Affordable Houses Divided: Settlement Allocates Credit for Units Nansay Built

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A dispute over how to allocate affordable housing credits accumulated by Nansay when it owned the Puako was settled only last year after years of litigation involving Nansay, Bridge `Aina Le`a, and the County of Hawai`i.

In the early 1990s, Nansay Hawai`i received county zoning approvals for developments not only at Puako, but also an area along the Kona coast just south of Keahole, called Kohanaiki. Conditions of both rezonings were that Nansay would build housing that would be affordable to people earning some percentage of the median income of Hawai`i County, as determined by the county’s Office of Housing and Community Development. Separately, the Land Use Commission imposed another condition on Nansay in relation to the Puako development, calling for 60 percent of the housing units built there to be “affordable.”

Over the next few years, Nansay built 147 units, most of them low-income rental apartments in Waikoloa.Village. By 1998, Nansay was in default to its primary Japanese lender, Mitsui, and its projects at both Puako and Kohanaiki were moribund. Mitsui sold the note to Kennedy-Wilson International. Later that year, Kennedy Wilson foreclosed on the mortgage, acquiring both the Kohanaiki and Puako parcels. In 1999, it sold the Puako land to Bridge Capital but retained ownership of Kohanaiki.

When Bridge began moving forward with its plans to develop the Puako land, it sought to have the affordable housing units built by Nansay credited against its obligations under the county rezoning ordinance. Kennedy-Wilson, on the other hand, claimed that it had not transferred those credits to Bridge when it conveyed title to the Puako land. Therefore, it argued, all the affordable housing credits accumulated by Nansay should be available to KW, to count against its obligations on the Kohanaiki land.

So, in 2005, Bridge sued KW and Nansay, now known as NHICORAM, seeking rights to claim all 147 affordable housing units.

In 2007, the litigation was settled, with a non-financial agreement (public) and a financial agreement (sealed). According to the public agreement, Nansay agrees to assign the housing credits it earned during the 1990s to Kennedy-Wilson. In turn, Kennedy-Wilson agrees to use those credits to satisfy the requirement that it build 100 affordable units for 500 planned market units at Kohanaiki.

Kennedy-Wilson assigns the balance of 47 units to Bridge, with the county agreeing that those units may be used against the county-imposed affordable housing requirement at Puako. According to the settlement, Bridge can apply those credits “towards satisfying future affordable housing requirements for the development of Puako … but not towards satisfying Bridge’s existing affordable housing obligation at Puako to construct 385 affordable housing” units pursuant to the LUC decision of 2005.

The state LUC affordable-housing requirement was lowered to 20 percent in 2005. Bridge `Aina Le`a has said it will satisfy that through onsite construction of 385 units meeting the affordable criteria.

— Patricia Tummons

Volume 18, Number 9 March 2008

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