A Hawaiian Homeland development shortchanges tenants
November 03, 2004
Darin Awong has been served his eviction notice. After months of having video cameras trained on his Kapolei house and suspicious cars cruising by late at night, his landlord has determined that Awong has an ‘ineligible tenant’ living in his house.
Kahealani Keahi-Wood and her husband own their 4-year-old home on leasehold land above the city. On a recent morning, Keahi-Wood noticed a Jaguar drive up her street. People armed with cameras and notebooks emerged.
“I asked them what they were doing and they said they were making a mandatory inspection—that they were the management company in charge of taking care of our community—and they were taking pictures of houses and lots that were in violation of the rules and regulations. They were proposing to make a fine of $25 for every violation that they see. And the fines could be used as a lien against your house if you didn’t pay.”
Awong and Keahi-Wood don’t know each other, but they have one thing in common: They are Hawaiian and procured their houses because the land beneath them is owned by the Department of Hawaiian Homelands (DHHL).
Created out of legislation pushed through Congress by Prince Kuhio in 1921, DHHL controls more than 200,000 acres throughout the islands, and has been slowly awarding parcels to people with 50 percent or more Hawaiian blood. In the past, the awards have often been virtually worthless, due to the remoteness of the land or lack of infrastructure. Approximately 20,000 qualified Hawaiians remain on the Department’s waiting list.
The Lingle administration made “putting Hawaiians on the land” a campaign promise, and the new DHHL Chairman, Micah Kane, recently announced the Department’s acquisition, from other state departments, of 1,800 acres on O‘ahu, Maui and the Big Island. Kane claims that the new land will provide homes for 3,500 families. DHHL, however, is not in the business of building homes; if past experience is any indicator Kane will, in many cases, seek to “partner” with private developers, who will build the housing for profit, selling them to individual Hawaiians who qualify for a loan.
What these new suburbs will look like is a matter of great concern to Kane, who stated in a recent Honolulu Advertiser article that DHHL has “…really shifted its philosophy…to move toward master-planned communities.” The trouble is, not everyone likes the plan—or the master.
Enter Awong and Keahi-Wood, two “beneficiaries” who live inside two versions of the new paradigm for the 21st century Hawaiian Homestead. “A prison without walls,” says Awong. For Keahi-Wood, “Everything is violation, violation, violation.”
Awong was excited as he sat with a hundred or so people in the Kapolei Elementary School cafeteria four years ago and listened to a DHHL representative and a private developer explain that as 50-percent blood Hawaiians earning 50 to 60 percent of the median income they qualified for a “unique” new homestead, Ho‘olimalima (“to rent”). The unique part? Instead of being required to qualify for a mortgage on an already built house in the Village Six Homestead in Kapolei, they could “rent to own,” as Mark Development and DHHL referred to the deal. They could nab one of 70 homes in that very same subdivision, and at the end of 15 years have the option to buy the house outright.
True, during the 15 years they would not have genuine homestead status: They would not hold the standard $1-a-year, 99-year lease, be able to extend the lease for another 100 years or pass on their house and lot to a qualified relative of at least 25 percent Hawaiian blood. That’s because DHHL had granted the 70 ground leases to Mark Development for 55 years—for a whopping $70. One dollar a year for each 5,000-square-foot parcel. Mark Development owned the houses, held the leases and would manage the subdivision privately.
Still, it sounded good to Awong at the time. He’d be working toward ownership, and in 15 years he would, as a native Hawaiian, be awarded a homestead lease and have an opportunity to purchase his house for whatever amount remained on the original 30-year mortgage—an amount that Mark Development’s Watase assured Ho‘olimalima residents would be in the $55,000 to $65,000 range.
“They’d be getting a $500,000 home for something like a tenth of the real value,” Watase says.
But Awong was eventually puzzled by something. “All the rent money was going into one single bank account—the Mark Development account. So, how could your rent be going to your unit alone? How could they keep track?”
The confusion stems from DHHL and Mark Development pitching Ho‘olimalima as an opportunity to “rent to own.”
“There is a specific legal definition of ‘rent to own,’” explains Andrew Springer, an attorney with the Native Hawaiian Legal Corporation. “You rent a TV and you pay monthly payments, and with every payment a portion of that payment goes to equity, towards ownership, like a quasi-mortgage. The people who were invited by [DHHL] to participate [in Ho‘olimalima] were under the impression they would be creating equity, and that at a time certain they would become homeowners, but that is not the case. The contract they signed was a plain vanilla landlord-tenant agreement, with some very fine print at the bottom that permits them the option to buy, at the end of 15 years.”
