Kukui‘ula project redux

NAWILIWILI — The Kaua‘i County Council Planning Committee agreed Wednesday to revise major conditions of a housing agreement reached years ago between the county and developers of a massive South Shore project.

A key part of the agreement involved the creation of affordable housing in perpetuity in the Port Allen-to-Koloa area.

The committee in a three-to-two vote agreed to allow significant changes that are more favorable to developers A&B Properties and Kukui‘ula Development Hawai‘i.

The changes allow the developers to sell the homes in the open market after 14 months if qualified buyers can’t be found, and also reduce a critical buy-back clause that puts the homes in the open market after 25 years of ownership instead of the previously agreed upon 90 years.

The council approved the Kukui‘ula project five years ago —  which included 1,500 high-end homes, a golf course and a shopping center — in exchange for 75 affordable homes for first-time homebuyers.

Employees of the project, as long as they meet certain criteria, have the first dibs on 60 percent of the affordable houses. The remaining homes will be available for qualifying workers within the county.

Those houses, under the original agreement, could only be sold in the open market after 90 years. Owners would gain one percent of shared equity each year, plus improvements made, in case the house would be sold before that period.

The county or the developers, in the original agreement, had the right to buy back the houses if they were sold before 90 years. The houses would then go back into the market as an affordable home.

The economic downturn, however, has prompted the developers to ask the council to loosen up the agreement. The committee, after several deferrals, approved the changes.

Councilman Daryl Kaneshiro introduced the amendment reducing the buy-back clause to 25 years. Qualified buyers will retain four percent of shared equity each year, which at the end of the 25-year buy-back clause will accumulate to 100 percent of gained equity in the house.

But perhaps the most significant change — which prevented Council members Tim Bynum and Lani Kawahara from voting in support of the amendment — allows the developer to sell the affordable homes in the open market if qualified first-time buyers can’t be found 14 months after the homes go up for sale.

The homes are supposed to go into the market as affordable housing four months before completion, and remain as such for 10 months thereafter. If nobody qualifies, the homes will then go into the open market. In that case, the developer will retain 75 percent of the difference from the sales in the open market, minus the price tag of the house as an affordable unit. The remaining 25 percent will go to the county.

The County Housing Agency recommended the 25-year buy-back change, but made no comment on the clause letting the houses go into the open market after 14 months of advertisement.

Kawahara said the developers were doing what they were supposed to, asking for more profitable terms. The council, she said, wasn’t obligated to accept the terms.

Councilman Derek Kawakami said other projects, despite major differences, got more concessions in past agreements approved by the council.

Kaneshiro said that by denying the Kukui‘ula project developers what they were asking for, it would set precedence to other developers, even small-scale ones.

“Being a Libra, I like to balance on the scale,” Kaneshiro said. “I’m satisfied that the amendment I have on the floor is a fair and balanced amendment.”

Former Councilwoman JoAnn Yukimura said the county will never be able to afford land in Po‘ipu again, and asked the council to consider not approving the changes.

“Look at how many young families there are on our island,” Yukimura said. “We’re going to have to provide housing for them.”

Yukimura said affordable housing has to last more than one generation, and the only way to do that is by making sure that the homes that developers build with “huge subsidies” last longer than one generation.

“This is a very critical issue,” she said. “I urge you to look if the 90-year buy-back doesn’t work, then find out some other way to make it work.”

Yukimura said if it is true that the 90-year buy-back is causing financial problems to the developers, then the council should get “at least for the record,” a written statement from the developers’ finance department.

Committee Chair Jay Furfaro also supported the amendment. He said the one-percent equity policy “doesn’t even keep up with inflation.”

About 38 percent of the population, he said, falls into a wage bracket that has not been offered affordable homes in the last 10 years, but at the same time could not afford home ownership in the open market.

This agreement, according to Furfaro, addresses some of those community members who fall under this bracket, which includes professionals such as police workers, firefighters, teachers, county workers and others.

Bynum introduced a subsequent amendment to disallow the sale of the homes in the open market, but it was voted down three-to-two.

He then introduced another amendment to allow most the profits from the sale of houses in the open market to go to county coffers. The developers would recoup only the investment in each house that didn’t sell to a qualified first-time buyer.

Bynum’s second amendment was also voted down three-to-two, with he and Kawahara voting in favor.

Furfaro said the major problem with Bynum’s second amendment was that the calculation didn’t address the loss that developers had with houses sold to qualified buyers.

The full council will likely consider the issue next Wednesday for final approval.

Go to www.kauai.gov for more information.