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The Honolulu Advertiser
Posted on: Wednesday, July 26, 2006

Steps needed to keep affordable housing

Here's some perspective on the urgency of the affordable housing situation in Honolulu:

In the next 10 years, more than 1,900 affordable units financed by the U.S. Department of Housing and Urban Development will disappear, according to the latest inventory by local HUD analysts. Decades-old agreements to provide affordable housing in exchange for low-cost loans are coming to an end, and building owners will be free to do what they choose with these units.

At this point, neither HUD nor the state has a real plan to extend the affordability of existing units before it's too late.

That underscores the importance of the fate of Kukui Gardens, the largest chunk of the expiring affordable units at risk — with more than 850 rentals scheduled to go away by May 2011.

This week, the Kukui Gardens Corp., the entity set up by the late Clarence T.C. Ching as the nonprofit owner of the development, took a major step toward its desire to sell the project to a for-profit developer, Carmel Partners, for a reported $130 million.

The announced sale caused ripples of concern from here to Washington. Local affordable housing advocates hoped that HUD would block the sale and redirect Kukui Garden's owner to deal with a nonprofit dedicated to the preservation of the affordable units beyond 2011.

But in a surprise move, the corporation invoked a rule that sidestepped the need for HUD approval by simply giving notice that it intends to pay off its low-interest 40-year HUD note.

The legal maneuver is good for Kukui Garden's owner, who is now free to sell to whomever it wants without fear of HUD interference.

But it's bad for the long-term preservation of the affordable Kukui units.

HUD is weighing whether to reject the prepay notice so it can control the sale. Considering the housing crisis, that may be warranted. It also may set an unwanted precedent or open up a long and pointless legal battle.

The state also is prepared to step in after a new law was signed last month specifically authorizing the state to extend the life of Kukui's affordability or invoke eminent domain. That should be a last resort. Condemning Kukui Gardens for a takeover by the state would require public financing that would be costly to taxpayers.

With at least 1,000 more units expiring within the next decade, the state must begin now to look at ways to preserve affordability before we are plunged even deeper into crisis. That should include timely negotiations with owners to buy properties or extend affordability agreements. These talks must happen soon — there's no time to waste.