Mark Development collects and deposits the rental income into a single account to pay down the 30-year mortgage on the 70 units as a whole, not individually. At the end of 15 years (when the tax credit runs out) each tenant can buy his or her unit, but lost revenue due to vacancies will be tacked onto the remaining 15 years of mortgage. As Watase says, “Everybody swims together. Everybody benefits together, everybody hurts together. You don’t just have to take care of your unit—it’s a community project.”
“That means,” counters Awong, “every time they evict someone or a tenant moves out—and we’ve had some houses empty for months—it costs me money down the road, when I purchase. Why? I didn’t break the rules or move out.”
It gets worse. “Turns out,” says Awong, “that if you leave before the 15 years are up, since there’s no money put in your specific account, there’s [no equity] in your house, and goodbye.”
“That’s right,” confirms Springer and other legal experts interviewed for this article. “The option to buy, the ownership trigger, applies to anyone who happens to be occupying the house on that date, 15 years from now. I could very well be living in the place right up to the 15th year anniversary, and [Mark Development] kicks me out and puts somebody else in there, and [the new tenant] gets the benefit of it being occupied by somebody else for all those years.”
Along with the standard rental agreement, Ho‘olimalima residents were required to sign off on four pages of “House Rules.” The house rules deal with everything from the color of the drapes to be hung in the house to the definition of what constitutes a legal household in the eyes of Mark Development: “Households shall be single-family, related by marriage or custody; and as defined as the DHHL applicant and their spouse, their children, grandchildren and parents.” (The federal low-income housing tax-credit program that still monitors compliance with its rules does not specify that the residents be related by blood.) Having a guest stay overnight requires the landlord’s permission, and “guests may not stay overnight…in the Tenants’ unit for more than a total of 21 days in one calendar year.” Tenants needs permission from Mark Development if they want to tune up a car, plant a tree or sleep in a waterbed.
With many Ho‘olimalima residents participating in the subsidized housing program known as Section 8 (in which the rent subsidy, paid to the landlord, is determined by the tenant’s income and family size) it became critical to Mark Development that no one cheat the system by allowing an unauthorized person to live in their house. In the community newsletter, Mark Development explained to residents that “…if a household were found in major non-compliance [with occupancy rules] for a long period of time, say 10 years, $100,000 in Tax Credit Equity would be lost. This would cause each home sales price to increase in excess of $1,400.”
The only way to determine “non-compliance” would seem to require that someone watch the comings and goings of 70 households 24 hours a day, seven days a week. However, Watase admits that Mark Development has only one property manager for the whole community. He relies on residents “who tell us about those who are violating the rules,” explains Watase. “After they tell us, we just try to gather more information.” That means aiming video cameras at houses of suspected violators—like Awong, the president and co-founder of the Kapolei Ho‘olimalima Tenant Board.
Awong is a stocky man in his late thirties. Seated in the comfortable living room of his house, looking through sliding glass doors on an immaculately landscaped backyard, he smiles.
“Mark Development—the Watase family. Mark, the old man, and the sons Craig, the president, and Paul, who manages Ho‘olimalima—they’re too much. They want to evict me because they say a 25-year-old female lives here. That’s ridiculous. I’m a single parent with five sons, and that’s the allowable number for this unit. They had cameras in the house next door for four months, while it was vacant, watching me—Paul Watase admitted that at my eviction hearing. One of them is always driving around, writing down license plates late at night, trying to to see who is parked where. But I don’t own the street—anybody can park out there.”
Maile Shimabukuro, the Legal Aid attorney representing Awong, questions his eviction and several of the house rules imposed by Mark Development. “Right now you have a situation where if a tenant has a niece or nephew living in the house they are not allowed. Legal Aid questions whether that violates the Constitution, and/or violates the housing discrimination laws, where you can’t discriminate based on familial status or composition.” Whether the family composition provision is unconstitutional is yet to be determined, but DHHL’s own website provides evidence that it is at the very least un-Hawaiian.
According to a study conducted for the department, “…28 percent of native Hawaiian households include more than one family, compared to 4 percent of non-native Hawaiian households.” Awong, for example, lived with a cousin and then an uncle’s family in his teenage years.
