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Construction , Government , Real Estate – September 4, 2019

Fixing the Backlog of Native Hawaiians Waiting for Homesteads

The Ka‘ulu‘okaha‘i homestead community is located in Kapolei | Photo: Courtesy of DHHL

28,000 Native Hawaiians are on the home lands waiting list. Getting more of them into homes or farms will take partnerships, collaborations and a willingness to try different things. Here are some ideas. 

bout 28,500 adults who are at least 50% Native Hawaiian are waiting for residential, farming or ranching homesteads from the state Department of Hawaiian Home Lands.

This backlog exacerbates Hawai‘i’s overall housing shortage – an estimated 64,700 to 66,000 more units are needed to meet overall demand by 2025 – and contributes to a homeless crisis that disproportionately affects Native Hawaiians.

Developer Peter Savio points out that building more homes on Hawaiian home lands will help reduce Hawai‘i’s affordable housing crisis. He explains the domino effect as each Hawaiian moves to a homestead home: “If they own a home, it becomes a rental unit. If they were renting, it opens up a rental unit. We look upon it as ‘Well, we’re going to help the Hawaiian community.’ The reality is if we help the Hawaiian community with Hawaiian homes, we help everybody in Hawai‘i.”

The Department of Hawaiian Home Lands plans to develop 1,300 new lots, most of them residential, from fiscal year 2020 through 2024 – assuming funding by the state Legislature is available. At that rate, it would take 110 years to serve everyone on the waiting list – and that’s if no one else applies.

DHHL will be seeking over $300 million to deliver all 1,300 planned lots on schedule. Funding, resources and limited land are the biggest challenges the department faces in getting people onto homesteads, says Cedric Duarte, DHHL’s information and community relations officer. Those obstacles have existed for decades. DHHL has developed over 2,000 lots over the past 20 years.

Today, the question is how to open more homesteads and at a faster pace than the department has been doing. There’s no single solution, say many people involved in housing, but what is required is a wider variety of homes and partnerships with willing outside organizations.

 

At the projected rate of getting Hawaiians onto homestead lots, it would take 110 years to serve everyone on the waiting list as long as no one else applied.

 

Diversification Needed

Hawaiian home lands consist of about 203,000 acres of former crown lands spread across six islands that were put into a trust with the enactment of the federal Hawaiian Homes Commission Act of 1920. DHHL, headed by the Hawaiian Homes Commission, manages these lands. 

Individuals with at least 50% Hawaiian ancestry qualify for land awards – for residing, farming or ranching – in which they receive 99-year leases for $1 a year, with the option to extend the leases for another 100 years. There were 9,890 homestead leases at the end of May; they can be passed from generation to generation until the leases expire. About 8,300 of those leases are residential.

Residential awards include:

  • Turnkey, which includes a pre-built single-family home;
  • Vacant lot, which includes infrastructure developed by DHHL but no dwelling;
  • Self-help, in which lessees build their homes with assistance from nonprofit partners like Habitat for Humanity;
  • Rent with option to purchase; and
  • Undivided interest award, which is provided to a group of individuals for a parcel of land that is not yet subdivided. It gives beneficiaries time to prepare for homeownership while their homes are built. 

DHHL says developing homestead lots involves understanding what applicants want, identifying trust lands that meet those needs, securing the necessary funding to develop the land and preparing the lots with infrastructure.

Oswald “Oz” Stender, a former trustee for Kamehameha Schools/Bishop Estate and the Office of Hawaiian Affairs, says DHHL must develop housing products that meet the needs and resources of beneficiaries. For instance, he says, many Native Hawaiians can’t afford the $200,000 and $300,000 homes the department has built in Kapolei.

He and Savio are part of the Build More Hawaiian Homes Working Group, which was founded by state Rep. Gene Ward to look into the issues surrounding DHHL’s slow progress and to find solutions.

“What we’ve got is a lack of product diversification,” Ward says. “There should be rentals, there should be senior housing, there should be rent to own, there should be condo high-rises.”

The Department of Hawaiian Home Lands plans to develop 1,300 new lots through fiscal year 2020. Here are the number of lots by island. Source: DHHL

Jeff Gilbreath is executive director of Hawaiian Community Assets, a nonprofit housing counseling and lending agency approved by the U.S. Department of Housing and Urban Development. He says homestead families, on average, are only able to qualify for mortgage loans of $181,000 – which is less than the price of many of DHHL’s turnkey homes.

“Even if they have their credit in check, even if they have their income in place and their debt-to-income ratio in a good spot and some savings, they still can’t qualify for what is being built on Hawaiian home land. So the biggest barrier, honestly, is we need to be building more affordable homes to meet the qualifications of families on the Hawaiian homes waitlist. If we do that … I think we can see a significant number of folks get into housing,” he says.

