WAILUKU - A request by nonprofit Na Hale O Maui for $1.1 million from the county's affordable housing fund, for its program of turning foreclosed properties into affordable homes, will be reviewed Tuesday by the County Council's Budget and Finance Committee.
The organization has been identifying single-family homes in foreclosure, rehabilitating them and selling them to qualified buyers at affordable prices using a $3 million federal grant.
However, the federal grant effectively prohibits Na Hale from acquiring homes built before 1978 because of lead paint removal requirements, said the nonprofit group's executive director, John Andersen. This has kept many properties in Dream City Kahului and Waiehu out of their reach, he said.
The cost of lead paint removal from a kitchen and bathroom would be $25,000 to $50,000, which would price the homes out of the affordable range, he said.
If Na Hale were to receive the money from the county's Affordable Housing Fund, it would disclose the presence of lead paint to buyers, said Andersen, adding that in most cases the professional recommendation is to not remove but to encapsulate the lead paint by painting over it.
Andersen estimates that the county funds would help Na Hale turn eight to 10 foreclosed properties into single-family affordable homes.
Since October, Na Hale has acquired 10 foreclosed homes, about one a month. Five of them have been rehabilitated and sold, two are in escrow and three are in the rehabilitation process, said Andersen. So far, 21 families have been prequalified for homes; there is room for more, he said.
Prospective buyers have to take a one-hour orientation seminar on homeownership and mortgages, meet the income limits and be preapproved for a mortgage by a lender. For a family of four, the federal Housing and Urban Development income criteria is $107,500, which is "most of the work force," he said.
Na Hale retains ownership of the land through a 99-year renewable lease, while the buyer owns the home and improvements. This arrangement, similar to the Department of Hawaiian Home Lands homestead program but without the blood-quantum requirement, keeps prices down and allows Na Hale to keep the property "affordable in perpetuity."
If buyers choose to sell, they will not reap the full net profits in a sale and are subject to a strict resale formula.
Homes are being sold for between $250,000 and $320,000, while being purchased for between $350,000 and $410,000, Andersen said. The rehabilitation cost runs between $15,000 and $20,000.
So Andersen estimates that the subsidy for each home runs about $100,000.
Na Hale acquires only homes "that have been abandoned," he said. "We are not displacing anybody. Residents have moved out prior or during the foreclosure process."
He acknowledged the "tragedy" of the foreclosures and families who have lost their homes, but he also views an opportunity the likes of which "we have never seen." The Na Hale affordable housing program puts families in existing homes, hundreds of which are languishing in foreclosure, and does not tap more water and create more urban sprawl, he said.
"These houses are sitting vacant, and we have to deal with them," Andersen said.
Na Hale is currently embarking on phase 2, using the proceeds of sales to purchase more foreclosed homes. Andersen said Na Hale will continue to acquire and sell more foreclosed homes with the money until it runs out.
The meeting will be begin at 1:30 p.m. Tuesday in Council Chambers on the eighth floor of the Kalana O Maui building. For more information about Na Hale, call 244-6110 or e-mail info@nahaleomaui.org or visit nahaleomaui.org
* Lee Imada can be reached at leeimada@mauinews.com.
