Posted on: Tuesday, November 27, 2001

Renters get feel of ownership in public housing project

By Mike Leidemann
Advertiser Staff Writer

Curtis and Alma Ruth can't believe their luck.

A brand new four-bedroom home with a big fenced yard. Plenty of room for their five kids to live, study and play. A chance to grow in a safe environment along with the developing Kapolei community.

A year ago, it seemed impossible.

Living in a Palolo public housing project and getting by on Curtis' salary as a delivery driver for Office Depot, the family could only dream about owning a home like this. Alma, who home schools all their children, had been on the Department of Hawaiian Home Land waiting list for decades, ever since she turned 18. They saved a little every month but never made much progress toward their goal of getting enough for a down payment on a place of their own.

"We tried everything, but having a big family doesn't go with buying a home," Curtis Ruth said.

Then they heard about Kapolei Ho'olimalima, a first of its kind public-private rent-to-own program that gives Hawaiians a real shot at becoming homeowners.

"It's a great opportunity," he said. "It's the answer to our prayers really."

The project is the brainchild Mark Development, a Kaimuki company that has built more than 1,700 low-cost homes in the state in the last decade.

In this case, the company parlayed a combination of a $1-a-year lease of Hawaiian Homes land, federal tax credits, rental subsidies and private lending into a community of 70 new homes for Hawaiians next to the privately developed 'Iwalani community.

Under a complicated system that becomes simplicity itself, eligible families moving into the home pay rents between $705 and $940 for 15 years, then have the opportunity to purchase the house for about $56,000. That translates to an estimated monthly mortgage of between $573 and $672.

"The financing was five years in the making," said Craig Watase, Mark Development's vice president for development. "The idea of combining different types of subsidies was deathly risky, but something we felt was important to try."

One financing key was tax credits available through the Internal Revenue Service tax codes. The credits are available to all states, which can then sell them to investors. The sale of tax credits helped Mark Development raise $6.85 million toward the project. That meant less than half of the development's $12 million cost had to be raised through conventional mortgage loans.

"The tax credits make it possible to keep our mortgage low, which in turn makes it possible to keep rents down," Watase said.

That, in turn, makes it possible for people like Curtis and Alma Ruth to get their first realistic chance of owning their own home. Even though they're still renting, they know they have a proprietary interest in the home.

"We look at every payment we make as getting us a step closer to our ultimate goal of owning the home," Alma said.

Visitors would never guess the Ho'olimalima homes are "affordable" housing.

They are designed and built like other single-family home projects in the Kapolei neighborhood and include many extras, including steel framing, low maintenance vinyl siding, a concrete walkway around the home, heavy-duty carpeting, solar water heating, full landscaping (including a sprinkler system) and a stake in the Kapolei community association.

"A lot of Hawaiians couldn't even dream about owning a house like this," Watase said. "Then we explain how that if they rent for us for 15 years, they'll almost certainly be able to buy it."

Part of the developer's philosophy is helping the renters prepare for ownership. While they live in the home they eventually will own, they learn about such necessities as insurance, maintenance and paying bills on time, Watase said.

"When they know they'll own it some day, the beauty is that they'll take care of it. We make sure they know what they are getting here. They know it's a once in a lifetime deal. There's no way they're going to let something like that slip away," said Mark Watase, president of the company.

More than 1,000 people applied for one of the homes and the company prequalified more than 700 buyers. All of the 70 homes have been allotted and should be filled by the end of the year, Craig Watase said.

Chris and Alma Ruth know they were one of the lucky couples to land in the project.

"Out here at Kapolei, everything's definitely different," Alma said. "It's a great community, a safe place, great environment for the kids. I still get butterflies thinking about it."