A second lawsuit has been filed to ensure the preservation of a senior low-rent housing project in Kahuku, but this time the defendant is the U.S. Department of Housing and Urban Development.

The Legal Aid Society of Hawaii and the nonprofit Housing Preservation Project are challenging HUD's action to allow Kahuku Elderly Housing operators, the Kahuku Housing Foundation Inc., to pre-pay its mortgages, thereby releasing the property from HUD restrictions. The lawsuit was filed last week in U.S. District Court and also names the foundation as a defendant.

The lawsuit claims that leaving the program violates a federal law requiring the foundation to stay with HUD for an additional five years for obtaining a rent increase. It got that increase last year, the suit says.

Earlier this month, Legal Aid filed a similar action in state Circuit Court against Kahuku Housing Foundation Inc. for opting out of the HUD rent subsidy program known as Project Base Section 8.

Gavin Thornton, attorney for residents at Kahuku Elderly Housing, said the second suit was necessary because he believes that HUD and the foundation's actions are illegal and could cause dozens of seniors to lose their homes. He's asking the courts to stop the foundation from leaving the HUD programs and to limit rent increases.

Kahuku Elderly Housing has 64 one-bedroom units where the majority of occupants pay $150 to $500 a month, said Tim Shea, a resident there. Most of the residents have lived there for more than 10 years.

The foundation has argued that, upon release from the HUD restrictions, it will join a city rent subsidy voucher program so seniors don't have to worry, but that is problematic, Thornton said.

The units were inspected recently to see if they qualify for the city voucher system and the homes of eight of Thornton's clients failed to pass safety and health inspections that are necessary to enter the program, he said, adding that it was not much of a leap to believe the other homes would also fail.

Letters from a city inspector said if repairs weren't made within a specified time, then the units would not be approved for rental Section 8 tenants, Thornton said. The letters listed several problems, but the worst was rotten exterior siding that could be costly and take time to correct, he said.

"There's a real risk that the people living there either won't be eligible for the voucher or won't be able to use them at Kahuku Elderly and will have to move," Thornton said.

HUD's San Francisco office said it couldn't comment on the lawsuit. HUD's Honolulu office confirmed that the foundation prepaid its loan and requested to leave the HUD Section 8 program by April 30.

Junior Primacio, a board member for Kahuku Housing Foundation, said he wasn't aware of the second lawsuit and hadn't heard anything about the city's inspection.

Primacio said the foundation would "cope" with any necessary corrections required by the city.

"All this time we thought all our buildings were up to par because we are inspected by HUD and periodically we do our own inspections internally," Primacio said.

Primacio said he couldn't comment further and referred questions to the foundation's attorney, William McCorriston.

McCorriston said he thinks the seniors are wrong about the law and that they will not be harmed by his client's action.

Both sides will meet in federal court March 31, but McCorriston said both sides may meet to work out a settlement.

"The lawyers have discussed trying to meet together and tying to resolve this in a mutually satisfactory way," he said. "Whether or not those talks will bear fruit, I don't know."