In The News
Block prepayment of project’s mortgage
October 30, 2006
Honolulu Star-Bulletin
THE ISSUEThe governor says she will oppose Kukui Garden Corp.’s prepayment of the mortgage on the affordable rental complex. |
LOW- and moderate-income residents of Kukui Gardens appear shielded from eviction over the next five years, but state condemnation of the property may be needed after that to keep it as affordable housing. Gov. Linda Lingle cited a federal law that assures the short-term affordability, and the prospective buyers should realize they will not be allowed to convert it into luxury housing.Carmel Partners Inc., a California real estate company, has agreed to buy the 857-unit complex in downtown Honolulu, which was built as affordable, tax-exempt housing in 1970 under Federal Housing Authority rules. A 1982 amendment to those rules forbids prepayment of the mortgage unless the project no longer meets the need for rental housing for lower-income families in the area.
The amendment was aimed at ensuring that subsidized housing “would remain as a resource for lower income tenants and would not be diminished by owners seeking prepayment of the project’s insured mortgage for the purpose of converting the project to either luxury apartments or condominium ownership,” according to the U.S. Department of Housing and Urban Development.
Apparently unaware of the rule, Kukui Gardens Corp. notified its roughly 2,500 tenants in July that it wanted to prepay the outstanding balance of the mortgage prior to the sale so it could borrow money for maintenance and repair. The mortgage is due to expire in May 2011. Carmel Partners has said it intends to keep the complex affordable in the meantime.
This year’s Legislature enacted a law that gives the state administration eminent domain power to purchase the 22-acre property at fair market value if Carmel or any future owner departs from the affordability policy. Lingle has promised to do whatever is necessary to keep the units affordable.
Provided she wins re-election next week, Lingle would leave office before the mortgage expires, but her successor is likely to agree with her that the state “cannot afford to lose such a large number of affordable units for our lower-income residents.”
