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Front Street Apartments case could be decided soon

Decision focuses on whether rents stay affordable or go market rates

The ongoing legal dispute over whether Front Street Apartments rents will remain affordable or be allowed to increase to market rates may be decided soon.

On Wednesday, a hearing on motions for summary judgment was held remotely before U.S. District Court Judge Jill Otake, who said she would issue a ruling “within a reasonable time frame.”

The case involves a lawsuit brought by tenants of the 142-unit complex in 2018 that challenged plans by developer and leaseholder Front Street Affordable Housing Partners to convert the complex to market rates before the end of its 51-year affordability commitment.

The developers cited a change in federal tax law that allows them to be released from their low-income commitments after 15 years if no buyer can be found within a certain time frame.

The Hawaii Housing Finance Development Corp., a state entity, is also a defendant in the lawsuit. The plaintiffs only seek to keep affordable rents in place and have not asked for other damages.

Lance Collins, an attorney for the plaintiffs, said after the hearing that he anticipates the ruling to come in the next week or so. If Otake rules in their favor, Collins said it would ease worries by tenants, many of whom are senior citizens, those living on fixed budgets and working multiple jobs to make ends meet.

“At least they will know one way or another how things are going to go,” Collins said, noting the unease about the rent conversion that has been going on for about four years, even prior to the lawsuit.

Under the federal tax law change, developers say they were eligible to raise rents to market levels in August 2019.

The COVID-19 pandemic has added more stress to those at the complex, who need the affordable rents to make ends meet, Collins said.

Affordable rents have been maintained during the adjudication of the case, according to an agreement with the parties, he said. Units of tenants who have left the complex could be converted to market rates; he did not have data on how many have been converted.

The main contentions of the lawsuit are over a declaration that was filed in 2001, when the developers received federal and state tax credits and other fast-track affordable housing benefits.

The developers have said that they received $15.6 million from the state Low Income Housing Tax Credit program in 2001. In addition, Front Street Affordable Housing Partners received more than $5 million in reduced county property taxes assessments, along with waivers from zoning laws under the “fast-track” approval process that trimmed construction costs.

The declaration against title also said that the apartments would be affordable for 51 years; there is no mention of cutting short the affordability component, Collins said Wednesday.

The state released Front Street Affordable Housing Partners from the terms of that 2001 declaration in 2016, he said. The lawsuit alleges that the state housing agency that oversees the tax credit program that governs the apartments failed to legally convert the property from low-income to market rates and released the restrictive covenant without legal authority and public notice or consent of the tenants.

An attorney for Front Street Affordable Housing Partners could not be reached for comment following the hearing.

As the lawsuit has proceeded, state and county officials have been working to keep rents affordable for the apartment residents.

In October, Gov. David Ige announced that the state purchased the land under the complex for $15 million from 3900 LLC, a Weinberg Foundation affiliate. The sale was done under a law approved by the Legislature in June 2019, in which the state also would initiate negotiations with the owners of the Front Street Apartments to keep units affordable for the tenants.

The June 2019 law not only directed the HHFDC to initiate negotiations but also gave the housing agency the right to use the power of eminent domain to acquire Front Street Apartments if the ground lease was not renegotiated by the end of 2019.

In January, the HHFDC said it has not taken any steps toward condemnation but was evaluating proposed lease terms to ensure affordability of the project.

The state and county each have put in $250,000 for the condemnation proceedings.

Back in October, Ige’s office said that with the state acquisition of the land, HHFDC will try to work with Front Street Affordable Housing Partners on a ground lease that will include, at a minimum, retaining current tenants and rent protections for existing affordable units.

Kent Miyasaki, housing information specialist with HHFDC, said Wednesday afternoon that negotiations still are ongoing and due to the litigation he cannot comment on specifics.

Attorneys for Front Street Affordable Housing Partners have said that they have been involved in “good faith” negotiations with the state.

* Melissa Tanji can be reached at mtanji@mauinews.com.

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