeless “off and on” since 1994.

Mitchell, a former Navy petty officer third class who served aboard the aircraft carrier USS America, moved into his one-bedroom, one-bath apartment in the back of Palolo Valley on July 24 and loves it.

On the first night, “I got a lot of sleep,” Mitchell said, as a cool breeze blew in through his new apartment. “It’s nice and quiet. I’m more relaxed than being on the street, less agitated.”

Part of his homelessness was due to alcohol and drugs, and Mitchell insisted he’s not going to blow his chance on a place of his own. He said he’s been clean and sober since moving in and plans to join a treatment program this week to keep it that way.

Asked if he might slip up and go back to being homeless, Mitchell said, “No, no, no.”

He is adamant he will not return to a life where he was surrounded by “a lot of noise, a lot of traffic, a lot of drinking, sometimes fighting.”

Housing First is a national model that’s been embraced by Gov. David Ige and Mayor Kirk Caldwell to find market-rate units to reduce the country’s highest per capita rate of homelessness, even in high-priced housing markets like Honolulu.

The concept relies on landlords who are guaranteed monthly rent, along with social workers who provide so-called “wrap-around services” to deal with any tenant problems.

In Mitchell’s case, the HUD money managed by Steadfast Pacific Corp. and ‘Ohana Health Plan pays the bulk of his $1,200 monthly rent in his seven-unit apartment complex. Mitchell’s Social Security benefits pay $113 toward his rent and he’s responsible for the utility bills.

Mitchell sleeps on a futon in his living room but plans to go furniture shopping. So far he’s been dining on microwaved burritos but Mitchell is looking forward to preparing his first home-cooked meal in his own kitchen.

“I love cooking,” he said.

Mitchell is happy to sleep in the living room because he’s already turning the bedroom into an art studio to create watercolor paintings. Three of his sketches that he plans to paint hung on a white wall in the bedroom. One of them looked down from a high-rise building at a homeless person buried in a grave.

Mitchell said he had not intentionally considered the perspective of his drawing — looking down at a homeless person.

Asked if he ever painted while on the street, Mitchell said his paints and brushes always got stolen.

He got help finding his new home through Deni Ramiro, a housing specialist with the Steadfast Housing Development Corp.

Ramiro and her colleagues are now working on finding other market-rate apartments to house at least 22 more of Oahu’s chronically homeless, and possibly more.