The state Department of Hawaiian Home Lands is returning, in a big way, to a practice of issuing unconventional land leases to beneficiaries on its homestead waitlist.
DHHL plans to resume issuing undivided interest lease awards, which are sometimes referred to as “paper leases” and essentially promise homestead lot leases at an uncertain future date for a specific subdivision project where the land isn’t ready for near-term use because it lacks road and utility infrastructure.
Kali Watson, a former DHHL director tapped in 2023 to lead the agency again, let members of a state House of Representatives committee know during a January briefing that he plans to issue undivided interest leases this year, and later clarified that he aims to issue nearly 3,700 such awards at numerous envisioned projects with uncertain funding prospects and development timetables.
The planned move represents a revival of a nearly 20-year-old program where close to half of all such leases still haven’t been converted into lot leases upon which to live.
Watson’s initiative also comes at a time when DHHL is already working to speed up lot deliveries with $600 million appropriated in 2022 by the Legislature under the Waitlist Reduction Act.
There are good intentions behind the undivided interest lease program, and support from many beneficiaries. But DHHL’s past performance and uncertain timing for converting a new round of such leases into homesteads for beneficiaries is also resurrecting some dim views of the practice.
“I don’t think it’s the best idea,” said Leona Kalima, a DHHL beneficiary who was the lead plaintiff in a historic lawsuit against the agency over homestead claims that the state settled for $328 million in 2023. “I think it’s kind of a cop out.”
Paper lease trail
DHHL’s earlier use of undivided interest leases happened in 2005 and 2006 with 1,434 such leases being awarded at seven planned subdivision projects on Oahu, Maui, Hawaii island and Kauai.
One stated benefit of the program is to give beneficiaries, who pay $1 a year for a lot lease but must pay for their home, time to improve financial conditions to qualify for a home loan.
The other stated benefit and goal is to allow beneficiaries, who must be at least 50% Hawaiian, to pass a paper lease to a family member with less than 50% Hawaiian blood but at least 25% in instances where the leaseholder dies. Many beneficiaries have died on the waitlist, and in such circumstances can’t have successors who are less than 50% Hawaiian take their place.
DHHL, however, was viewed by some observers in the mid-2000s as using the program to artificially reduce the embarrassing size of its waitlist, which around 2005 had about 22,000 applicants.
From 2003 to 2006, during the administration of Republican Gov. Linda Lingle, the agency heralded awarding nearly 2,300 residential homestead leases compared with 5,941 awarded in the prior 82-year history of the Hawaiian Homes Commission Act.
Yet more than half the awards during those four years were undivided interest leases.
Officials in Lingle’s administration dismissed criticism that a motivation for the program was to reduce waitlist volume with unrealistic expectations for converting undivided interests into homestead leases.
“We won’t hand out an undivided interest award until we know the funding (for subdivision development) is secure,” Lloyd Yonenaka, a DHHL spokesperson, said in 2007. “They have a timeline.”
Blossom Feiteira, a waitlisted beneficiary advocate, questioned in 2007 whether DHHL had the resources to make the promised lots a reality.
“It’s all good and well to go out there and talk about this and start making all these wonderful awards,” she said at the time. “But if you don’t have the money to back you up, how long are we going to have to wait for those awards?”
At the outset of the program under then-DHHL Director Micah Kane, the agency’s goal was to have house lots ready for delivery within 10 years, though officials said typical conversion of undivided interest leases into house lots ready for use was expected to take one to three years.
Actual results came up far short.
After about 16 years, 774 of the 1,434 undivided interest leases awarded in 2005 and 2006 had not been converted to homestead leases with beneficiaries moved into new homes as of June 30, 2022, according to DHHL’s most recent annual report.
One project that took a decade to convert was the 45-lot Kakaina subdivision in Waimanalo, where undivided interest lease awards were made in 2006 and initial lot awards were made in 2016. Still, today the subdivision is only partially filled with homes.
Other projects from 2005 and 2006 with undivided interest leases include East Kapolei I on Oahu, Waiohuli on Maui, Anahola on Kauai and Villages 4 and 5 of La‘i ‘Opua on Hawaii island.
