NAWILIWILI — An agreement reached years ago between developers of a massive South Shore project and Kaua‘i County Council members led to approval of a project including 1,500 high-end homes, a golf course and a shopping center in Kukui‘ula, in
NAWILIWILI — An agreement reached years ago between developers of a massive South Shore project and Kaua‘i County Council members led to approval of a project including 1,500 high-end homes, a golf course and a shopping center in Kukui‘ula, in exchange for 75 affordable homes for the community and other concessions.
The deal has been said and done for five years, but now A&B Properties and Kukui‘ula Development Hawai‘i are saying they want changes out of fairness and to adapt to the economy’s downturn.
The council Planning Committee revisited the issue Wednesday at the council chambers here, but deferred any decision for two weeks.
“If this thing doesn’t work, let’s find another way to make it work, but let’s not compromise the goal of long-term perpetuity (of affordable housing),” said former Councilwoman JoAnn Yukimura about the agreement.
Yukimura was instrumental in reaching the original agreement when she was on the council. The affordable homes have a buy-back clause of 90 years, a clause co-created by Yukimura and the developers.
In the present agreement, if qualified buyers can’t be found at the end of a certain sales period, unsold homes become affordable rentals until finally sold to qualified buyers. The homes can’t be sold on the open market for 90 years, thus preserving their affordability.
The agreement was reached in 2005 when the real estate market was still booming.
Economy peaked, crashed
But the economy peaked and crashed since then, so developers are asking the council to re-negotiate the terms.
Gary Mackler, housing development coordinator at the County Housing Agency, said that the developers have asked the agency for changes that would allow sales on the open market.
Mackler said there have been occasions in the past where developers have sold affordable units on the open market after being unable to find qualified buyers.
Tom Shigemoto, representing the developers, has also asked a reduction on the buy-back clause to 25 from 90 years, plus an inclusion of a “shared-appreciation” clause that would kick in in case the county wouldn’t have enough money to buy the property back.
The owner would have 12 months to sell the property on the open market, and split the equity profits with the county, depending on how long the house was owned.
In this shared-appreciation model, borrowed from Habitat for Humanity, the owner would add 4 percent to his/her share of the home’s equity each year until the ownership reaches 25 years, when the owner would achieve 100 equity in the home.
In other words, if a qualified buyer sold the affordable home after 10 years, he would be eligible for a 40-percent share of the equity. If the equity reached, for example, $200,000, the owner would keep $80,000 and the remainder would go to the county.
“Shared-appreciation is a feel-good illusion, in my opinion,” said Yukimura, adding that she got a negative response when she asked Ken Rainforth from the CHA if the county would get enough money back from the shared appreciation to provide replacement for the lost house.
Present requirements?
Shigemoto said in past meetings that what his client was asking for is fair and concurrent with present-day housing requirements. But besides setting a buy-back period of 25 years, present-day housing requirements now ask for a 30-percent match in affordable homes, a far cry from the 10 percent required at the time of the original agreement.
Councilman Tim Bynum told Shigemoto weeks ago if the developers wanted to match present-day requirements, then they should also build 30 percent of affordable homes.
The Kukui‘ula project was originally approved to have 3,500 units of different sizes. But when Kukui‘ula Development Hawai‘i joined landowner A&B in the project over five years ago, and took over design and construction, the density was downsized to 1,500 units, and the project gained a golf course and a shopping center.
The developers had already built 176 affordable homes, but during the negotiations were asked to add another 75. The combined number of already-built and agreed-upon units is 251, still 199 units short of present-day 30 percent requirements.
Provisions nice, but…
“All of the anti-speculation things are nice, buy-backs, shared-appreciation, etc.,” Yukimura said. “But once they expire, then it’s out in the market and we don’t have affordable housing anymore.”
She said there may be other ways of holding costs, and that’s why there are incremental steps in providing the 75 homes.
“If you need to change it, let’s change,” Yukimura said. “I think that the incremental or the holding off in the construction … is a good idea.”
When Kalepa Village was built, much of the construction was postponed, she said.
“I’m strongly against allowing market sales, because that totally defeats the purpose of this housing provision,” Yukimura said. “All it is is giving them additional zoning.”
Councilman Derek Kawakami said he agrees that the CHA should try to keep the affordable housing in its inventory in perpetuity.
“But we gotta be flexible, too, to adapt to the changing times and needs,” he said.
“After talking to housing and hearing the business-aspect side of it, if it doesn’t pencil out, at the end of the day, it doesn’t pencil out,” Kawakami said.
The council has declined buying back units in past occasions, Kawakami said.
Yukimura, however, said if the development is timed properly, something the council and developers are currently trying to achieve, the county will be “much more likely” to achieve the goal of affordable housing by using the buy-back provision.
‘Extraordinary’ agreement
“This agreement was extraordinary in a lot of ways,” Bynum said. “So is the Kukui’ula development extraordinary in my mind. It’s 1,500 all-high-end homes, and a golf course and shopping in this glorious place that the South Shore is.”
The downsizing of the density to 1,500 from 3,500 came with a cost, according to Bynum.
“With 3,500 units we would develop it as a mixed community … which may have included housing that may have been affordable to the working people of Kaua‘i,” he said. “Moving it to 1,500 units made it for sure that it would not be a development for the average working person on Kaua‘i.”
Bynum said the new amendment proposed by the developers makes many changes that are not part of the recommendations from the Planning Commission or the CHA, including the ability to go to market relatively quickly if qualified buyers cannot be found.
“There are provisions in this amendment that I could support,” Bynum said. “But the provisions in this amendment that allow the developer to sell the house at market, and go out of the affordable inventory, I can’t support.”
Community benefits
“The ordinance is about providing housing for workforce,” said Planning Committee Chair Jay Furfaro.
“Two thirds of this project is directed at employees who earn 140 percent of the median income of the island and below,” said Furfaro, adding that the housing is intended to provide opportunities for home ownership.
The remaining one-third, or 25 units, are based first on workforce associated with the project, and then associated with the workforce on Kaua‘i, he said.
Yukimura said that the project was designed in a way that by providing homes to Kukui‘ula employees, they wouldn’t compete for existing housing.
“So it is really to benefit the larger community in general,” Yukimura said.
“It’s also part of the smart-growth approach, where people could bike or walk to work and live in the vicinity of their employment, and it was long-term, it was to make affordable housing in perpetuity, knowing that if you let it go into the market, it’s no longer affordable in a very short time,” she said.
“If you keep this purpose in mind, for every proposal that is being made by the housing department or Kukui‘ula, you need to ask, ‘Are we still achieving these goals?’” Yukimura said.
An amendment with all the requirements from the developers reached the floor during Wednesday’s Kaua‘i County Council meeting, but any decision was deferred until at least July 21, when the Planning Committee will revisit the issue.
Go to www.kauai.gov for more information.
• Léo Azambuja, staff writer, can be reached at 245-3681 (ext. 252) or lazambuja@kauaipubco.com.