A new rule demands that tenants supply Mark Development with photos of all household members, including minor children. Several tenants have refused to come up with the images. The rule particularly angers Val Zamora, a neighbor of Awong.
“My grandchildren are just babies. I don’t trust anyone with their photos. It’s an invasion of privacy.”
Shimabukuro recently submitted a pre-trial “request for interrogatories” (facts for Mark Development to provide) on behalf of Awong in ‘Ewa District Court. Among the requests: “State the names and addresses of all persons known to you…who witnessed or have knowledge of the unauthorized and ineligible individual living at Darin Awong’s residence and give a brief description of all witnesses whose names or addresses are not known to you.”
Mark Development immediately filed a Plaintiff’s Motion For Protective Order with the court, in which Ho‘olimalima project manager Paul Watase claimed that the witnesses against Awong, who are his neighbors, feared retaliation, because Awong and “…his 16-year-old eldest son, Darin Awong Jr., who is approximately 6 feet in height and weighing about 300 pounds, have a reputation of harassing, intimidating, threatening and arguing with their neighbors.”
“Again, that’s ridiculous,” says Awong. “If I was harassing another tenant, that’s grounds for eviction, so how come I never heard about it until now? Our organization represents the tenants who bring forth their grievances—we don’t represent everybody [in Ho‘olimalima] and we don’t pressure anybody, one way or the other. Mark Development’s mentality is: if you cut the head off, the body cannot function—if I’m evicted, everything else going just fade away and die. But that’ll
Craig Watase, while unable to comment directly on the Awong court case, is unapologetic about Mark Development’s management style. “Unlike some government agencies, where they’re afraid to evict or enforce rules, we’re a private management company and we will do our jobs. There are always people who will test us…but we will not be intimidated by anybody.”
Watase admits that his company has not always explained the reasons behind its rules to residents, or been overly polite in its correspondence. “We’re not legally required to, but a consultant from Alu Like told us it might be a good idea to try a kinder, gentler approach. You know, use ‘kokua’ and ‘mahalo’ in letters. So we do that now.”
Indeed, the July issue of Mark Development’s Kapolei Ho‘olimalima Newsletter sent residents a “Big Mahalo,” congratulating tenants “…for your participation and assistance in the recently successful removal of a household violating lease and occupancy rules by having ineligible household members and a pet dog at their unit.”
As for the use of video cameras, Watase believes they are the shape of things to come. “I recently got a call from the prosecutor’s office, and the woman there told me, hey, you’re heroes! What you guys are doing—recording license plate numbers, videotaping—those are the same things we teach landlords to do at our Weed and Seed seminars. She said that’s how you make safer and happier communities.”
DHHL Chairman Micah Kane, who inherited Ho‘olimalima from the Cayetano administration, calls the controversy “…the toughest issue I’ve had to deal with since I came on board here.” He “has a problem” with several aspects of the Watases’ management approach. “I strongly disagreed with the cameras—that has really bothered me—as well as the late-night checks of license numbers. And because [the Ho‘olimalima residents] are not leaseholders, they’re renters…if a 50 percenter passes, there is no successorship, and there is a perception among our beneficiaries that there is successorship on our property.”
Why then doesn’t DHHL resolve disputes between its beneficiaries like Awong and the Watases? Money. Specifically $11.5 million. “The tax-credit program puts Mark Development under some very strict management guidelines,” says Kane. “The moment [DHHL] intervenes and jeopardizes their ability to qualify for the reimbursement of their funds we expose the department to that liability.” DHHL could end up having to, in essence, buy out the Watases—$7 million for the tax credit plus $4.5 million on the mortgage note equals a staggering bill for a cash-strapped state agency.
Kane isn’t exactly ecstatic about the deal.
“I’ve walked Ho‘olimalima,” he said, “and talked door to door, and the majority of the people are happy there.” On the other hand, “…[low-income rentals are] probably not an area that [DHHL] should be engaged in. That is the responsibility of the Housing and Community Development Corporation—they have the rental market. [Creating rental housing] just isn’t a good use of our time.”
Would DHHL hire Mark Development to manage another homestead? “No,” says Kane. Yet he also says there is a “possibility” of another development deal with the Watases. “If Mark Development comes in and they are the qualified bidder or applicant we will treat them just like anybody else.”
