When the Land Use Commission approved the redistricting of the land where the Kaloko Heights subdivision is now planned, it included, as its first condition, the requirement that 10 percent of the units be affordable.
That fraction was included in 2016, when the landowner sought most recently to amend the affordable housing condition. The landowner was to provide “affordable housing units equivalent to ten percent of the lots and residential units to be developed in the petition area, to residents of the state of Hawaiʻi of low- and moderate-income as determined by the [Hawaiʻi Housing Finance and Development Corporation] and County of Hawaiʻi Office of Housing and Community Development (OHCD). … This affordable housing condition shall be implemented to the satisfaction of OHCD.” Deference to the LUC condition is also found in the county’s ordinance that rezoned the land back in 1983: “the low- and moderate-income housing requirement imposed by the State Land Use Commission shall be complied with.”
Plans for Phases One and Two vary but seem to call for somewhere between 1,140 and 1,300 market-rate units.
But the plans drawn up for its affordable housing development contain just 99 affordable apartments, plus one manager’s unit. Under the LUC condition, this would limit the market-rate development to 990 units, more than 200 short of what RCFC apparently plans to build.
So how does it intend to work around this?
In documents submitted to the LUC in connection with its request for a time-extension to apply for redistricting of the Phase Two land, RCFC includes an affordable housing agreement (AHA) that it has worked out with the OHCD. According to the calculations associated with that AHA, RCFC can build up to 1,300 market-rate units.
As seen in other affordable housing agreements that Environment Hawaiʻi has reviewed over the last year, the Kaloko Heights AHA arrives at a satisfactory number of “affordable housing credits” – sufficient to allow a 1,300-unit market-rate development – by applying affordable housing credits purchased from others who have either earned them through development of low-cost housing or have acquired them by other means; by calculating credits associated with the actual number of units built; and by awarding credits for deals or agreements reached that have nothing to do with the county’s Chapter 11, which governs affordable housing.
Four of the housing credits that are included in the AHA derive from one of the fraudulent affordable housing deals that were master-minded by former county housing employee Alan Rudo and his associates. The first AHA with RCFC, dated March 30, 2015, was signed even before RCFC purchased the four credits, at $50,000 each, from the fraudulent Luna Loa Development, LLC, something that didn’t occur until April 1. That assignment of credits to RCFC was approved by county housing administrator Susan Kunz (then known as Susan Akiyama). These four credits, the AHA states, satisfy requirements for 40 units of affordable housing.
The AHA seems almost to anticipate the fraud that wasn’t discovered until seven years later. Paragraph 4 states: “The developer’s use of said housing credits is not subject to termination or revocation by reason of any default or breach by Luna Loa” of the AHA that Luna Loa itself signed two months earlier.
Eighty credits – allowing 800 market-rate units – were to be awarded apparently in return for 80 affordable units being built. Eighty is the number of units specified in a 2017 agreement between the OHCD and the Hawaiʻi Island Community Development Corporation, executed around the same time that HICDC took title to the 11-acre affordable housing parcel.
Chapter 11 of the Hawaiʻi County Code allows developers to earn housing credits when they transfer land to qualified organizations that will build the affordable units, one credit earned per unit built. In the case of units that will be rented, the rental rates must be affordable to households earning no more than 60 percent of the area median income. Although this is not stated in the AHA between HICDC and the county or that between the county and RCFC, the units in the affordable housing development will be within that limit, according to other documents, including those presented to the Hawaiʻi Housing Finance and Development Corporation.
So far, the four credits from Luna Loa plus the 80 credits from HICDC’s build come to 84.
Then the county and RCFC get creative. Although nothing like this is contemplated in Chapter 11, the parties agree that RCFC will assign 19 “additional water units” to the affordable housing site, in return for which the county “will award 19 additional credits for the benefit of the Kaloko Heights Project lands towards satisfaction of the affordable housing requirements.”
That brings the total number of credits to 113, which would be sufficient for 1,130 market-rate units.
But the agreement doesn’t stop there. Another 27 credits are to be awarded for the heck of it, apparently, giving RCFC the 130 credits it needs to cover for 1,300 market-rate units.
Paragraph 4 of the 2020 AHA states: “In recognition that the Affordable Housing Project addresses a critical housing need … upon the completion of the Affordable Housing Project by HICDC … County will award affordable housing excess credits to HICDC in accordance with [Hawaiʻi County Code] Section 11-5(c) and Section 11-15, as amended.”
Neither of those sections seems to apply. Section 11-5(c) merely sets forth the ways credits are to be earned. Paragraph 11 of that section describes the way in which credits are earned through the transfer of land. RCFC already obtained 80 credits in this fashion.
Section 11-15 describes how “excess credits” may be transferred. Under the terms of the AHA, it is unclear how RCFC would have earned any excess credits.
Yet when the AHA is held up against the standards of Chapter 11, another issue arises.
Although the LUC in 1983 set the affordable-housing quota at 10 percent of the market-rate units, the county itself has had a standard in place for more than two decades that is double that. For residential subdivisions of five or more units, developers nowadays need to obtain credits equivalent to 20 percent of the total market-rate units.
The 2017 affordable housing agreement that the county executed with HICDC acknowledges Chapter 11 as governing. “Chapter 11, Article 1 of the Hawaiʻi County Code … authorizes the county to enter into this Agreement … to perform one or any combination of the options for satisfaction of the affordable housing requirements contained in … Section 11-5, and subject to Condition ‘P’ of Ordinance 86-91, which requires the development of Affordable Housing Units” as required by the State Land Use Commission.
In any event, even if the county’s OHCD is satisfied with the creative accounting seen in RCFC’s affordable housing agreement, it remains to be seen if the Land Use Commission agrees that the affordable housing component can be discounted so heavily from the 10 percent quota it has required since 1983.
— Patricia Tummons
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