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State bill mulls condemnation of land under Front Street Apartments

Compromise measure also sets aside $30 million for affordable housing in Lahaina

A state House-Senate conference committee engineered a compromise measure Friday that West Maui Rep. Angus McKelvey called “the best of both worlds” to protect Front Street Apartments tenants from eviction while approving $30 million for a 200-unit state affordable housing project mauka of the Villages of Leiali’i in Lahaina.

“That’s a huge win-win,” he said, emphasizing that the new housing site would not be on Hawaiian homelands, but mauka of them. “We’re not displacing Native Hawaiian housing entitlements.”

Originally, the housing to be developed by the Hawaii Housing Finance and Development Corp. was meant as a fallback position, McKelvey said. If negotiations failed to get a deal with the apartment owners, then the tenants could be moved to the new affordable housing.

Now, the compromise bill headed for final approval next week on the House and Senate floors mandates that the HHFDC negotiate the acquisition of the Front Street property with the landowner, he said. If that fails, the property could be condemned through eminent domain.

Maui County would be a partner in the process, he said, helping to expedite permitting for the affordable housing project, for example.

“There’s a lot of families who are going to have affordable housing in West Maui,” McKelvey said.

Senate Bill 2293 says the Legislature declares it is in the public interest and is required for public use to acquire the Front Street Apartments as an affordable rental housing project by exercise of the power of eminent domain. That is the right of government to take private property for public use, with payment of just compensation.

McKelvey said the aim would be for the government to acquire the land underneath the apartments, not the buildings.

Negotiating an acquisition, appraising the property and reaching terms make up the first step of a two-step process, he said.

“This is only setting the table for the acquisition to happen,” he said. “We’ve got to come back (next year in session) and finish the job.”

That means funding the property condemnation, if necessary, he said.

The property leaseholder is Front Street Affordable Housing Partners. The landowner is 3900 Corp.

The apartment complex opened as a 142-unit affordable housing project in 2001, and it was supposed to remain affordable for 50 years. But Front Street Partners used an Internal Revenue Service loophole to put the project up for sale after 15 years.

After it was unable to sell the property, the partners were able to begin charging higher market-rate rents for units.

Last year, the partners tried to sell the project for $15.4 million, but the state was unable to purchase it because the price exceeded the appraised value of $8.7 million.

Project developers have reportedly received millions of dollars in federal, state and county tax credits and entitlement exemptions.

Gary Kubota, liaison for the apartment tenants, said the complex has 250 residents.

According to Kubota, the conference committee voted to provide $250,000 toward the condemnation of about 8.5 acres, with the understanding that Maui County would provide a matching amount.

Kubota reported that if the purchase takes longer than expected, the bill provides for rent subsidies to tenants.

The building owners plan to raise the rents from low-income to market prices at the apartment units by August 2019, which would be unaffordable for tenants, he said.

Another version of the bill had called for the condemnation of the building and land. But the partners estimated that purchasing the building alone would cost upward of $50 million, Kubota said.

He quoted Upcountry state Rep. Kyle Yamashita as saying that purchasing the land was the best option because it would make the state the landlord and acquire the low-income housing site for the public.

McKelvey credited the passage of the bill to a team effort that included the bill’s author, West and South Maui Sen. Rosalyn Baker, and Yamashita, a member of the House Finance Committee.

Barbara Henny, the co-chairwoman for the Front Street Apartment Tenants, said she was studying compromise measure’s details but was grateful for lawmakers’ efforts.

“We never imagined we’d get this far and have this much support,” she said.

Last week, the Maui County Council adopted a resolution authorizing council Chairman Mike White to contract for an appraisal of Front Street Apartments’ six buildings at 1056 Front St. The move is aimed at retaining the apartments as affordable units.

* Brian Perry can be reached at bperry@mauinews.com.

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