Lawmakers target personal gains from homestead sales

As the state Department of Hawaiian Home Lands gears up to deliver a historic number of new homestead leases, some Hawaii lawmakers want to block existing or former lessees from acquiring more homesteads while long-unserved applicants languish on a waitlist.

The effort is aimed at combating a longstanding practice known as “list jumping,” which critics say allows more affluent Native Hawaiians to purchase homesteads from lessees at the expense of beneficiaries who have spent decades on DHHL’s homestead application waitlist or, in at least 2,100 cases, died waiting.

“This has been going on for a long time,” state Sen. Kurt Fevella, a Republican who represents the Ewa Beach-Ocean Pointe- Iroquois Point area, told DHHL administrators at a legislative briefing in January.

Lawmakers in past years have unsuccessfully attempted to prevent the practice, but the goal has become more imperative for some given the Legislature’s $600 million appropriation to DHHL last year — a historic sum envisioned to accelerate development of 2,727 homestead lots over the next couple of years.

The renewed push against list jumping is being made via Senate Bill 741, which in part proposes to give the Hawaiian Homes Commission, a board overseeing DHHL, a first option to pay a fair-market appraised price to acquire homestead leases from beneficiaries who intend to sell for personal gain. This way, reclaimed leases could be awarded or resold to some of the roughly 28,700 applicants on DHHL’s waitlist.

SB 741 also proposes to bar someone who sells their homestead for personal gain from going back on the waitlist.

Sen. Lynn DeCoite (D, East and Upcountry Maui-Molokai-Lanai), the lead introducer of the bill backed by the Senate Native Hawaiian Caucus, describes the issue targeted by SB 741 as a “big problem” where beneficiaries are buying their way into homesteads while others wait on the list.

“The lease was never meant to be sold,” she said.

There is widespread acknowledgement that list jumping is a troubling practice, though SB 741 has drawn opposition from some beneficiaries over concerns about unintended consequences, while DHHL does not favor the proposed legislation.

Opponents of the measure say DHHL lessees should not be impaired from capitalizing on the value of their property or acquiring a new lease after selling for any reason, including needs for a different home or wanting to pass a homestead to a family member.

Homestead commodity

Under DHHL’s homestead program, initial lease awards cost a beneficiary $1 a year for renewable 99-year leases, and beneficiaries, who must be at least 50% Hawaiian to acquire a lease from the agency, either buy or build their own house that they own.

Lessees may transfer or sell their homestead to someone else who is at least 50% Hawaiian and not a current lessee, though an acquirer doesn’t need to be on the waitlist. Lessees also may convey their lease to certain family members who are at least 25% Hawaiian.

The rules have enabled some beneficiaries to acquire one lease after another for purposes that include flipping homes for profit and conveying multiple properties in succession to relatives.

According to a Honolulu Star-Advertiser/ProPublica investigation, DHHL and other public records show that more than 450 Hawaiians have been able to acquire multiple residential leases in the past 25 years even as homestead development slowed to historic lows. Nearly a third of them weren’t on the waitlist at the time of the acquisitions, meaning they list jumped through purchases or transfers over those waiting their turn.

Hans Lundberg, a Honolulu police officer who is 25% Hawaiian, has bought five DHHL leases within two decades relying on his mother, who is 50% Hawaiian, as an initial buyer.

Lundberg, who declined to comment on his acquisitions, initially bought an undeveloped leasehold DHHL lot from another lessee in 2005 for $45,000. He then built a $180,000 house on the lot and sold it two years later for $375,000.

Over the next 15 years, Lundberg bought and sold four more leases and amassed more than $400,000 in profits from his homestead sales, according to DHHL trust and city documents.

Helen Wai, a contractor with DHHL, acquired four residential leases, including one she still holds and others that were conveyed to members of her extended family.

Wai defended the transactions as deals with willing sellers. “The lessee is the one who has to make that decision,” she said.