A safer, happier community was what Kahealani and Chris Keahi-Wood were hoping for when they moved into their brand new house in Kalawahine Streamside Homestead, adjacent to Papakolea, in 2000. “I’m from Nanakuli homestead,” she says. “Since I was a baby we’ve moved all over the island, pretty much running away from the landlords because we couldn’t stay up with the rent. When Kalawahine came up, we couldn’t believe it.”
Although it was “tough financially,” the Keahi-Woods qualified for a mortgage on a three-bedroom duplex for $196,000 and a lease on the 3,800-square-feet of O‘ahu under it for $1 a year, for 99 years.
“We were never given enough time to look at the paperwork we signed that night,” she says. “The feeling was that there’s another person, right behind you on the waiting list.”
The “paperwork” is a 42-page document, attached to her deed, entitled Declaration of Covenants, Conditions, and Restrictions (DCCR) for Kalawahine Streamside. DCCRs, which typically give a “design committee” power to regulate everything from a doghouse roof to where a homeowner can hang her laundry, have become common throughout the nation in the past two decades. Usually written by subdivision developers, DCCRs, according to a real estate website, “…give a development a more standard appearance. When enforced, covenants protect property values.” Mililani’s 52-page DCCR prohibits homeowners from, among many other things, putting political signs in their front yards.
The Kalawahine DCCR mandated the creation of a community association, which would refer any violation of the rules to a design committee, consisting of three managers of Kalawahine’s developer Kamehameha Investment Corp., and an ex-officio member from DHHL.
“There are rules on everything,” says Kahealani Keahi-Wood. “Your grass is too long—violation. Your car doesn’t run—violation. You put up a satellite dish—violation. It’s all about aesthetics. They’ve totally lost Prince Kuhio’s vision for Hawaiian homelands.”
A provision in the DCCR gives the community association board of directors, a body elected by residents, the power to enter any lot at any time to “inspect” the property for violations of design-committee rules, and to remove, if they see fit “…any Improvement constructed, reconstructed, refinished, altered or maintained…in violation of the provisions of this Declaration…” The DCCR authors granted association members the power to hire a management firm to do their aesthetics-police dirty work, and tack the cost onto the association fee assessed to each household. Management Specialists, a division of Century 21, has the contract for Kalawahine.
“To me,” says Keahi-Wood, “living on Hawaiian homelands is about a community based on Hawaiian values. Aloha, malama, laulima (cooperation), lokahi (unity)—those are the values I was raised on. We do not need an outside company telling us how to live as Hawaiians.”
Kane has listened to Keahi-Wood’s “concerns.” “It isn’t as if the department is moving in the direction of trying to suburbanize Hawaiians,” he says. “In the case of Kalawahine, these covenants were in place prior to the development [being built]. The beneficiaries were made aware of them, and they were given the authority and the democratic process to amend, or even abolish them, and we would respect that.”
Kane is referring to a provision in the DCCR that allows repeal of all covenants and rules by a vote of three-fourths of the residents. Keahi-Wood has been gathering residents’ signatures to eliminate maintenance fees and fines for DCCR violations, but she believes the DHHL knows she can never get rid of the restrictive covenants entirely.
“Some of the board members have actually talked about putting a gate at the bottom of the hill,” explains Keahi-Wood, who was accepted as vice-president of the board after this interview was conducted. “A lot of people are here because they see it’s not like the typical older homesteads like our neighbors Kewalo and Papakolea. When you ask them if they know about the Hawaiian Homes Commission Act and the idea of rehabilitating the race, they say no, we just know that you have to be 50 percent Hawaiian to qualify for the homestead and the homesteads they have now are nice—that’s why we applied. [I also find] people are grateful to be living here and a little guilty that they have what others don’t, so they’ll just go along with anything.”
Puni Kekauoha is president of the Papakolea community association. Founded in the 1930s, Papakolea does not have DCCRs. “These rules,” says Kekauoha, “were made by the developers, and they do nothing to help a community come together. We are suggesting to the department that in the future the lessees should be the key to establishing DCCRs, before anyone moves on the land.”
It’s an idea that comes too late for homesteaders like Keahi-Wood. “Micah Kane says we can change things on our own,” she says. “But that change comes with many obstacles that pit people in our community against each other. The battle lines have been drawn.”
Seen at http://www.honoluluweekly.com/cover/detail.php?id=57