Under the undivided interest award program, a beneficiary accepting a paper lease for a project has a one-time option to rescind the award and go back on the waitlist at their original place by application date.
Program proponents
All the 2005 and 2006 undivided interest lease awards happened after Watson’s first tenure at DHHL, which ran from 1995 to 1998 under then-Gov. Ben Cayetano. But Watson in 2007 called them an innovative and a smart approach because they give beneficiaries a tangible goal.
“Now you’ve got a whole ton of homesteaders that are excited and looking forward to that date, and positioning themselves to make their dreams a reality versus just sitting on the waiting list, dying and having nothing to pass on,” he said at the time.
During the January briefing for the House Finance Committee, Watson said making new undivided interest lease awards would prevent more relatives of beneficiaries on the waitlist from missing out on homestead leases.
“We’re going to do that this year,” he said, indicating that such leases are planned at a future phase of DHHL’s East Kapolei II project subject to funding.
Watson told the committee that undivided interest award recipients can look at model homes for an existing phase and see lots on plans that they might like.
“They also can have the assurance that they’ll have a lease, and should the unfortunate situation arise (of a paper leaseholder dying), they at least have an opportunity for the successor to take over,” he said.
At least 2,100 beneficiaries have died while on DHHL’s waitlist, which now has roughly 28,700 applicants.
Robin Danner, immediate past chair of the Sovereign Council of Hawaiian Homestead Associations, said one policy recommendation from the organization in 2022 to then-gubernatorial candidate and now-Gov. Josh Green was for DHHL to issue undivided interest leases to every eligible person on the agency’s waitlist.
KipuKai Kuali‘i, current SCHHA chair, strongly supports undivided interest lease awards solely for addressing the succession issue.
“As SCHHA chair, I’d say for myself and many homestead leaders, we’ve always been deeply troubled by waitlist beneficiaries dying on the state DHHL’s waitlist without being able to leave their legacy Hawaiian homes lot award to a successor,” he said in an email. “That’s a devastating loss to their successor descendants for generations to come in perpetuity. … If anything, I think of it more as a sort of insurance and a way of providing a sense of peace to those kupuna in knowing that all the years waiting was not in vain; and, that they are able to keep their legacy in their ‘ohana.”
Waiting time
How long a paper leaseholder might wait for a homestead lease can be incredibly uncertain, and often doesn’t match beneficiary expectations.
According to a 2020 statewide DHHL lessee survey, 43% of undivided interest beneficiaries expected a lot to be available in one year.
The next highest expectations on wait times from survey respondents were two years (18%), less than a year (13%) and four to five years (13%). Only 4% expected a lot to be available after eight years.
Watson’s vision includes awarding undivided interest leases this year for 250 lots in DHHL’s East Kapolei II project subject to obtaining $60 million for developing the phase, which would be subsequent to developing 450 lots at East Kapolei II already funded at a cost of $145 million from the 2023 legislative appropriation.
During the House Finance Committee briefing, Rep. Micah Aiu (D, Moanalua-Aliamanu-Foster Village) wanted to get an idea of when the funded 450-lot phase might be delivered, but he couldn’t get an answer after pressing for one several times.
DHHL anticipates being able to use $600 million of the 2022 appropriation to produce 2,180 lots, and Watson said existing paper leaseholders will have a priority for those. The agency also has longer-term plans to produce another 3,659 lots for an estimated $626 million if it can obtain such funding from state and federal sources, and Watson aims to issue undivided interest leases for these.
“When you look at the history of the program in over the 100 years, we have about 10,000 (homestead leases),” Watson said at the briefing. “That’s about 100 per year, which is not very impressive. We’re trying to turn that around.”
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Undivided interest lease hangover
From 2005 to 2006, the state Department of Hawaiian Home Lands awarded 1,434 “paper leases” for future homestead lots, but has been slow to convert most to lot leases.
Conversions by fiscal year:
2006: NA
2007: NA
2008: NA
2009: NA
2010: 134
2011: 68
2012: 3
2013: 3
2014: 0
2015: 8
2016: 12
2017: 11
2018: 16
2019: 73
2020: 22
2021: 16
2022: 9
Unconverted as of June 30, 2022: 774
Source: DHHL annual reports
