A legislative committee has declined to support a five-year block on the state raising ground-lease rents for about 100 residential and farm tenants in Waiahole Valley, where tension exists over potential evictions.

The Senate Committee on Water and Land recently deleted the moratorium provision in a bill aimed at giving the tenants more time to avoid a planned 560% increase in ground rent, which the state has subsidized at far below market rates for decades.

Senate Bill 1195 could be amended again by other committees, but the unfavorable initial reception isn’t a good sign that the Legislature will insert itself into what has been a complicated and troublesome matter for the state agency that owns the land and has offered tenants what it considers a reasonable increase representing 50% of market rent.

Many tenants contend that the state should maintain more deeply discounted rent to sustain rural affordable housing and small family farming in the Windward Oahu valley largely acquired by the state in 1977 to stop a private landowner’s urban redevelopment plan.

“Our goal is lease terms that support sustainable agriculture,” Judith Clark told the Senate committee during a Feb. 15 hearing on behalf of 10 farm tenants including herself. “Potentially a (560%) increase in lease rents on the agricultural lots will make it unfeasible for farming to continue.”

There are about 40 farm lots, most or all of which contain houses, and about 60 residential lots in the subdivision owned by the Hawaii Housing Finance and Development Corp., a state agency mainly charged with helping private developers finance affordable-housing projects.

A predecessor to HHFDC became the landlord in 1977 when then-Gov. George Ari­yoshi had the state buy the property under threat of condemnation to preserve the rural community and defuse tenant protests against the prior landowner who had jacked up rents and attempted evictions.

However, it took the state until 1998 to come up with 55-year ground lease contracts for tenants.

Under lease terms, rent over the last 25 years has gone up once for residential lots and not at all for farm lots. The leases specify rent renegotiation for a 15-year term commencing June 30, and stipulates that if HHFDC and a tenant can’t agree on new rent by April 1 then a decision will fall to an arbitrator for residential leases and mediation possibly followed by arbitration for farm leases.

Current farm lot rent is $100 a year per acre, plus $500 a year for a residence occupying up to 7,500 square feet of land. The annual rate would rise to $660 per acre plus $3,300 for a house on up to 7,500 square feet. Farm tenants also must pay 0.9% of their gross farm income as rent.

HHFDC said monthly rent for a median-sized 8-acre farm lot with a house is $108, and would rise to $713 through July 2038 under its offer.

For residential lots, current rent is $600 a year plus 35 cents per square foot for lot area beyond 7,500 square feet. This annual base figure would rise to $3,960 a year for a 7,500-square-foot lot.

HHFDC said the median- size residential lot is a half-acre, where monthly rent would rise to $745 from $119 through July 2038 under its offer.

The agency said its offer represents a balance to maintain below-market rents while reducing by half what has been a $1.1 million annual deficit managing the rural subdivision because of low rent and a potable water system that is expensive to operate and maintain.

The $1.1 million comes out of a fund meant to help build affordable housing.

Moratorium debate

Denise Iseri-Matsubara, HHFDC director, told the committee in written testimony that the agency is in a tough position to balance the responsibility of using taxpayer revenue while preserving the rural community, which is on land zoned for agriculture and includes a sprinkling of private fee-simple residences, some Department of Hawaiian Home Lands lots, Waiahole Elementary School and the site leased by Waiahole Poi Factory.

“We realize that subsidizing specific parts of the community to cover a homeowner’s ground rent is not necessarily good public policy,” she wrote. “Offering to freeze lease rents for five years at current rates, which this bill attempts to do, would amount to ‘kicking the can down the road.’”

Iseri-Matsubara also cautioned that intervening in lease rent could negatively influence the economics of 380 residential lot leases at the Ulu Wehi subdivision in Waianae and 134 in Waima­nalo Village.

The state Department of the Attorney General opposed the bill in part on grounds that a moratorium would apply only to a special group and thus violates the state Constitution.

Proponents of the bill said a moratorium would provide more time for tenants to negotiate a smaller increase and possibly find some kind of new land ownership or management structure involving a nonprofit or a community land trust, or one or more state agencies.

Some of those options have been explored previously to no avail, though the administration of recently elected Gov. Josh Green is trying to see if some new solution can be found.

Nick Reppun, whose father and two uncles have collectively farmed about 20 acres in Waiahole Valley since before the state’s acquisition, told the Honolulu Star-Advertiser that the original lease rents were based in part on challenging conditions in the valley that include slopes, high rainfall and flooding issues.

“Not much has changed,” he said. “We want to see something that is supportive of the kind of agriculture that we’re engaged in.”

The Reppun family farm includes wetland taro, sweet potato, a wide range of fruit trees and different seasonal crops that in the past have included sweet corn and peanuts. The family sells its harvest once a week at Kalihi Valley District Park through the city’s People’s Open Market program.

The farm in the back of the valley is on a 28-acre lot also shared by one other family. All four families each have a house on the property.

Reppun said his family is willing to pay a moderate increase for the residential component of the lease but has concerns over the proposed farm rent increase. For 28 acres of farmland, HHFDC’s proposed base rent is $18,480 a year, up from $2,800.

As of earlier this month, eight farm tenants and four residential tenants had accepted new rental rates since HHFDC produced its offer in July.

Eviction fears

Though some original lessees have sold their property interests under lease assignments to newcomers in recent decades, there is concern that some longtime tenants will refuse to pay higher rent and resist eviction as was done 45 years ago.

In that instance, the community, aided by outside supporters, blocked roads, delivered group chants with messages including “They say we go, we say hell no!” and burned eviction notices after court challenges failed against Elizabeth Loy McCandless Marks, the wealthy landlord who attempted to develop 6,700 homes in Waiahole and neighboring Waikane Valley with local developer Joe Pao.

Longtime Hawaii community activist John Witeck urged the Water and Land Committee in written testimony to freeze rents at current rates for 10 years and apply any necessary increases incrementally over time.

“The state owes that to these farmers and citizens who took such a significant stand to protect ag lands and their lifestyles and halt the high-priced development of their beautiful and productive valley,” he said. “If leases are not extended at a reasonable price and this results in leaseholders unable to pay the higher lease fees, many of us again will support the people there and block the highway, if necessary, to block any unjust evictions.”

Nani Medeiros, a veteran Hawaii affordable-housing advocate recently appointed by Green as the state’s chief housing officer, is not taking a position on the moratorium proposal or what constitutes reasonable rent for Waiahole Valley tenants. But she is adamant that there be no evictions over increased rent.

“No one’s getting evicted,” she said. “No one’s getting displaced — not at least on our watch.”

As amended, SB 1195 requires HHFDC to give the Legislature a report by December detailing progress and results of lease rent renegotiations and recommending whether the agency’s role managing the valley should be transferred to a different state entity.