Mayor looking into perks given to affordable housing owner

Barbara Henny, co-chair of the Front Street Tenants Group, shows her support for the affordable housing project in Lahaina during a West Maui Taxpayers Association meeting Nov. 14. The Maui News / COLLEEN UECHI photo

The Maui News

An apartment building owner who received millions of dollars in benefits to create an affordable housing project in Lahaina is coming under county scrutiny in light of the owner’s plans to raise affordable rents to market rates in 2019.

Maui County Mayor Alan Arakawa has instructed his administration to examine the transactions of Front Street Affordable Housing Partners LLC, which received several million dollars in benefits to develop the low-income Front Street Apartments in 2001, according to a news release from tenants.

“We’d like to thank Mayor Arakawa for taking the lead in this inquiry,” said Barbara Henny, co-chair of the Front Street Tenants Group, an organization representing tenants. “All of that adds up to a lot of public investment in the apartments.”

Front Street Affordable Housing Partners received more than $2 million in tax exemptions, with the understanding that the 142-unit apartment complex would be affordable over a 50-year period. The county also allowed the rezoning of parcels and issued waivers on parking requirements and on the contribution of 1.5 acres of park land.

Front Street Affordable Housing Partners also was granted up to $15.6 million in federal and state tax credits, and more than an estimated $20 million was paid in rent and federal subsidies by tenants in the past 16 years.

“Hawaii’s taxpayers deserve an answer and deserve to get back what it can, whether it’s a rollback in zoning, benefits and the imposition of penalties or the withdrawal of tax exemptions,” Henny said.

Henny said her group asked Arakawa to take a hard and thorough look and was grateful that he was exercising what he called “due diligence” in reviewing the issue.

Adam Dornbush of the Honolulu-based Dornbush & Co., the group speaking for Front Street Affordable Housing Partners, said he was open to negotiations.

But state legislators said the partners have broken off negotiations twice.

Landowner 3900 Corp., a tax-exempt 501(c)(2) firm, bought the 8 acres of land from Amfac for $778,000 in 1993 and agreed to lease it to Front Street Affordable Housing Partners in 2001 for 50 years.

The lease rent was scheduled to go up in 2017 to $310,000 a year, according to documents filed with the state.

The partnership is using a 2012 IRS tax amendment to raise rents to market-price levels. The amendment allowed the owners to put the project up for sale after 15 years. When the project went on the market, the state was interested in buying it. But because it was selling for $15.4 million, well above its appraised value of $8.7 million, the law prevented the state from making the purchase. Unable to find a buyer within a year, the owners were allowed to raise the rents by Aug. 4, 2019, effectively evicting the low-income tenants. Many have said that they are on fixed incomes and would not be able to afford higher rates.

Several groups, including the more than 2,000-member West Maui Taxpayers Association, have sent letters to state legislators, saying they want the low-income tenants to remain at Front Street Apartments.

Ka Hale Ake Ola Homeless Resource Center said the evictions would increase the number of homeless in Lahaina at a time when the center is at capacity.

State Sen. Rosalyn Baker and state Rep. Angus McKelvey, whose districts include West Maui, plan to introduce measures in the 2018 legislative session to retain Front Street Apartments as low-income rentals.

State lawmakers attempted to pass legislation to keep the apartments affordable last year, but one bill died and the other stalled in conference.

Arakawa was traveling to Washington, D.C., Sunday afternoon and could not be reached for comment.

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