$600M spending plan finalized for Hawaiian Home Lands

The state Department of Hawaiian Home Lands has sent the Legislature a finalized plan to spend $600 million that lawmakers appropriated earlier this year largely to facilitate DHHL beneficiary homeownership.

DHHL also is asking lawmakers to introduce six bills in January aimed at making the agency more productive by eliminating regulatory constraints and boosting finances, including one proposed bill that DHHL said is needed to fully use the historic $600 million within three years as directed by the Legislature.

The report, sent Tuesday, closely mirrors a preliminary plan that was endorsed in August by the Hawaiian Homes Commission and criticized in October by two advocacy organizations representing existing and future Hawaiian homesteaders.

DHHL’s final plan estimates that 2,727 homestead lots can be developed with as much as $540 million, compared with 3,163 lots in the preliminary plan. The agency also anticipates producing 177 rental apartments, acquiring some land and spending about $60 million on other beneficiary aid that might include help with down payments to buy a home and rental assistance.

“We have set forth a plan for what is possible to accomplish given all the information we have on creating new homestead lots and leveraging other resources to work alongside this funding,” William Aila Jr., DHHL’s director, said in a statement. “The plan is rooted in reality and flexible enough for the next administration to make adjustments as needed and seek innovative solutions to meet the needs of the beneficiary community.”

Under the Hawaiian homestead program, created in 1921 by federal law and administered by the state since 1959, DHHL beneficiaries must be at least 50% Hawaiian and can receive 99-year land leases for $1 a year but pay for or build their own houses.

Roughly 28,700 applicants are on a waitlist for homesteads, and more than 2,000 beneficiaries have died while on the list, according to an analysis by the Honolulu Star-­Advertiser and ProPublica.

The agency has about 10,000 lot lessees but has struggled for over 60 years under state control to do more, in part because of relatively little past funding and expensive infrastructure costs to develop its land, which is often outside urban areas.

The Sovereign Council of Hawaiian Homestead Associations and the Association of Hawaiians for Homestead Lands previously criticized DHHL’s plan and have produced their own plan that was sent Monday to the Legislature and newly inaugurated Gov. Josh Green with hope that it gets implemented by Green’s administration, which is still being formed.

SCHHA and AHHL contend that DHHL should put the $600 million mostly toward expanding its land holdings and helping beneficiaries pay for homes leveraged by private capital, while relying on the Legislature to provide bond financing to pay for lot development on land the agency already owns.

The competing plan recommends that $345 million be used to buy land or existing homes for beneficiary use and $138 million be used to help beneficiaries with home purchase costs including down payments, closing costs and interest rate buy-downs.

Another $51 million is recommended for mortgage and rental subsidies, and $60 million to develop homes.

The plan from the two nonprofits also includes recommendations to help DHHL be more productive, including an expansion of procurement capabilities and creation of an internal building permit division to sidestep a backlogged county permitting system.

“Our plan boldly leverages that support maximizing more land awards, building more housing units of all types; and, even acquiring more housing units and more land,” KipuKai Kuali‘i, SCHHA Policy Committee chair, said in an email. “We believe we absolutely have to maximize the impacts of this investment by creating transformational change at our State Dept. of Hawaiian Homelands. We can’t afford to have business as usual. Far too many of our beneficiaries have been suffering without housing opportunities for far too long.”

Lawmakers gave DHHL wide latitude to spend the $600 million under Act 279, also referred to as the Waitlist Reduction Act.

The money can be spent on developing or buying lots and homes, principal residence mortgage or rental subsidies for beneficiaries, funding to help waitlist applicants buy a home, and “other services as necessary to address the waiting list.”

Any sum not encumbered by June 30, 2025, reverts to the state general fund.

DHHL noted in its final report that a provision in the state Constitution limits expenditures of biennial appropriations only one year beyond the biennial period, which means up to June 30, 2024, under Act 279. So the agency is seeking a bill that would re-appropriate the $600 million in the subsequent biennial period to allow spending up to June 30, 2025, as intended.

Other draft bills proposed by DHHL would exempt homestead lot and home expenditures from state general excise taxes, repeal a 2024 sunset on an exemption for DHHL paying state school impact fees and repeal a 2024 sunset on an exemption for DHHL obtaining county affordable-housing credits for lot or home production.

Such credits can be sold by DHHL to home developers so those developers don’t have to produce affordable housing as part of real estate projects that require such contributions under county regulations.

Two other bills sought by DHHL would allow the agency to govern historic-preservation assessments for its projects instead of the State Historic Preservation Division, and would allow use of interim rules for up to 18 months without being subject to state public notice, public hearing and gubernatorial approval requirements.

Under the spending plan, nearly all of the $540 million to develop lots and some rental housing is focused on accelerating work on 20 DHHL subdivisions already in various stages of production — from planning to design to permitting to contracting for construction.

These include 781 lots in Kapolei for $149 million and 600 in Ewa Beach for $48 million. In Maili, $60 million is envisioned to produce 144 lots and a 136-unit rental town-home project.

On Kauai, $28 million is slated to pay for 75 residential lots and 115 agricultural and pastoral lots.

On Maui, $105.5 million is expected to allow development of 411 residential lots and 50 subsistence agriculture lots.

Spending on Molokai is projected to result in 20 residential lots and a 16-lot agricultural subdivision for $9.5 million.

On Hawaii island, DHHL anticipates producing 400 residential lots and 40 subsistence agricultural lots for $73 million.

For Lanai, $2 million is slated to be spent on off-site infrastructure to allow subsequent development of 75 lots.

DHHL notes in its plan that actual construction costs will influence how much development and financial assistance can be delivered with the funding.