A May 2017 HUD report titled “Housing Needs of Native Hawaiians” (tinyurl.com/NHhousing) reported that thousands of beneficiaries on the residential wait list have been offered a land lease during the past 20 years, but many have not accepted it. There are a variety of reasons: beneficiaries might not be interested in the available lot, want to live in a different area, live on the Mainland and aren’t ready to return to Hawai‘i, consider themselves too old to assume a mortgage, or are unable to secure the necessary mortgage loan for the home on the property.

Turnkey awards have been the department’s primary method of issuing lots, says William J. Ailā Jr., director of DHHL and chair of the Hawaiian Homes Commission. The “Housing Needs of Native Hawaiians” report found that “DHHL’s shift to more expensive housing development may have exacerbated the problem of people staying on the waiting list for extended periods of time.”

A turnkey home in the Kānehili subdivision in Kapolei | Photos: Courtesy of DHHL

Turnkey awards are the most sought-after housing product among residential applicants, according to DHHL’s 2014 Beneficiaries Study Applicant Report. However, it also found that “a significant challenge for applicants who wish to purchase homes appears to be their lack of savings. The percentage of current DHHL applicants who stated that they had no money in savings to put toward a down payment on a home jumped 10 percentage points, from 11 percent in 2003 and 2008 to 21 percent in 2014.”

Ailā says vacant lots – the department has been opening more of them over the past several years – provide lessees with flexibility to build houses that meet their needs and they can afford.

A lessee who hires his own general contractor and can do some work himself might be able to build a three-bedroom, two-bathroom house for $200,000, he says. A similar home developed by Gentry in the Kānehili subdivision in Kapolei will sell for $343,000.

“If you’ve been sitting on the waitlist for … 20 years, and you have a job that’s just above minimum wage, you’re never going to qualify for that turnkey, right? But you might be able to qualify now under a vacant lot and build a tiny home,” Ailā says. “So we’re providing additional opportunities for people who have been on the waitlist but not been able to qualify financially.” Duarte says it’s too early to say how many of the 1,300 planned lots will be vacant lot awards.

The department is also exploring kuleana homestead awards, in which beneficiaries would receive leases for unimproved lands that are accessible via rudimentary roads. Some awards were made in Kahikinui on Maui in 1999; lessees there agreed to live off-grid and maintain the area.

A Kuleana homestead in Kahikinui, Maui

DHHL has started offering subsistence agricultural lot awards, which allow lessees to farm on 3 acres or less of land. The first lots will be in Honomū on Hawai‘i Island. They’ll be ready to award in the next couple of years.

Duarte says diversification of awards is a fairly new concept for the department, which is crafting administrative rules that will guide it in exploring multifamily complexes, rentals, kupuna housing and supplemental dwelling units. It can take anywhere from 18 to 24 months for DHHL to create administrative rules. The department needs to gain approval from the Hawaiian Homes Commission and consult with beneficiaries before it can pursue the state’s rulemaking process, says Lehua Kinilau, a legislative analyst with DHHL. At press time, the proposed rules on multifamily complexes, rentals and kupuna housing were pending the governor’s approval. The proposed supplemental dwelling unit rules were about to go out for public hearing. 

Kali Watson, director of DHHL in the late 1990s, says a lack of willingness – not rules – has prevented the department from offering a wider variety of housing products all along.

“The people that are working there, they are good people, but they’re not developers. When I was there, I was not a developer. I’ve learned the business since leaving there. I wish I knew all this stuff when I was director because I would have done a hell of a lot more development, knowing what I know today,” he says.

Today, he’s president and CEO of the Hawaiian Community Development Board, a nonprofit developer, and says he’s committed to sharing his expertise to help move the department forward: “I’d like to be a partner with the department in (that), collectively, we work with the homestead organizations to ferret out different sites that make sense to build either kupuna housing, high-rises, single family, multi-units, whatever.”

 

Housing with Potential

Jean Lilley, executive director of the Hawaii Habitat for Humanity Association, the support organization for the five Habitat affiliates in the Islands, says the need for housing is so great that if the state continues to focus on single-family homes it’s never going to catch up with demand.

Habitat for Humanity offers homeownership opportunities to low-income families, including those on Hawaiian home lands. Most of the homes it helps to build are single-family. Lilley says the organization wants to partner with DHHL to start building multifamily homes.

“We know that’s the future of homeownership in Hawai‘i, and so that all takes a bit of planning and money and time and all of that kind of stuff, but if we could partner with DHHL, which has the land and has some funding to get it started and so on, it would make a huge difference to meeting the needs of more families.”

Daniel Sandomire, VP of Armstrong Development, which has worked on several subdivisions on Hawaiian home lands, says he would encourage the department to develop multifamily complexes for both homeownership and rentals.

