Two federal assistance programs that have accounted for millions of dollars in grants and loan guarantees for Native Hawaiian housing on the Big Island are on hold for several homestead communities there because of concerns related to decades-old unexploded ordnance in the ground.

A $2 million grant for infrastructure work at a Hawaiian homestead development in Waimea is among the funding on hold, along with assistance to a handful of families planning to build new homes.

In addition to a freeze on housing-related spending on Department of Hawaiian Home Lands property affected by the ordnance problem, the U.S. Department of Housing and Urban Development has stopped issuing loan guarantees in those areas, jamming up homesteaders trying to get HUD-backed private financing for mortgages or home repair projects.

"This is definitely a major concern," said Michael Hodson, president of the Waimea Hawaiian Homesteaders’ Association.

While the ordnance problem is not new, HUD only recently learned that five homestead communities are within two sections of the Big Island contaminated with remnants of old bombs, grenades and other munitions left from military training exercises during World War II. The two sections cover roughly 100,000 acres.

The U.S. Army Corps of Engineers has been overseeing remediation work to remove and dispose of old munitions on that land for more than a decade. The cleanup work, which so far has removed more than 2,300 bombs, hand grenades, mortar shells, land mines and other remnants from the 1940s military exercises, is expected to continue for decades and cost the federal government hundreds of millions of dollars.

At least nine people have been killed or injured by old artillery rounds since the 1940s.

DHHL says it is not aware of any homesteaders finding unexploded ordnance on their lots.

Out of an abundance of caution, HUD recently stopped issuing grants or loans in the affected DHHL areas until the ordnance issue is sufficiently addressed, according to Ryan Okahara, the agency’s field office director in Honolulu.

Regulations governing the two HUD assistance programs include reviewing environmental issues. When DHHL late last year notified HUD about proceeding with the second phase of a Waimea homestead project called Lalamilo, the federal agency learned about the ordnance concerns because the development is within the boundaries of what was once known as Waikoloa Maneuver Area, according to Okahara.

Waikoloa, which spans nearly 100,000 acres on the northwest side of the island, has been described by the state as the single largest site in the nation contaminated with unexploded ordnance.

Once HUD learned of the connection, the agency decided to restrict spending involving all DHHL property on the Big Island affected by the unexploded ordnance problem. A $2.16 million grant for Lalamilo was caught in the freeze.

The uncertainty created by the ordnance issue also is raising the possibility that lessees in the five affected homesteads may have to be relocated.

DHHL says it is offering relocation as a possible option and has met recently with affected lessees to discuss the situation. As part of the process, the department is identifying available lands in its Big Island inventory and what infrastructure work would be required to get the property ready for homesteads. DHHL also is examining how it can accommodate lessees who are interested in relocating.

"The department is expediting the process to provide our lessees with as many options as possible as quickly as possible," DHHL spokesman Puni Chee said in written responses to Honolulu Star-Advertiser questions.

But many lessees oppose the notion of relocating, partly because they say they would not be compensated for their homes or other improvements made to their leased lots. Nearly 600 have leases in the affected areas, and the majority have built homes on them.

"It’s not our fault that the United States used the land as a bomb practice," said Lauae Kekahuna, treasurer of the Maku‘u Farmers Association.

Makuu homesteaders are not only dealing with the ordnance issue, but also the lava flow from Kilauea Volcano.

If the lava gets closer to Makuu, that threat alone could force the 124 lessees there to give up their homestead lots.

Even as the Makuu homesteaders keep a wary eye on the lava, they also worry about what might happen because of the munitions issue.

Makuu is not within the former Waikoloa Maneuver Area but is part of what was once called the Popoki Target Area, a 640-acre Puna district site believed to have been used in the 1940s for target practice by the Navy. Since 2010, the Corps has removed 95 practice bombs and one 60 mm mortar shell from that area.

