Mayor’s plan to sell rentals OK’d

The City Council voted 6-2 on Thursday to give the OK for Mayor Peter Carlisle’s plan to sell the city’s 12 affordable rental complexes for $142 million despite reservations raised by people from Chinatown and a competing developer who said the plan would force 700 tenants from their homes.

The agreement with Hono­lulu Affordable Housing Partners LLC requires the corporation to retain most of the 1,257 units as affordable rentals for the life of the 65-year lease and pump a minimum of $42 million in improvements into the projects.

Keith Ishida, city housing office director, said city taxpayers are subsidizing the projects at a rate of $500,000 a month.

Councilmen Tom Berg and Romy Cachola voted to reject the plan, saying that a vote should be postponed until more of their concerns could be addressed. Four of the members voting for it — Stanley Chang, Nestor Garcia, Ann Koba­ya­shi and Ernie Martin — did so with strong reservations.

The plan is viewed as a key victory for the Carlisle administration. Carlisle’s predecessors have tried unsuccessfully to remove the city from the affordable-rental management business since the Ewa Villages scandal in the late 1990s. City housing official Michael Kaha­pea was imprisoned after being found guilty of stealing nearly $6 million in housing funds.

The fate of the proposed sale was far from certain during most of Thursday’s three-hour Council meeting.

Chuck Wathen, founder of the Hawaii Housing Alliance and president of Pier Management Hawaii LLC, urged Council members to delay approval of the sales plan until they could look into his claim that the proposal would put an estimated 719 "workforce," or gap-group, tenants out of their homes due to a change in eligibility requirements that would create more lower-income units and a proviso that allows HAHP to raise rents up to 10 percent annually.

Workforce renters are those people who work but can’t afford market-rate rentals, according to Wathen.

Wathen said the city will be breaking a promise made to some tenants that the complexes "would be mixed-income housing forever." Providing subsidies for those gap-group dwellers would cost taxpayers up to $2 million annually, he said.

Otherwise, Wathen said, displaced renters would be thrown into a housing market where "there has not been a workforce housing rental project built since 1989."

Wathen also called for the plan to be rejected because HAHP was allowed to extend the deadline to close the deal until March 2014 when all other bidders were told the sale would need to close by Oct. 31, 2012.

Wathen, who submitted a proposal to purchase the units, said he had no intention of taking the matter to court.

Susan Lebo, a member of the Chinatown Gateway Plaza Tenant Association, said her state government job will not allow her to keep up with a 10 percent annual increase in rent. Lebo said she wants to know who would be eligible for the subsidy city officials have promised for those who can’t afford their rents.

"There isn’t a surplus of workforce housing outside of these 12 city-owned buildings," Lebo said. "Where am I going to go when I am displaced or don’t quality for this rental assistance?"

Lebo and others also voiced concerns that a majority of the projects are within the Chinatown district, which has not had representation since Councilwoman Tulsi Gabbard resigned in August in a run for Congress.

Veteran housing developer Peter Savio said he also opposed the project in part because it appeared the city was trying to rush it through.

Earlier this year the city sought proposals to sell the housing projects and received seven bids. It awarded the sale to HAHP in the summer.

Savio said he personally did not submit a proposal because the criteria did not allow for his plan to start a program allowing residents to become owners and gain equity from the project.

"It would allow every tenant to become a homeowner outside the project," Savio said.

Savio said he agreed with Wathen that HAHP was given an unfair advantage by being allowed to close later, when the Oct. 31 deadline given to everyone else discouraged many from bidding.

City officials insisted that the change in the closing deadline was information made available to the public under a bill approved by the Council earlier this year that was related to the planned sale.

Bill Rice, an official with Arcadia, Calif.-based Highland Property Development LLC, HAHP’s lead partner, said "our best guess" is for the sale to close by the second quarter of 2013.

Contrary to Wathen’s warnings, "we’re actually increasing the supply of workforce housing," the city’s Ishida said. More of the housing would be made available to those making 60 percent of median income or less, he said, "people who work in food service or retail trades … folks who work every day but earn very low wages and because of that are very vulnerable to cost increases in rents."

Council members who approved the plan but noted reservations said they did not expect all their concerns to ever be addressed and that they were reluctant for the matter to be sent back to committee or have the bid process reopened, possibly exposing the city to liability.