Uncertainty remains over demand for tower rentals for Native Hawaiians

In about two years, a new high-rise building in Honolulu will become the first apartment building to serve beneficiaries of the Hawaii State Department of Lands, and that controversial question will be answered.

The question is whether enough beneficiaries of DHHL, the agency created to return Native Hawaiians to ancestral lands through residential, agricultural or pastoral leases, will move into the apartment tower.

Stanford Carr Development, the local firm developing the 23-story, 278-unit Hale Moiliili project in downtown Oahu, firmly believes there will be more than enough demand for the project, which includes studios and three-bedroom apartments where monthly rents are estimated to range from 675 to $3,461 and will be reserved for very low and moderate income households.

The firm also believes that Hale Moiliili could become a model for additional similar projects on DHHL land, which is well suited for multi-family rental housing.

But earlier this year, the federal Department of Housing and Urban Development, which is insuring a $59 million loan that is helping finance the $154 million tower, was very concerned that some apartments would remain empty when Hale Moiliili opened.

To mitigate this perceived risk, HUD has insisted on making units available to nonbeneficiaries if demand from beneficiaries declines.

What was described as a condition of HUD funding was presented to the Hawaii Housing Commission in March, sparking heated debate.

“We haven’t sailed in these waters before,” Kalani Fronda, DHHL special projects representative, told the commission, describing the first-of-its-kind project. “Multi-apartment (housing) is a different language for us. We are very maa (accustomed) to moving forward in single-family (home) development.”

Unexpected condition

At the meeting, commissioners were asked to approve a 65-year ground lease under which the developer would build, own and operate the tower on DHHL-owned property once occupied by the Bowl-O-Drome stadium.

The information provided to commissioners made no mention of the broader tenant rights sought by HUD, but Commissioner Dennis Neves noted that written meeting materials described the project’s tenant profile as “primarily” Native Hawaiian beneficiaries.

“What does it mean?” – asked Nevis.

Deputy State Attorney General Alana Bryant explained that the commission must decide whether the Hale Moiliili apartments can be rented to non-beneficiaries if there is not enough demand from the beneficiaries. This reserve right could go first to Hawaiians who don’t meet the 50% blood minimum for DHHL, and then to the general public, she said.

Randy Avo, then-commissioner, said he was not inclined to vote for that option.

“This concerns me because it opens the door to non-beneficiary uses,” Avo said. “I can’t imagine that will happen given the current situation with our waiting lists.”

There are approximately 28,700 beneficiaries on the DHHL waitlist seeking homesteads, including approximately 11,500 seeking rental homes on Oahu. Many waited for decades, and more than 2,000 applicants died while waiting.

Unique project

Hale Moiliili tenants will not be removed from the estate’s waiting list if they move into a rental tower. Partly because of this, DHHL does not consider the broader rights of tower tenants to be a violation of the Federal Hawaiian Housing Commission Act, which governs DHHL and reserves homestead leases for beneficiaries, who are allowed to transfer the lease for $1 per year to certain family members. who make up at least 25% of Hawaiians.

DHHL also considers Hale Moiliili, which the agency does not finance, to be more similar to one of its commercial real estate leases, where the agency leases its land to private developers for retail, industrial or other commercial purposes that generate income for the agency to support homestead development. .

However, Hale Moilili the developer pays $1 per year to rent the land.

Neves said at the March meeting that he did not intend to approve a broader right for tenants to participate in the tower project.

“Our responsibility is to ensure that trust is maintained,” he said. “Our fiduciary responsibility is to provide homes for the ‘little Native Hawaiians’ (at least 50% of Hawaiians) and I am not in favor of going beyond that.”

Kaloa Robinson, project manager for Stanford Carr Development, told commissioners the company believes expanding eligibility is unnecessary. But Robinson also said the commission’s decision could determine whether the tower gets built because HUD is unwilling to support the loan, a critical part of the financing, without adequate collateral.

Robinson explained that HUD believes Stanford Carr Development faces too much risk of defaulting on its loan without a broader pool of potential tenants.

“HUD is scared,” he said, also acknowledging that 10 empty units for such an affordable housing project is the difference between default and no default. “There are very few vacancies.”

DHHL director Kali Watson, who also chairs the commission, called for approval of broader eligibility.

Commissioner Michael Kaleikini said providing affordable rental housing to at least some beneficiaries at the old Bowl O’Drome site would be better than nothing, especially since the property has been owned by DHHL since 1995 and has not been put to good use. since the bowling alley ceased operations in 2004.

Commissioners voted 6-3 to approve broader eligibility.

HUD trigger

However, some time after the March meeting, HUD abandoned the provision it had sought. Agency officials would not say publicly when or why the changes were made.

In a statement, HUD said: “We have worked closely with DHHL to ensure that the property will provide affordable housing to DHHL beneficiaries in accordance with applicable laws. FHA (part of HUD) insures the mortgage with the requirement that residence in (Hale Moiliili) be limited to (Native) Hawaiian beneficiaries, as determined by DHHL, in accordance with the laws of the State of Hawaii.”

The federal Hawaii Housing Commission Act also regulates DHHL and is overseen by the U.S. Department of the Interior.

Kaiini Kaloi, director of the Department of the Interior’s Office of Native Hawaiian Relations, said in an interview that DHHL’s provision of rental housing to non-beneficiaries falls within the scope of a breach of trust under federal law.

“DOI has consistently maintained that housing on Hawaiian lands is for the benefit of beneficiaries and no one else,” he said. “Our position is very clear.”

Some members of the Hawaii Housing Commission are unsure whether enough beneficiaries will move into Hale Moiliili when it opens. The eligible pool will be smaller than the total number on the waitlist because households will need to meet income restrictions to live in the tower.

Of the 278 units, 183 will be reserved for beneficiary families earning up to 60% of the Oahu median income. That equates to $58,500 for a single person, $66,840 for a couple and $83,250 for a family of four.

Another 14 units are for households earning up to 30% of the median income, as well as 53 units with an 80% cap and 28 units below the median income.

Hale Moiliili must reach out to beneficiaries who cannot rent a homestead because they cannot afford to buy or build a house. The project may also appeal to older beneficiaries who do not want to take on the responsibility of home ownership.

About 20 years ago, DHHL had serious problems filling a complex of rental townhomes designed for seniors earning between 30% and 100% of the median income. This 86-unit project in Waimanalo, Kulanakauhala Maluhia O Na Kupuna, was 56% occupied about a year after opening and took more than two years to reach 90% occupancy.

At the time, DHHL attributed the results to paperwork problems and lack of publicity.

Stanford Carr Development plans to ramp up leasing efforts at Hale Moiliili and says strong demand for affordable rentals among beneficiaries will make the tower a success.

Watson also recently expressed his strong belief that there will be more than enough demand from beneficiaries. “We do not anticipate any problems filling apartments,” he said in an email.

Construction is expected to begin in December and be completed in approximately two years.