Kalena Pelekai-Wai, whose mother is Helen Wai, obtained four homestead leases from 2009 to 2017 via transfers while he was working for the University of Nevada at Reno, had Nevada addresses as his residences and was voting in elections there, records show.

DHHL rules require a lessee who gets a lease through a transfer to occupy the property immediately, though a DHHL spokesperson said that Pelekai-Wai, who is 50% Hawaiian, obtained waivers to the occupancy rule spanning about seven years.

Pelekai-Wai did not respond to emails and phone calls seeking comment.

DHHL’s view

DHHL representatives told lawmakers at hearings on SB 741 that there are valid concerns over what the bill aims to address, but also said the problem is a small one and that carrying out provisions in the bill could have unintended negative consequences for some beneficiaries.

The agency produced a report in 2019, at the direction of the Legislature, that examined instances of homesteaders selling their leases for personal gain and then going back on the waitlist.

The report said there were 176 such deals, and that this relatively small number did not warrant legislative action.

DHHL has about 10,000 lessees for mostly residential but also agricultural and pastoral homesteads.

But the study compared the 176 lease transfers for personal gain, which excludes transfers to family members, with roughly 45,000 applicants for homesteads that include some beneficiaries who apply for more than one type of lease.

The agency also noted that it instituted a rule change in 2017 to prohibit a lessee from selling vacant lots or undivided interests in homestead lease awards to stop awardees from profiting off leases where they made no property improvements.

Still, much of the value for homesteads with homes is in the land lease.

In one instance, the owner of a DHHL homestead in Waimanalo demolished an old house on the property in 2015 and replaced it with a new 1,288-square-foot home built for $276,000. The leasehold property was sold last year for $850,000.

In one of DHHL’s newer subdivisions, Kanehili in Kapolei, a five-bedroom house built in 2010 for $232,320 was resold in 2016 for $490,000 and again in 2020 for $630,000. A year ago, it was listed for $700,000 and sold Thursday for $750,000. The city for property tax purposes values the structure at $323,100 and the land at $480,500.

Ikaika Anderson, DHHL’s interim director, said in written testimony to members of the Senate Judiciary Committee at a Feb. 24 hearing that the Hawaiian Homes Commission intends to form a permitted interaction group to address the issue after a brief discussion at the commission’s Feb. 21 meeting.

DeCoite said DHHL’s position is an old one predating current leadership, and remains unacceptable in her view.

“DHHL fails to acknowledge that they have a problem,” she said. “They choose to do nothing.”

Uncertain consequences

A few individual testifiers on SB 741 said they oppose the measure because it could hurt some homesteaders who are forced to sell their property.

Marlene Kamuela Purdy said in written testimony that a few families have superseded the DHHL lease award process, but that the proposed legislation could hurt homesteaders who may have to sell their property to avoid foreclosure and would be penalized from obtaining another lease if their finances improve.

“This is a bad bill for all, including the State,” Purdy said.

Johnnie-Mae L. Perry told the committee in written testimony that a DHHL lessee should be treated no different than a traditional homeowner who can sell their home for a profit or pass it down to help their children.

Sen. Maile Shimabukuro (D, Nanakuli-Waianae-Makaha), chair of the Senate Committee on Hawaiian Affairs, noted that affordable housing subsidized by other state agencies is sold with provisions that allow the state agency to buy back the home for a price that splits equity with the seller, so the home can be resold as affordable housing. Shimabukuro recommended amending SB 741 to add the buyback provision, which was done Feb. 2.

DeCoite supports the buyback provision but would like the purchase price to be based on the appraised value of the home and not the land lease.

SB 741 awaits a floor vote from all Senate members after unanimous passage by the Senate Committee on Hawaiian Affairs and the Senate Judiciary Committee. If the full Senate approves the bill, it would cross over to the House of Representatives for consideration.

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Former staff writer Rob Perez contributed to this report.