Almost 280 people live in the Front Street Apartments, an affordable housing complex in Lahaina on Maui’s western shore. In two and a half years, their rents will convert to market rates if state lawmakers don’t take action to keep the 142 units affordable.

The House Committee on Housing advanced Senate Bill 1266 to do just that Thursday after discussing what Chairman Rep. Tom Brower called a “very delicate issue.”

Front Street Affordable Housing Partners developed the apartment complex in 2001, relying on state and federal low-income housing tax credits for financing.

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All 142 units were “expected” to remain affordable for 50 years, the bill says.

But the developer later opted for a qualified contract, an option that allows it to raise rents in 2020 rather than after 50 years.

In 2009, the Hawaii Housing Finance and Development Corporation, the state agency in charge of administering state and federal low-income housing tax credits, closed that loophole.

But that didn’t help the Lahaina residents, who are still left wondering if they must move come 2020.

“There is a critical affordable rental shortage on Maui,” Darren Ueki, executive director of HHFDC, said at the hearing. The agency submitted testimony in support of the bill.

Testimony also poured in from tenants of the complex. Among them were hotel workers, single mothers, survivors of domestic abuse and people with disabilities.

One piece of testimony came from Ratna Heilscher. She said she and her husband both work as educational assistants at King Kamehameha III Elementary School.

“We really can’t afford to live anywhere else,” she said.

Half of the units in Front Street Apartments are reserved for people making 50 percent or less of area median income. According to the U.S. Department of Housing and Urban Development, that’s $28,200 per year for an individual and $40,250 for a family of four in Maui County.

The second half of the units are reserved for individuals with slightly higher incomes, up to 60 percent of area median income.

The bill would require the state to ensure the complex remains affordable.

It calls for the state to either enter negotiations with the developer, or buy the land. If neither of those options occur in a reasonable time, the state can acquire the property using eminent domain.

In an amendment to the bill Thursday, Bowers extended the length of time the complex would need to remain affordable from 2027, what the bill originally called for, to 2032.

Maui County Mayor Alan Arakawa submitted testimony in support of the bill. He requested the units be kept affordable for the 50 years originally anticipated.

Is This A Trend?

Kent Miyasaki, a spokesman for HHFDC, called the Front Street Apartments an “isolated case.”

Unlike other affordable housing complexes in the state built with low-income housing tax credits, Front Street Apartments sits on private land rather than public.

With a private landowner, the developer faces rising prices on the lease. With rising land costs for the developer, maintaining affordable units becomes economically unfeasible.

William Meyer, a lawyer representing the developer, provided the sole testimony in opposition to the bill, which he called “palpably unfair to the developer.”

While the details make it unique, this would not be the first time the state has intervened to keep a housing complex affordable.

Cory Lum/Civil Beat

In 2007, lawmakers passed a bill to keep 389 of 857 units in Kukui Gardens affordable.

Sen. Karl Rhoads, then a representative, introduced the bill as the lease on the downtown Honolulu affordable complex approached expiration.

“It’s a lot easier to preserve affordable housing than it is to build it from scratch,” Rhoads said.

Purchasing the property cost the state $151 million.

“At some level we were lucky,” Rhoads said. “That was a year when the economy was going well and we could afford to do that.”

The combination of pension shortfalls for state employees and retirees, and lower than predicted growth this year might leave the state more strapped for cash and less willing to fund the bill.

The bill’s next hurdle is the House Finance Committee, chaired by Rep. Sylvia Luke.