“I think that land is scarce and we should be doing higher density. Sometimes (DHHL) land is in good places that put in a lot of jobs and a lot of population, and I think that’s an opportunity DHHL should be pursuing for sure,” he says.

“The people that are working (at DHHL), they are good people, but they’re not developers. When I was there, I was not a developer. I’ve learned the business since leaving there. I wish I knew all this stuff when I was director because I would have done a hell of a lot  more development.”

Kali Watson, Former director of DHHL and now CEO of the Hawaiian Community Development Board

Craig Watase, president of Mark Development, which has developed almost 400 housing units on
Hawaiian home lands, agrees, adding that there’s a market for condos and studios for young, urban Native Hawaiians and seniors, leaving single-family homesteads mainly for families.

Duarte says the department is already exploring multifamily housing – such as potential transit-oriented development near the Kroc Center in Kapolei and potential rental housing on the former Bowl-O-Drome site in Mō‘ili‘ili, which the department is seeking a developer for – but it’s waiting on the creation of administrative rules to guide its work.

Multifamily properties are one tool the department can use to get people off the waitlist, Ailā says, but one obstacle is constructing a building substantial enough to last the 99-year term of a lease, plus another potential 100 years.

* Thousands of applicants have applied for multiple types of lots. For example, an applicant can apply for both a residential lot and an agricultural or pastoral lot. Lessees can only have one residence. If a beneficiary already has a house on his residential lot and wants to build a house on his agricultural or pastoral lot, he must transfer or surrender one of the two lot leases.

“Truthfully, I don’t think anyone in the fee simple world has figured out what’s going to happen with their condominiums at the end of their shelf life,” he says. “A bunch of condominiums were built in the ’60s and ’70s that are approaching end of use situations, and so I don’t think the legal process has even figured out how do you get all of these individuals to decide that we’re all going to move out temporarily while they tear this building down, where the funding is going to come from to build new condos. I think some of those opportunities, if you will, have to be furtherly explored.”

Watson says another approach that has potential is renting with an option to purchase. The first project, Kapolei Ho‘olimalima, he says, allowed beneficiaries earning 50% to 60% or less of the median income to rent newly constructed three- and four-bedroom single-family homes. They were given the option to purchase the homes and become land lessees after 15 years.

All 70 homes in that first project have been converted to homeownership. Watase, whose company developed Ho‘olimalima and was responsible for rental management, says the project is a model for homeownership for low-income people. The project used state and federal low-income housing tax credits to build the homes and provide affordable rents. Mark Development had to get approval to limit occupancy to Native Hawaiian beneficiaries, he says, but equity from the tax credits allowed rents to be half the price of market rentals, and the homes’ prices ranged from about $63,000 to $67,000.

The department is working on a second rent-with-an-option-to-buy project in La‘i ‘Ōpua in Kailua-Kona, says Stewart Matsunaga, acting administrator of DHHL’s land development division.

Rentals don’t get people off the waitlist, but they can address overcrowding in homestead areas and provide affordable housing. Such was the case with Hale Makana O Nanakuli, a 48-unit affordable rental project within an existing homestead community that was spearheaded by the Nānākuli Hawaiian Homestead Community Association and Hawaiian Community Development Board. The project used low-income housing tax credits and other funding; occupancy is open to all Hawaiians and non-Hawaiians alike. After certain tax credit requirements are fulfilled, the homestead association will eventually become the owner and operator of the project.

The rental is a component of the Nanakuli Village Center, which will include health, retail and learning centers. Watson says it’s a pilot project that shows how homestead associations can address the long waitlist and social and economic problems in their communities.

 

Potential Partners

Essentially, getting Native Hawaiians off the Hawaiian homes waitlist and into housing means different organizations working together, several sources agree.

DHHL is open to partnerships and exploring new concepts, and invites ideas from business on how they would make things quicker and less expensive, Ailā says. Reach the department at dhhl.icro@hawaii.gov.

Hale Makana O Nanakuli is an affordable rental project within the Nānākuli homestead community | Photo: Courtesy of Cory Hafele

The Sovereign Council of Hawaiian Homestead Associations, a coalition of beneficiary and homestead associations, and its Homestead Housing Authority, a nonprofit developer, are planning to develop affordable workforce rental housing in Anahola and Kekaha.

These Kaua‘i projects would be a pilot. The idea, says Robin Danner, who leads both organizations, is that homestead associations or their designated community development corporations would license 1 to 5 acres of trust land and build fourplexes – two-story buildings with four apartment units. They’d own and operate the rental housing, which would serve beneficiaries and, if it’s their desire, Hawaiians who are not beneficiaries and non-Hawaiians. The proposed project must secure financing and will need approval from the Hawaiian Homes Commission.

