by Andrew Walden
What costs nothing but is worth millions?
Hawaii affordable housing credits.
For Maui developer Dowling Company, Inc, these tender morsels of nothingness, produced through development deals with the Department of Hawaiian Homelands, are a sweet deal indeed.
Now under development, the 47.4 acre Hawaiian Homelands Pu'unani Homestead will consist of 137 homes to be sold at prices deemed to be affordable to families earning 80% or less of “Area Median Income” (AMI) and another 24 ‘self-help’ lots. The homes should generate 137 affordable housing credits but in a deal ratified May 30, 2019 by the Hawaiian Homes Commission, Dowling got 300.
Each affordable housing credit is a license to build a market-rate unit in Maui County. Under DHHL rules, a developer “may not sell or transfer the credits to any other entity other than an entity in which it is a principal.”
According to DHHL spokesman Cedric Duarte, the Puunani site was valued at $10.8M when it was transferred to DHHL by Dowling. It is not known what Dowling paid for the property. Maui County assesses the parcel at $1.9M. (TMK: 235002002) Duarte explains the additional 163 credits, taken from DHHL inventory of credits from past projects, represent a purchase price for the underlying land. DHHL Affordable Housing Credits Policies allow a one-for-one purchase of fully improved lots with affordable housing credits. But when asked their value, Duarte replies: “Hard to put a value on how important affordable housing is in Hawaii.”
DHHL has not always been so circumspect. At a December 7, 2009 ‘Beneficiary Consultation’ DHHL staff gave the credits a “$75,000 - $125,000 - range in all counties.”
At these 12-year-old prices, 163 credits would be worth $12.2M to $20.4M.
In practice, their use-value would be determined by the specific market-rate construction enabled by the credits.
According to the St Louis Federal Reserve Bank, the ‘All-Transactions House Price Index for Maui County, HI’ jumped 54% from 163 in 2010 to 252 in 2020.
If affordable housing credits also increased 54%, then the current value would be $115,500 - $192,500. At these higher prices, 163 credits would be worth $18.8M to $31.4M.
Depending on which number is applied, the affordable housing credits paid to Dowling are worth $1.4M to $20.6M over and above DHHL’s $10.8M parcel valuation.
By transferring the property to DHHL, Dowling also avoided Maui County zoning rules imposing a large greenbelt buffer area on the property which, according to an October 19, 2020, Power Point presentation to the Hawaiian Homes Commission, “would eliminate at least 68 homes.”
According to Duarte, Dowling was selected as developer, “through a 2018 Request for Proposal from DHHL. Dowling Co. was the only respondent.”
Everett Dowling did not respond to a request for comment on this article.
Jim Lyon of Lyon Associates confesses in his January 22, 2019 federal plea agreement to paying $240,000 in ‘state agency’ bribes for a contract with an unnamed state agency. The description of the contract matches a 2010 DHHL Anahola Kauai reservoir project. No state employees were prosecuted in the Lyon case.
In 2011 Oahu developer Jeff Stone attempted to trade an $8M Makaha property to DHHL and KSBE for $30M to $50M in affordable housing credits. The deal eventually collapsed.
PDF: DHHL Ev Dowling Transactions