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A rental project for Kauai families on the state Department of Hawaiian Home Lands waitlist is in limbo as millions of dollars in tax credits it needs to move forward this summer are likely to be rejected by the state housing finance agency.

Without that funding from a state housing agency, DHHL won’t be able to complete the purchase of the 82-unit Courtyards at Waipouli apartment complex, delaying a key component of the department’s new plan to get people off the waitlist through rental housing.

But the proposed acquisition has been controversial. If DHHL takes over the apartments, an estimated 300 residents would be evicted to make way for people on the waitlist. And some beneficiaries have said they don’t want to live in rentals.

DHHL Chair Kali Watson said in a text message on Tuesday that the project is still eligible for another batch of tax credits that will be decided later this year.

But the Waipouli project received the lowest score by evaluators at the Hawaii Housing Finance and Development Corp. during this most recent round of funding. The HHFDC is requesting tax credits go to other projects instead.

Watson said that it’s important to have a range of housing options targeted at various income levels for people on the department’s waiting list that has grown to more than 29,000 applicants, many of whom have died before receiving a homelands lease.

The Waipouli complex has a mix of one-, two- and three-bedroom units. If DHHL acquires the property and makes it available for beneficiaries, rents are expected to range from as low as $554 a month to $1,667.

Rentals would be limited to families earning at or below 80% of area median income, which for a four-person household is just over $111,000 annually.

Running Out Of Time

DHHL originally intended to acquire Waipouli and turn it into kupuna housing. That plan was rejected on a 5-to-4 vote by the Hawaiian Homes Commission at its Jan. 16 meeting.

The Waipouli project came back again at a special meeting 10 days later. This time around it was pitched as a rental project. The idea is to have a beneficiary rent a unit for 15 years and then they would have the option to buy it.

After a six-and-a-half hour meeting, the proposal passed 5-to-3 after Commissioner Michael Kaleikini flipped his vote. Another commissioner who initially opposed the project was absent.

The department set aside $2.4 million to pay for pre-development costs including studies for the low-income housing tax credit application, permitting fees, legal counsel and consultant costs.

Full funding to purchase the $44 million apartment complex is contingent on receiving tax credits from the HHFDC. The release of $25 million in federal funds that DHHL has on hand is also contingent on getting HHFDC funding.

But it appears that the HHFDC is not recommending DHHL for those tax credits in this round.

The Waipouli project was the lowest ranked of the five applications for those tax credits based on their scores out of 120 points, according to HHFDC documents for its Thursday meeting. State officials are recommending that the HHFDC Board of Directors approve tax credits for three housing projects, including one DHHL project in Hanapepe. The Hanapepe project actually received the highest score.

The Waipouli project scored just three points lower than another project that is set to receive funding, the 330 Kuulei Apartments project in Kailua.

Whether the department can come up with a new plan to save the Waipouli purchase is not clear. Opportunities to receive low-income housing tax credits from HHFDC are few, and the projects set to get funding on Thursday would take up most of the available tax credits for the current fiscal year.

Time is running short. DHHL needs to pay $1 million by July 8, and exercise its option to purchase by Jan. 25. It has until April 30, 2025 to close the sale, according to a summary of the sale agreement.

Resident’s Don’t Know Where To Go

Waipouli residents are worried no matter which way the sale goes. The complex’s owner, KD Waipouli LLC, which is owned by developer Kevin Showe, has been trying to sell the apartments for about a year.

Showe did not return a message left at one of his offices in Ohio.

Civil Beat recently interviewed more than a dozen Waipouli residents. They were a mix of retirees and those employed in professional fields or in the service industry.

All of them — locals and transplants alike — said they would struggle to find another place to rent on Kauai if they are forced out of their apartments. Some already have plans to move. 

There aren’t many rentals available on Kauai, the residents said. Some have pets, shrinking their already limited options to only those that allow animals.

None of them have been told anything about the sale directly from state officials, other than a letter from DHHL outlining their rights and the government’s responsibility to help relocate them if they are evicted.

“Being vague doesn’t help anyone,” said Paul Palop, a visual effects supervisor who lives in a second-floor unit at Waipouli.

Since he moved to Kauai in January from California, the impending purchase has been top of mind for his neighbors. He described being mostly in the dark about the whole process.

“At a tenant level, it’s a huge problem,” he said, while unloading outdoor equipment from his Jeep.

Yun Park, a Waipouli resident and dentist in Lihue, pointed to the small housing market on Kauai with few rentals and home ownership out of reach for many who live on the island.

There’s no single source that keeps track of the number of available rental units on the island. A search of rentals on Craigslist returns just 56 results. If dogs or cats are allowed, that number drops to just six results. None are under $3,000 a month. Current residents said they pay between $2,400 and $2,700 at Waipouli.

Park, who moved to Kauai in 2016, said rents across the island have risen steadily since he’s been there.

He has firsthand experience with the impact rising rent can have on local businesses: two dental hygienists at his clinic left the island because of rent increases. One was a Waipouli resident, Park said.

Park believes he has the means to find another place to live and stay on Kauai if he’s forced to move from Waipouli. But he’d rather stay right where he is. He hopes DHHL builds elsewhere.

“Why doesn’t (DHHL) use the land to build what they promised?” Park said.

Do Waitlisters Want Apartments?

Kekaha resident Joseph Kali has been wondering that since he applied for homelands in 1995.

“We get plenty Hawaiian Home Lands, but nothing happening with them,” Kali said. “They just sitting there.”

For years, the department has struggled with a lack of funding and lands that would be difficult to develop.

DHHL has more than 15,000 acres in the mountains in Waimea, but most of it can’t be reached to start developing homestead lots. There’s another 1,500 acres designated for agricultural lots in a hilly area of Anahola, much of which has not been developed yet. The department has set aside $5 million to start developing the area.

The Association of Hawaiians for Homestead Lands, a group that advocates for people on the waitlist, sent a petition to DHHL in January with 130 signatures from people on the waitlist across the state, including other islands besides Kauai, who are opposed to the Waipouli project.

Those who oppose the project don’t believe that creating rentals are one of the objectives of the Hawaiian Homes Commission Act, the 1921 act of Congress that led to the creation of DHHL and granted it 200,000 acres of land.

Watson says the needs of beneficiaries have changed since that time.

“Innovation I think is important,” Watson said in a recent interview. “We are six generations past the passage of the act. The needs of our beneficiaries are very different.”

For residents who may be displaced, Watson said that federal law requires 42 months of rental assistance. He said many of the current residents are working professionals “versus the people we are dealing with who are challenged economically.”

“I don’t apologize for what we’re doing,” Watson said. “I think it’s necessary and it’s a way to address the people on our waitlist.”

The department also conducted its own survey of the more than 1,200 applicants for Kauai lots. It received about 200 responses. The results were mixed.

About 44% of respondents indicated that they were interested in accepting a “townhouse” in Kapaa, as the survey worded it. 

Nearly half said they were interested in participating in a rent with the option-to purchase program if they were income limited. But about 45% of the respondents also said they would prefer a single-family residence in Hanapepe, another site DHHL is developing, than live at Waipouli.

Kali, the Kekaha waitlister, falls under that group. He wants a single-family home with an open yard where his grandchildren could play.

He doesn’t want to live in an apartment. And he said he is willing to wait for the residential lot he applied for nearly 30 years ago.

“For me, I just wait until the right time comes,” he said.