"If the lava hit or the heat of the lava came in close proximity to unexploded ordnance, (the) prediction is it will blow up anything within a mile," Kekahuna said.

While the threat from the lava remains unpredictable, the fallout from the old munitions already is being felt.

Until the funding freeze is lifted, DHHL loses access in the affected areas to what has been a significant source of capital statewide for infrastructure work and other assistance designed to get more DHHL beneficiaries — those at least 50 percent Hawaiian — into homes or to make home repairs.

From 2003 to July 2014, DHHL spent nearly $76 million in Native Hawaiian Housing Block Grant funds, one of the two HUD programs affected by the ordnance issue, according to federal data. About $8.4 million of that amount was spent on the Big Island.

Through the second program, referred to as Section 184A, the federal agency over the past decade issued guarantees for 435 loans valued at $107 million, including $10 million worth of loans to beneficiaries on the Big Island.

Access to capital for DHHL developments has long been a problem, contributing to the slow pace at which the agency is able to accommodate the more than 26,000 beneficiaries on waitlists for homestead lots.

The ordnance problem only exacerbates that situation, according to Michelle Kauhane, president and chief executive officer of the Council for Native Hawaiian Advancement. "It is cutting off one of those lifelines (to capital)," she said.

The council, which offers construction loans to homesteaders, already has had one mortgage deal collapse for a Waimea client because his lender could not get a HUD guarantee for the loan. The unexploded ordnance concern was to blame. The council was ready to issue an interim construction loan when the mortgage deal collapsed, Kauhane said.

Another client was about to get funding to install a solar power system on his home, but that deal fell apart because of the ordnance problem as well, she added.

DHHL’s Chee said the department is doing its due diligence to find other financing options to assist lessees in building or repairing their homes.

The Corps already has completed remediation work in the former Popoki Target Area but is continuing to provide long-term oversight, particularly for ground-disturbing activities.

The federal agency began remediation work in the Waikoloa area in 2002, but that site is so large the project is expected to continue for decades, with the Corps tackling the higher-risk properties first.

The four DHHL homestead developments within Waikoloa — Puukapu, Kuhio Village, Kawaihae and Lalamilo — are part of munitions response sites considered low risk, according to Dino Buchanan, a Corps spokesman.

Remediation work started in Lalamilo but not in the three other homesteads, he said in an email to the Star-Advertiser.

Homesteaders said they are concerned because remediation work in Lalamilo has stopped and funding for such work has not been appropriated for any of the four homestead developments.

Hodson, the Waimea association president, criticized the federal government for doing remediation in areas that are uninhabited while not getting to homesteads where people live.

"You would have thought that would be the priority," he said, adding that the government is discriminating against Hawaiians.

But Buchanan said the work is done, as required by law, based on the potential risk to human health, safety or the environment, and higher-risk sites nationwide, including at Waikoloa, have higher cleanup priorities.

Chee, DHHL’s spokesman, said the agency’s current administration became aware of the unexploded ordnance issue in October 2014 while doing research for a federal loan for a simple home repair. The department discovered a "UXO" designation — the abbreviation for unexploded ordnance — while checking county property tax records for the parcel.

The department has since had discussions with the Corps as part of an effort to gain a better understanding of the size and scope of the problem and to develop an action plan, Chee said.

Asked why the problem was not discovered sooner by DHHL, Chee said the agency’s records are unclear on what information, if any, was made available when the Big Island lands were transferred to the department long ago by the then-territorial commissioner of public land.

At the time, no one suspected the property being given to meet the territory’s and subsequently the state’s obligation to Native Hawaiians would be contaminated with unexploded ordnance, Chee said.

In the 1950s, he added, the department and other government agencies considered the risk minimal based on the limited information and technology at the time.

"We cannot change decisions of the past," he wrote. "However, the department is committed to improving its service to Native Hawaiians and doing what is necessary to ensure the health and safety of the beneficiaries we serve."

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Freelance writer Megan Moseley contributed to this report.