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The Department of Hawaiian Home Lands is planning to develop thousands of lots in the coming years, a dramatic increase for an agency that has historically fallen short of its federal mandate to put Native Hawaiians back on their lands.

But the department’s immediate plans hinge on its ability to raise hundreds of millions of dollars in funding quickly. It received $600 million from the Legislature in 2022 through Act 279, known as the Waitlist Reduction Act. The department planned to use that money to develop some 3,100 lots.

But those plans have changed under DHHL Chair Kali Watson. The department now anticipates needing an additional $600 million — at least — to carry out its new plans.

Watson detailed changes to the department’s spending plans in a wide-ranging interview with Civil Beat last week. 

The department wants to offer a variety of housing options, including new rent-to-own projects in addition to its traditional lot offerings. There’s also plans to pursue a mix of funding sources from the Hawaii Housing Finance and Development Corp., something developers like Watson have been doing for years. DHHL is now expected to provide more than 6,000 lots in the coming years.

Watson also wants to bolster services available to homesteaders as well as increase the availability of areas that could be used for commercial and residential developments.

“It’s across the board improving the program’s operations and results,” Watson said. “The idea is to not only get people off the waitlist, but to create jobs, business opportunities, services.”

Looking To Other Lands

Some projects that were set to yield more than 800 lots are now being delayed because of environmental issues where the lands are situated.

In 2021, U.S. Department of the Interior officials heralded the transfer of 80 acres of land in Ewa Beach as an important step to resolving DHHL’s land claims against the federal government. DHHL planned to eventually develop between 400 and 600 lots for homesteading.

But it turns out most of that land at the former Pacific Tsunami Warning Center can’t be used for housing, according to a recent environmental assessment that DHHL commissioned.

It’s a problem that has plagued DHHL since its inception. A majority of the lands in DHHL’s inventory aren’t suitable for homes or are too far away from infrastructure.

Watson said just one-third of the 80 acres of land can actually be used for housing. The site is about 200 yards from the beach. A 3-foot rise in sea level anticipated by 2050 would inundate part of the property, according to by the University of Hawaii.

For the site to be usable, the department needs to access it from the mauka end of the property near North Road, which is now covered in heavy brush. Watson described developing the area as a long-term project.

Another project being put on hold is in Nanakuli near another DHHL-owned property called Ulu Ke Kukui. The site, which was expected to house upwards of 200 lots, would need to be elevated so that gravity lines can carry sewage down into the system at street level.

Other projects being deferred include the second phase of the Honomu Subsistence Ag lots on the Big Island. The 40-lot homestead community is still being designed.

A 200-unit development in the Laiopua Villages on the west side of the Big Island was also deferred.

Agricultural subdivisions on Molokai and Lanai were also set to be deferred until the department acquires more funding, but those were added back into DHHL’s revised spending plans after pushback from those islands’ commissioners earlier this year.

Meanwhile, the department has been buying up land across the state.

DHHL plans to spend more than $20 million to acquire nearly 300 acres of land in Lihue owned by Grove Farm, where the department could eventually develop 1,200 lots.

On Oahu, DHHL has plans to spend $2.5 million to acquire and develop 25 townhouse units on a lot near the post office in Hawaii Kai. It is also spending $24 million to acquire land in Waialua.

Honolulu City Council members also plan to introduce a resolution on Tuesday that will transfer a 10-acre lot in Kailua to DHHL.

Kauai commissioner Dennis Neves, who was part of a group that wrote the original Act 279 spending plan, feels that the revised plan to acquire more land will delay development on lands DHHL already owns. The original plan approved in 2022 generally focused on properties that were ready for construction.

“This now delays the process and is based on future funding,” Neves said of the land acquisitions. “So, here we are back to square one again, kicking the can down the road.”

Diversified Funding

All together, DHHL’s new land acquisitions and projects it has started could eventually open the door to developing more than 6,000 lots and housing units. But those ambitious plans all hinge on getting more money to make them happen. Large appropriations from the Legislature in the future are uncertain.

The department in new funding for next fiscal year. Gov. Josh Green’s administration and the Legislature .

“There are going to be times when the state is flush with cash … but there will be times when the state resources go down,” House Finance Chair Kyle Yamashita told Watson at a budget hearing in January. 

