DHHL buying land to speed up new homesteads in Hawaii

The state Department of Hawaiian Home Lands might use around one-third of a historic $600 million legislative appropriation by the end of June, which marks one full fiscal year out of three given to deploy all the money helping beneficiaries.

Agency leaders briefed a panel of state lawmakers Thursday at the state Capitol about how new homestead projects recently added to a development pipeline will enlarge initial use of funding and help enable DHHL to use the full appropriation by a June 30, 2025, deadline.

“We’re getting the job done,” Kali Watson, the agency’s director, told members of a House of Representatives working group established in January to monitor DHHL’s work to use the $600 million the Legislature appropriated in 2022 to serve more of the roughly 28,700 applicants on DHHL’s waitlist for homesteads.

Watson, who led DHHL from 1995 to 1998 and got the job again in February via an appointment by Gov. Josh Green that was confirmed by the Senate in March, told the House panel that he expects to exhaust the $600 million by the deadline and still have funding needs for more homestead projects.

“We’re going to need the entire $600 million,” he said. “We’re probably going to need more money. … It’s an exciting time for our program.”

Rep. Troy Hashimoto, chair of the six-member working group and chair of the House Committee on Housing, called DHHL’s presentation a promising good start.

“We’ve made a lot of progress in a short amount of time,” Hashimoto (D, Wailuku-Waikapu) said at the briefing.

DHHL presented a list that included eight projects that collectively cost $192 million and are at a stage where money is encumbered for spending under a contract or could be encumbered by the end of June.

Nearly half of the $192 million is for one project where DHHL has arranged to buy land in Waiehu on Maui for $12 million and spend another $83 million to develop 366 homestead lots.

This $95 million project is one of four stemming from a request for proposals DHHL issued in November seeking to buy land or residential projects from private landowners or developers.

The Waiehu project involves an accepted proposal from a company affiliated with Maui developer Everett Dowling. A draft development agreement is being reviewed. Stewart Matsunaga, DHHL’s acting land division administrator, said the agency potentially could encumber the $95 million by June 30. If not, it is expected to fall into the next fiscal year and still would represent nearly one-sixth of the Legislature’s total appropriation.

Another Dowling company proposal to sell DHHL land on Maui and develop a subdivision represents the second-biggest use of funding this fiscal year under DHHL’s plan.

This project in Wailuku has costs of $5 million for land acquisition and $38 million for development expected to be encumbered by June 30 and would produce 207 lots.

Watson told the House panel that deals to acquire land without needed costly infrastructure extensions can accelerate production of homesteads because much of DHHL’s own land isn’t close to roads and other utilities, which adds a lot of time and expense to homestead production.

DHHL published another request for proposed land or residential project acquisitions Monday.

The biggest DHHL project with money already encumbered for spending is a 161-lot subdivision called Pu‘unani in Wailuku where a groundbreaking ceremony was held last week.

This project has been in the works on DHHL land since 2018 and involves Dowling developing 161 lots and building 137 homes for beneficiaries. DHHL awarded a $17 million contract to develop the lots. Another $5.5 million is encumbered for a water tank serving Pu‘unani. Beneficiaries selected for homestead leases are responsible for financing their homes.

Another project with money encumbered by DHHL involves 82 lots in Hanapepe on Kauai where an $18 million construction contract has been awarded to Hawaiian Dredging Construction Co.

A couple of deals under which DHHL has already spent some of the $600 million include paying $8 million to another state agency for land on Oahu and paying Avalon Development $2 million for land on Hawaii island that DHHL intends to develop after a higher-priority project in the area.

DHHL submitted a $600 million spending plan to the Legislature in December. That plan, approved by the Hawaiian Homes Commission, projected that around 3,000 homesteads could be produced, and included an estimated cost breakdown by project, many of which have been in the works for years.

The original plan projected delivery of 2,727 homestead lots and 177 rental apartments using $540 million that also included land acquisitions. Another $60 million was for other beneficiary aid that could include help with down payments to buy a home and rental assistance.

The biggest projects in the original plan were 781 lots in Kapolei costing $149 million, 600 lots in Ewa Beach for $48 million and 144 lots along with a 136-unit rental townhome project in Maili for $60 million.

DHHL’s use of the $600 million does not require lawmaker approval, though any sum not encumbered by June 30, 2025, reverts to the state general fund.

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.

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 DHHL land that is often outside urban areas.