Affordable-housing advocates are decrying a state agency’s move to lease its portfolio of six low-cost rental projects, including three high-rises in Kakaako, to a private investor at a time when housing is in extremely short supply for low-income families.

The Hawaii Housing Finance and Development Corp., or HHFDC, is soliciting bids until Friday for six affordable apartment properties with a total of 1,221 rental units on Oahu, Maui and Hawaii island. The properties are being offered without an asking price under what would be long-term ground leases — up to 75 years for five of the properties and 40 years for one property.

The agency, which has a mission “to increase and preserve the supply of workforce and affordable housing statewide,” says owning and managing affordable housing is not part of its core function. HHFDC anticipates a private owner will be able to invest some $13 million in needed capital improvements across the six properties, which are on average 26 years old.

“HHFDC is not seeking to profit from the sale … but to preserve the affordability and sustainability of the portfolio, and focus on our core mission of facilitating the development of housing,” Kent Miyasaki, housing information specialist with HHFDC, said in an email. “By partnering with the private sector, we believe the capital improvements can be met in a more timely and efficient manner than through the state procurement system.”

The agency plans to pay off $76 million in bond debt that was used to develop the properties, which include Kamakee Vista, Kauhale Kakaako and Pohulani Elderly in Kakaako; Kekuilani Courts in Kapolei; Lailani Apartments in Kona; and Honokowai Kauhale in Lahaina. Any net proceeds, Miyasaki said, would be used to fund rental assistance subsidy programs.

The six projects were developed in the early 1990s to cater to moderate-income families earning up to 80 and 100 percent of so-called area median income. Current tenants, however, include hundreds of low-income tenants who rely on state and federal rent subsidies each month.

In an effort to minimize displacement, HHFDC officials say, the agency will impose affordability requirements on any new owner, capping annual rent increases at 2 percent for the first five years for current tenants. But after that, rent could increase up to the maximum income caps at all of the properties except for Pohulani Elderly, where the 2 percent cap would be imposed for the life of the lease.

The state’s asking rent at most of the properties is well below the maximum rent an investor would be able to charge while still falling within the federal affordability guidelines of renting to families earning up to 80 and 100 percent of area median income. Area median income for Oahu is set at $86,600 for fiscal 2017.

After the five-year cap, rent could potentially rise by as much as 66 percent, or $746 a month, for a two-bedroom unit at Kauhale Kakaako, according to a Honolulu Star-Advertiser analysis of current asking rent and the maximum allowable rents listed in marketing materials for the sale. In another example, rent could increase by $841 a month, or 60 percent, for a two-bedroom unit at Kamakee Vista.

Victor Geminiani, co-executive director of the Hawaii Appleseed Center for Law and Economic Justice, said the plan raises concerns about the long-term affordability of the units.

“I question seriously this move within the context of the crisis we have with affordable housing in the state and in view of the projections that we need 25,000 units, of which the majority are needed for 60 percent below (area median income), in order to be able to stabilize our rental housing situation,” Geminiani said in an interview.

“We are not producing any rental housing at that level — we’re not even producing any rental housing. There’s basically been almost no rental housing built in Hawaii for 40 years. … Any low-income rental housing is next to nonexistent,” he added.

Just fewer than half of the tenants at the six properties, or 581 units, are receiving state-funded Rental Assistance Payment subsidies of $175 a month. Some 140 tenants receive Section 8 housing vouchers designed to assist low-income families with rent.

Gov. David Ige emphasized that the state would continue to own the properties; the proposed sale would involve selling decades-long leasehold interests.

“To be clear, we’re not giving up the portfolio. The state would continue to own the land. We’re looking for someone to make investments and upgrades and manage,” Ige told the Star-Advertiser. “The projects are more than 20 years old. … They’re not in terrific shape. I think part of the challenge is, how do we refurbish the units in a way that the state can afford, and how do we keep them affordable? From the state’s perspective, we think the timing is good to initiate this.”

He said the state has very few affordable rentals for moderate-income families earning 80 to 100 percent of area median income.

“When the project is done, we will have 1,200 refurbished units that would be targeted at 80 to 100 percent of area median income, which was the original target group,” Ige said.

Asked about what might happen to existing low-income residents after the five-year cap on rent increases, Ige noted there are 500 affordable rental units in the pipeline in various projects in Kakaako that are targeted for households earning 60 percent and below of area median income.

State Sen. Will Espero, chairman of the Senate Housing Committee, said he’s not convinced that privatizing the rental properties is in the state’s best interest.

Espero said he was told the six properties are expected to generate $3 million in net cash flow this year, after debt service and other expenses.

“This is a portfolio of properties that is profitable for the state of Hawaii, and it’s providing affordable housing,” Espero said in an interview. “Why would we want to give this up to a private investor?”

He said he questions why HHFDC, a state agency, has not requested the capital funds from the Legislature to make the needed improvements at the properties or asked for relaxed procurement rules to help expedite repairs.

“If a private investor is going to invest in something and spend their money, they’re thinking of some type of return on investment. And it looks like that might be on the backs of our renters who are in these affordable projects,” Espero said. “There should be some pause, and let’s take a serious, hard look at this to make sure that this is the right thing to do.”