Yamashita didn’t respond to an inquiry on Friday regarding DHHL funding. But during the budget hearing earlier this year, he suggested that the state should eventually take a half-percent general excise tax surcharge counties are allowed to levy and use that for state programs, including DHHL.

Sen. Kurt Fevella, the vice chair of the Senate Hawaiian Affairs Committee, was doubtful that the department would get the same level of financial support anytime soon.

“It was hard enough getting $600 million the first time,” he said.

Without consistently high funding from the Legislature, Watson said the department needs to look to other state and federal sources.

Watson wants to continue tapping into funds from the Native American Housing Assistance and Self-Determination Act. The department has been awarded about $20 million a year from that federal program.

Watson said there are other federal programs the department can take advantage of to finance its projects. He pointed to DHHL’s 270-unit condominium project on Isenberg Street in Moiliili.

Developer Stanford Carr used a mix of federal and state loans and tax credits to finance the project, which is anticipated to be DHHL’s first in the urban core. It’s expected to cost more than $150 million to develop.

Funding sources included the state’s Rental Housing Revolving Fund, which the Legislature has added hundreds of millions of dollars to in recent years, as well as a 40-year fixed-rate loan from the U.S. Department of Housing and Urban Development. The project is also using low-income housing tax credits approved by the HHFDC. 

“It’s a complicated set of financing tools,” Carr said. “But it’s necessary to develop these types of affordable housing.”

Watson plans to use a mix of Act 279 funds and the low-income housing tax credits on five projects spread across Hawaii island, Maui, Oahu and Kauai. He said it is now a requirement with DHHL’s developers to pursue those tax credits for certain large projects.

Currently, the department has applied for those credits for two of its projects, the Waipouli Courtyards and Hanapepe residence lots, both on Kauai.

The total pot of money for the various types of those housing tax credits this year is about $14 million. But more than two dozen projects, including DHHL’s, are requesting a combined total of more than $86 million in tax credits.

Watson said the department plans to spread its applications out, understanding that there’s a lot of competition for those tax credits and that Hawaii has a small pot of money to draw from.

He said it could take several tries, which may push the funding for those projects down the road. It takes perseverance, Watson said. He recalled a DHHL project he worked on as a developer and applied three times for the tax credits before getting them.

“There are many times where you don’t get it on the first application,” Watson said. “You apply again and revise your approach.”

New Approach Criticized

Meanwhile, the revised plans have gotten some pushback from homesteaders and waitlist advocates who feel the new direction deviates too much from the original plans created two years ago under former chairman William Aila. Many feel that offering rentals instead of focusing the department’s resources on building infrastructure for lots distracts from the purpose of the Hawaiian Homes Commission Act.

Kainoa Macdonald, secretary for the waitlist advocacy group the Association of Hawaiians for Homestead Lands, said the proposed rental programs have created concerns among those on the waitlist.

“Instead of addressing the Hawaiian Homes Commission Act in its simplest form — of giving our people access to live on our land, farm on our land — those things are now being replaced with ‘Lets just put them in apartment-style housing,’” she said.

There’s also been growing opposition to the department’s Waipouli condominium project. The department plans on using $25 million in federal funds to buy the 82-unit complex.

The new Act 279 plan also anticipates developing some rental housing units in new developments in Hanapepe on Kauai and in Kona on Hawaii island. A new subdivision in Kapolei is anticipated to be an entirely rent-to-own project.

The department’s first rental project was also in Kapolei. Watson said 71 of the 72 families living in Hoolimalima, the first rent-to-own project, were able to purchase their homes.

Sanoe Marfil, a recently appointed DHHL commissioner, looks forward to the various lot offerings the department has.

“I think when we have an opportunity to put Hawaiians in homes, everything is exciting,” Marfil said, adding that the new multi-pronged approach could benefit families who “need a different, outside-of-the-box opportunity to get into a home.”

Carr, the developer, believes its wise for the department to leverage its funds in whatever way it can. He said DHHL could stretch its money by buying more land and entering into agreements with developers to build.

Trying to pay for everything with just the cash DHHL has on hand, Carr said, “is not smart business.”