This project is a result of beneficiary leaders recognizing that there’s a need for rental housing and that, after seeing DHHL’s slow progress, they need to be part of the solution, Danner says. “Too many are dying on the waitlist. The homeless population is a clear indicator that we are failing our people,” she wrote in an email. “We are stepping forward because the failure of DHHL and settling for the horrific condition of housing in our homelands cannot continue.”

She says that if DHHL lets homestead nonprofit associations use trust lands, they would partner with architects, developers and social impact funders to build subdivisions and vertical housing without the yoke of state procurement rules and politics.

Ailā says the homestead associations’ idea needs to be studied by the Hawaiian Homes Commission. “We would consider anything that comes before us, but again, it has to match up to our trust responsibilities because we have to protect the trust,” he says.

Several years ago, Hawaiian Community Assets teamed up with the Council for Native Hawaiian Advancement to build 10 single-family homes in Kapolei and 12 homes in Anahola on Kaua‘i.

It provided affordable homeownership. Kūhiō Lewis, CEO of CNHA, says lessees had a hand in building each other’s homes, which reduced labor costs, and they had access to financial literacy education and support from both nonprofits to pay off bills, repair their credit and get them ready for homeownership.

A model of Kapili Like’s two bedroom home with an accessory dwelling unit | Photo: Courtesy of Kapili Like Hawai‘i

Hawaiian Community Assets has also worked with Kapili Like Hawai‘i, a construction industry vocational training nonprofit that is building affordable two-, three- and four-bedroom homes with attached accessory dwelling units on homesteads. (The homes are Americans with Disabilities Act-compliant.) Six houses are in the works in existing homestead neighborhoods in Papakōlea and Waimānalo, say founders Scotty Reis-Moniz and Randa U‘ilani Rogers-Fonoti. The homes will be rebuilds, but they hope this type of home will become models for future homestead housing, especially since many existing homes are multigenerational.

The cost of a two-bedroom home and ADU is about $325,000 and a four-bedroom home and ADU would not exceed $500,000, Rogers-Fonoti says. Costs are kept down by using apprentices during their training programs. In addition, their general contractors agree to a price cap for each project and commit to the nonprofit’s mission to provide affordable housing.

The work to open more homesteads is happening, Watson says – just maybe not as fast as people would like.

“We shouldn’t have any Hawaiian homeless. We should not. And I say that in all honesty because the resources are there to provide housing for all the Hawaiians out there. We’re not asking for handouts. The resources are there. The different Hawaiian organizations can step up, and DHHL just has to manage its lands better and start to partner with all these other organizations and just be smarter, leverage their assets.”

 

How You Can Help

Share your stories: Jeff Gilbreath, executive director of Hawaiian Community Assets, says it’s important for families on the Hawaiian Homes waitlist to share their struggles and for families who have been successful in getting homesteads to share how they overcame barriers. “I think in order to really make change, which is what we’re talking about, community has to be willing to share that voice. If folks can share it, we’re only going to be better for it.”

Hawaiian Community Assets is part of the Hawaii Housing Affordability Coalition, which launched in December 2018. The coalition, which is not limited to Hawaiian home lands, is still getting up and running, but its goal is to become a space for individuals to do policy advocacy work around housing affordability and help communities. Families wishing to share their stories with this coalition can email Hawaiian Community Assets at info@hawaiiancommunity.net.

Volunteer and donate: Jean Lilley, executive director of the Hawaii Habitat for Humanity Association, says people can volunteer and donate to organizations that support Hawai‘i’s Native Hawaiian population, like the Council for Native Hawaiian Advancement and Hawaiian Community Assets. 

CNHA provides financial literacy and homebuyer education and is looking for volunteers to help in these areas, says CEO Kūhiō Lewis. Interested volunteers can email info@hawaiiancouncil.org.

CNHA also oversees a Hawaiian Way Fund. Donors choose a participating recipient organization to send their donations to. Hawaiian Community Assets, Kapili Like and many other organizations are recipients of this fund, Lewis says. Makalapua Casson-Fisher is the manager of this program and can be contacted at maka@hawaiiancouncil.org.

Hawaiian Community Assets also accepts donations at hawaiiancommunity.net/donations.asp.

Habitat for Humanity accepts donations through its statewide support organization (hawaiihabitat.org) and
through its affiliates in Honolulu (honoluluhabitat.org), Leeward O‘ahu (leewardhabitat.org), Kaua‘i (kauaihabitat.org), Maui (habitat-maui.org) and Hawai‘i Island (habitathawaiiisland.org). Interested volunteers can contact their local Habitat affiliate for opportunities.

Encourage legislators to support DHHL requests for capital improvement funding: Cedric Duarte, information and community relations officer with DHHL, says this will ensure that the department stays on schedule with upcoming lot development.

Finally Tackling a Crappy Situation
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