Hawai‘i County Spurned Developer’s Offer To Donate Land for 80 Affordable Units

posted in: September 2018 | 0

News flash. Hawai`i County has too much affordable housing.

That, anyway, was the position that appears to have been staked out by the county’s Office of Housing and Community Development (OHCD) during the final months of the administration of Mayor Billy Kenoi in December 2016.

Susan Akiyama, director of the OHCD, did not want to accept land from a Waikoloa developer who had proposed offering it to the county as a way to satisfy county-imposed affordable housing requirements.

As noted in an undated, anonymous memo to the files found in OHCD records, “According to Susan, county is not interested in accepting the land because we would be competing with our own Kamakoa Nui project,” referring to a large affordable housing complex undertaken by the county on the opposite side of Waikoloa village that is planned, eventually, to include 1,200 units of workforce housing. In addition, the memo notes, “there is no final FUDS clearance.” FUDS stands for “formerly used defense sites.” Although the land under discussion, part of a training range dating back to World War II, had already been swept by Army Corps of Engineers personnel for the presence of unexploded ordnance, another sweep was required before the Department of Housing and Urban Development could agree to underwrite construction of affordable housing on the site.

None of the nonprofit organizations that might otherwise be likely candidates to develop low-income housing was interested, either. The area was too distant from their services, it was too expensive to develop, or they were occupied with other projects, the memo noted.

The developer that needed to satisfy affordable-housing requirements was Waikoloa Highlands, Inc., which owned 731 acres of land just mauka of the village of Waikoloa where it has proposed developing 398 single-family house lots. Under conditions of a 2008 Land Use Commission redistricting action that  placed the land into the Rural district, and also under terms of a rezoning ordinance passed by the County Council, the owner had to come up with a means of ensuring that some fraction of the housing that would eventually be developed on its land would be within the reach of families whose incomes would otherwise disqualify them.

As to the particulars of how the county’s affordable housing requirements would be met by this developer, the LUC left that to the county, and the county, in turn, in a series of several rezoning ordinances, left it up to OHCD to see that the developer complied with Chapter 11 of the county code, which addresses affordable housing needs.

As generally understood, housing developers – whether developing completed houses or, as in this case, subdividing vacant lots – need to provide affordable units equal to 20 percent of the number of houses or lots in the total development.

But what the code actually says is that the developers need to earn “housing credits” that add up to 20 percent of the number of units or lots proposed – which in the case of Waikoloa Highlands comes to 80 credits. And there are several different ways of earning those credits.

Waikoloa Highlands, through its consultant Sidney Fuke, a former Hawai`i County Planning Department director, went with the option that allows developers to donate to the county or a nonprofit organization, such as Habitat for Humanity, for example, land on which the county or nonprofit will, in turn, build for-sale units “affordable for qualified households earning no more than 80 percent of the median” household income for the area or for-rent units affordable to households earning no more than 60 percent of the median. Under this option, “credits are earned upon the conveyance of the land: 1.0 credit per unit.”

In the deal eventually worked out, Waikoloa Highlands carved out off an 11.7-acre piece of its land, which ultimately led the OHCD to release the developer from the need to do anything further to comply with Chapter 11.

But in the Housing Office files that Environment Hawai`i was allowed to review, there is nothing that would indicate the agency did any calculations of the kind that would lead staff to conclude that the deal was worth 80 affordable housing credits.

In fact, there is no legal requirement at all that the land be used for affordable housing. Nothing in the deed passed from Waikoloa Highlands to Plumeria at Waikoloa restricts use of the parcel. Nothing in the deed conveying the land to the current owner, Pua Melia, LLC, restricts its use.

If Pua Melia develops the 11.7-acre parcel as it has proposed in preliminary submittals to the Office of Housing, the county will see its affordable-housing stock increase not by 80 units, or even half that. So far, Pua Melia has drawn up plans for several duplex and four-plex buildings with a total of 32 units. The owner of Pua Melia, Danny Julkowski, has not indicated in filings with the OHCD whether those units be sold or rented, nor has he stated what level of household income will be targeted.

So, instead of 80 affordable housing credits, the county has settled for at most 32. At worst, it gets nothing.

In the meantime, current Mayor Harry Kim is asking the state for more than $600 million to help the county recover from the effects of the recent lava eruption in the district of Puna. Among other things, his request includes $5 million for construction of 100 units of “transitional housing” and  $10 million for 100 housing units in various areas of Puna. Over and above all this are tens of millions to pay for supporting infrastructure, including sewers, wells, water lines, and roads.

Outstanding Issues

A review of all the Housing Office files made available raises more questions than it answers. Environment Hawai`i sought to raise these questions with current OHCD administrator, Neil Gyotaku. So far, he has not responded to our outreach.

  • In the “affordable housing agreement” signed by Mayor Kenoi on December 1, 2016, the Housing Office specified that the transfer was to be not to the county or to a nonprofit, but to Plumeria at Waikoloa, an LLC formed just weeks earlier. Why? Paul Sulla, the only person whose name appears on the firm’s business records, declined to provide any details. No one now at the Housing Office could answer this question either.
  • When the “affordable housing” parcel was subdivided some months later, the original 731-acre parcel was still burdened by a $1.5 million mortgage. The anonymous memo identifying “challenging issues” noted that the office only “later discovered that the parcel had [redacted] encumbered against the bulk parcel that was not released during the subdivision.” No one at either the Housing Office or at the Planning Department, which processed the subdivision request in the spring of 2017, checked to see if there was any lien on the property. As Environment Hawai`i in November 2016, there was an outstanding mortgage for $1.5 million held by 77 Holdings of Utah. That mortgage was not released until after Plumeria at Waikoloa had arranged the resale of the affordable housing parcel to the current owner, Pua Melia, for $1.5 million. Did Plumeria at Waikoloa act as an agent for Waikoloa Highlands in arranging the resale to Pua Melia? That is certainly suggested by the evidence.
  • The affordable housing agreement between Waikoloa Highlands and the Office of Housing specified that it was to “run with the land and be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns.” To ensure that, the agreement was to be filed with the state Bureau of Conveyances. At the time of this writing, more than 18 months after the agreement was signed, it still has not been recorded.
  • In the deed transferring the affordable housing parcel to Plumeria at Waikoloa, there is no requirement that it be used for that purpose. Nor is there any such requirement in the deed transferring the same parcel to Pua Melia, the present owner.
  • The number of affordable housing credits required for a subdivision of 398 lots is, per Chapter 11 of the county code, 80. Julkowski, the principal of Pua Melia, has indicated he will be building – if he can arrange for the needed approvals (a big if) – no more than 32 affordable units. He has not indicated whether they are targeted to the lower or higher end of the affordable spectrum nor whether they will be offered for sale or for rent. He also has not indicated what size the units will be – whether for large or small families.

— Patricia Tummons

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