Worried Kukui Gardens tenants gathered yesterday to pray for a breakthrough in the sale of state tax credits — needed to keep the property affordable — and to plead with lawmakers, banks and neighbors for help.

"We're not in a very good spot right now," Carol Anzai, president of the Kukui Gardens Residents Association, said before a prayer vigil yesterday afternoon outside the 857-unit, low-income development on the edge of Chinatown. "We still need to be on our toes. Kukui Gardens is still here. We still have to save our homes."

Kukui Gardens tenants have been in limbo for three years, ever since the former owner of the project offered to sell the property for upscale development.

After months of rallying to save affordable units, a deal was reached in late 2007, when the buyer of Kukui Gardens — San Francisco-based Carmel Partners — agreed to sell half of the project for $72 million to keep it affordable.

The affordable portion is on 11 acres and includes 400 units.

Its buyers also plan to build an additional 400 affordable units.

The state helped patch together funding to keep half of Kukui Gardens affordable by offering $64 million in state bonds and $5 million in state tax credits. The remaining $21 million was to be raised with federal tax credits.

But that plan is in jeopardy because of the nation's economic downturn.

$26M AT STAKE

Of greatest concern right now is $5 million in state tax credits, which Kukui developers EAH Housing and Devine & Gong of San Francisco are having trouble selling. The preservation of the existing low-income units and the construction of new ones is, for now, — stalled until the credits sell.

That's because to tap into about $21 million in federal tax credits, which would sell relatively easily, the developers must first sell the state tax credits.

The federal government and states issue tax credits as a way to spur development of affordable housing. The credits can then be sold to investors to help fund construction and renovation costs.

The floundering markets, though, have made state tax credits much less desirable and many are not selling.

For Kukui Gardens residents, the details of the sale are perplexing.

Just a few months ago, they say, they thought their homes were safe.

Now, they're being told the deal is no longer a sure thing.

"We've got to keep our homes," said Chun Yuk Don, 84, who has lived at Kukui Gardens for 38 years. His friend, 82-year-old Hong Ming Yeung, added that he would have no place to stay if Kukui Gardens is no longer affordable.

"I'll go to 'A'ala Park," he said.

Affordable-housing advocates and members of Faith Action for Community Equity, which has been instrumental in saving Kukui Gardens, say they are worried about just what happens if the state tax credits can't be sold. One possibility for offsetting the loss of $26 million in tax credits, they say, is raising rents.

"We're reaching out to everybody" for help, said the Rev. Bob Nakata of FACE.

APPEAL TO BANKS

At yesterday's prayer vigil, housing advocates and Kukui Gardens tenants called on banks to buy some or all of the $5 million in state tax credits. Anzai said negotiations with local banks are ongoing, and appear somewhat promising.

Many yesterday also pledged to keep up the fight until Kukui Gardens is saved.

"We will be here until this project is done," said the Rev. Mike Young.

Alan Mark, state president of FACE, added that it will take the whole community rallying — again — to make sure Kukui Gardens doesn't become another victim of the bad economy.

"As we gather here, we are mindful," Mark told attendees, "we can not only make a difference, we can be the difference."