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Judge decides Front Street housing must stay affordable

Suit challenged developer’s attempt to increase rents to market rate, sell property without restrictions

Helen Bullion (left) and Nancy “Star” Silva catch up back in January 2018 outside the Front Street Apartments. The Maui News / COLLEEN UECHI photo

Hundreds of low-income tenants living for years in “fear and uncertainty” are able to rest easier after a federal court decided that their homes at the Front Street Apartments in Lahaina must be kept affordable.

Hawaii federal District Court Judge Jill Otake rejected an attempt by developer and leaseholder Front Street Affordable Housing Partners to end restrictions that prevent it from spiking rents to market rate or selling the project unencumbered by the rent restrictions, according to a Wednesday order.

Now, the developer must honor its commitment to keep rents affordable for the next 31 years, through 2051, the ruling said.

“This is such a huge relief,” lead plaintiff and tenant Mike Tuttle said during an online news conference Thursday afternoon. “I can’t tell you over the last three, three and a half years, everyone living there, hundreds of people have been living in fear and uncertainty, thinking that they were going to lose their home. There’s literally nowhere else to go for us.”

West and South Maui Sen. Roz Baker, one of the lawmakers who introduced bills to make rents affordable at the Front Street Apartments, praised the decision but said she wants the state to move on discussions to purchase the property.

“I am delighted that it’s clear that Front Street Apartments need to be affordable for the next 31 years,” she told The Maui News on Thursday night. “While it does not preclude the state from purchasing the property, it gives us some time to figure out the best approach.”

“The only concern I would have is that I wouldn’t want the state to drag its feet too long,” she added. “I’m sure the folks that have the property are not happy with the decision and I don’t want them to be bad landlords.”

When it first built the project in 2001 as an affordable rental housing complex for low-income residents, the developer promised to keep apartments affordable for 50 years in return for $15 million in state tax credits and $5 million from the county in real estate tax reductions, according to lawyers for the plaintiffs.

After 15 years, however, Front Street Affordable Housing Partners asked the state’s financing agency, the Hawai’i Housing & Finance Development Corporation, for permission to end the restrictions.

Developers cited a change in federal tax law that allows them to be released from their low-income commitments after 15 years if they were unable find a buyer for the project within a certain time frame. They planned to raise rates to market price by August 2019.

“The state should not have let the developer out of its promise,” Tom Helper, litigation director of the Honolulu nonprofit Lawyers for Equal Justice, said during the news conference.

In 2018, a small group of tenants from the 142-unit complex filed a lawsuit that challenged plans by the developer to convert the complex to market rates before the end of its 50-year affordability commitment.

As the lawsuit has proceeded, state and county officials have been working to keep rents affordable for the apartment residents, and the legal process allowed the rents to stay affordable beyond August 2019.

The state last year purchased the land under the complex for $15 million from 3900 LLC, a Weinberg Foundation affiliate, and lawmakers approved a bill to allow the state to initiate negotiations with owners to keep the units affordable.

Lance Collins, one of the attorneys for the plaintiffs, said in addition to the federal and state benefits received for the project, the developer also got approval through the affordable housing fast-track process, which exempted it from certain County of Maui zoning and building requirements and allowed for real property tax rebates.

“It’s always very concerning when one representation is made to the county to get these special tax breaks and zoning concessions to build affordable housing, to then turn around 15 years later with 36 years left on the timeline for affordability and try to move these types of units into market rate,” he said during the news conference.

Attorneys said that about 35 units were converted to market rate, with most people leaving on their own and some being evicted. Victor Geminiani, founding director of Lawyers for Equal Justice, said that residents who are not eligible to live there — the original tenants were all at 60 percent of area median income or below — will have to vacate at some point.

The Front Street tenants were represented pro bono by Andrew Lillie, Joseph Lambert, and Cory Wroblewski of the international law firm of Hogan Lovells US LLP, Geminiani, Helper and Collins, who is based on Maui.

Tuttle, who has lived at the apartments since 2015 with his teenage daughters, said the ruling gives him peace of mind after years of wondering whether he and his family would be on the streets. The single father worked as a retail sales manager until he was furloughed due to COVID-19 in March.

“Raising kids is hard enough, and then going years of wondering whether we’re going to be out on the street made it so incredibly difficult,” he said. “The feeling I have now, I can’t tell you, I’m trying not to cry because this is such an incredible feeling to know that . . . I have a place to live, that I don’t have to worry about, you know, being homeless.”

* Kehaulani Cerizo can be reached at kcerizo@mauinews.com.

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