For more than three decades, Carol Anzai and Rosella Newell have called Kukui Gardens home. An 857-unit affordable-housing complex on the edge of Honolulu’s Chinatown, it is a place where 2,500 residents – many of them senior citizens – look out for each other, taking walks in the local park and fishing in the nearby river. In a city known for upscale tourism and luxury vacation homes, such affordable housing for senior citizens and working families is increasingly rare – one resident calls the development “a blessing.”
So residents were terrified when they heard that Kukui Gardens, built in 1970 by a nonprofit foundation, might be sold and transformed into market-rate housing. What resulted was a multi-faceted campaign in which residents, interfaith leaders, national housing advocates, and local politicians gained what – if everything comes together as planned – is a historic affordable-housing victory.
Kukui Gardens was one of hundreds of affordable-housing projects built in the 1960s and 1970s under a federal program created by the 1937 National Housing Act in which the U.S. Department of Housing and Urban Development (HUD) would subsidize building costs, provide a low-interest loan, and insure a mortgage for private developers constructing affordable housing. The mortgage terms mandate the developments stay affordable for 40 years, allow rent increases only to cover operating costs, and require regular inspections, specific tenants’ rights, and other provisions.
“It was built mostly as a reaction to [failed] public housing,” said Drew Astolfi, a lead organizer with the Honolulu interfaith group FACE (Faith Action for Community Equity) who cut his teeth fighting to preserve HUD-subsidized affordable-housing projects in Massachusetts and Chicago in the 1990s. “It’s the nicest subsidized housing there is. If we could do this now we wouldn’t have a housing crisis in America.”
Over the past two decades, as property has gotten more valuable in many of the areas where HUD-subsidized affordable projects were built, owners have sought to turn the projects into market-rate housing by prepaying their mortgages and releasing themselves from the HUD restrictions. A 1983 amendment to federal fair-housing law says that at many projects including Kukui Gardens, where the original charter granted HUD approval rights over prepayment, this can only be done if several conditions are met. Those are that the project no longer meets a need for affordable rental housing; that residents are notified of the prepayment plan and allowed to comment on it; and that displaced residents are given relocation assistance.
In January 2006, it became known that Kukui Gardens Corp., the nonprofit company that runs the development, was seeking to prepay the $2 million balance remaining on its $16.1 million HUD-insured mortgage and sell the development for about $130 million to the San Francisco-based Carmel Partners development company. (These details were later confirmed in announcements by Kukui Gardens Corp. and Carmel Partners).
“People were very upset and worried because there would be no place for them to go,” said Anzai, 58, who raised four kids at Kukui Gardens and now lives there with her husband, who was in the military. “I can’t imagine my life not living here in Kukui Gardens.”
The Kukui Gardens Corp. said the mortgage prepayment was necessary to obtain funding for needed repairs. Once the mortgage was prepaid, they would be freed from HUD restrictions and allowed to sell the development. Then profits from the sale would go to the Clarence T.C. Ching Foundation, the nonprofit organization that formed Kukui Gardens Corp. and also runs several Catholic institutions: the Saint Louis School, Chaminade University, and the Saint Francis Healthcare Foundation.
Carmel Partners associate Chris Beda says the development would still have remained affordable, in compliance with HUD restrictions, through 2011. And he said the company was willing to maintain affordable housing in the long term if tax breaks and subsidies could be leveraged, but none materialized.
“Everyone is in favor of affordable housing until money has to be allocated for it,” he said, adding that, “people don’t realize for-profit companies can be the most efficient at managing affordable housing with tax exemptions and subsidies.”