Housing deal helps city and tenants

The City and County of Honolulu has had a tumultuous history with housing issues, but now officials stand on the brink of making progress in an effort to improve conditions for low-income tenants in their charge.

A public-private partnership is in the works to resolve a kind of paralysis that dates to 1998. That’s when the city dismantled its Housing Department in the wake of a scandal over fraud in an Ewa project development.

City officials then wholly backed away from housing issues, even proposing during the administration of Mufi Hannemann to sell off altogether the city’s 12 affordable-housing projects.

This was untenable, said tenants and their supporters in the nonprofit sector. One of them, Faith Action for Community Equity (FACE), pushed back hard.

The final result was the establishment of the city Office of Housing and, in recent weeks, the inking of a promising deal.

It’s a partnership that seems likely to keep rents within reach of the housing program’s target population: households earning below 80 percent of the area median income.

The core of the deal is that a private leasehold buyer, Honolulu Affordable Housing Partners LLC, will pay the city $142 million in cash and an additional $42 million for renovations in exchange for a 65-year lease on the properties.

There are still details the City Council, rightly, has insisted on nailing down, mainly assurances there is enough financial support to avoid displacing current tenants. But thanks to the insistence of FACE and other advocates, there seem to be safeguards in place, and good reason to move the deal along to completion.

A public-private arrangement offers a promising route toward long-term affordability to families that need subsidized housing, while essentially taking the operating losses of these properties off city books.

Private ownership and management of low-income housing has worked well in other settings. Nonprofits such as Mutual Housing Association of Hawaii have successfully owned and operated rental housing complexes on Oahu and the neighbor islands.

In this case, there’s a challenge. The deal allows Hono-lulu Affordable Housing to deed over the three least profitable buildings to a nonprofit: Pau­ahi Hale in Chinatown, Kanoa Apartments in Palama and the "Bachelors’ Quarters" in Ewa Villages.

Only a small portion of the renovation fund — $450,000 — is being budgeted for these three, but the nonprofit would be eligible to apply on its own for federal subsidies to help offset the operating losses.

The city retains ownership of the land, which lets officials keep tabs on the project.

For starters, when the city housing office finds the one or more nonprofits willing to take over the lesser properties, it should provide support and oversight during the critical startup phases, when renovation money must be raised.

The first order of business is for the Council to see that the city’s rental assistance account is beefed up with enough money from the sale to support the neediest tenants in paying rent at a sustainable level.

The private partner will be able to supplement its revenue by renting a percentage of units at market rates. Within the complexes, 850 units will meet federal guidelines for low- and moderate-income rentals. The rest of the 1,257 apartments will be divided between those priced for the "gap group" families, with incomes at 80-120 percent of median, and market-priced units.

There will also be commercial revenue from businesses renting storefront spaces in the mixed-use buildings.

For its part, the city will end up with renovations it never could have afforded and a sorely needed infusion of cash to its general fund; this money can help the city tackle its backlog of infrastructure projects and improve services. And the monthly revenue drain of nearly $500,000 in operating losses will end.

Assuming the pact is carefully vetted and executed, it would seem to be a very good deal, indeed — an opportunity that Honolulu should not fail to seize.