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Thursday, February 23, 2023
Audit: DHHL Traded 42 Affordable Housing Credits for a Fence
By Andrew Walden @ 8:53 PM :: 3130 Views :: Hawaii County , DHHL, Ethics

by Andrew Walden

Big Island lawyers facing the possibility of Federal Penitentiary after allegedly scamming Hawaii County Affordable Housing credits may have one question on their mind:

Just how much were those affordable housing credits worth?

It's hard to pin down a value. 

According to a February 1, 2023, report from the Hawaii County Auditor (pg 3), Hawaii County affordable housing credits have sold for prices ranging from $5,000 to $75,000 since 1988.

At a December 7, 2009 ‘Beneficiary Consultation’ on Kauai, DHHL staff gave the credits a “$75,000 - $125,000 - range in all counties.”

In a Maui deal ratified by Hawaiian Homes Commissioners, developer Ev Dowling apparently got 163 credits for a property appraised at $10.8M--$66,258 each.

Federal prosecutors allege the lawyers and their cronies snagged 316 illicit credits.  They hurriedly sold some for prices ranging from $30,000 to $50,000.

While making license plates, federal prisoners may want to consider this:  All they had to do was build a fence.

The Hawaii County Auditor (pg 18) explains:

In one instance, DHHL built 42 affordable housing units, obtained 42 credits, and transferred those credits to a developer in exchange for building fencing around an endangered plant preserve near La'i Opua Village, Phase 5 (2016). Several potential problems accompany non-cash forms of payment. For example, it can circumvent competitive procurement, sidestep a project's budget, carry tax implications, etc. The extent and effect are beyond the scope of this audit.

At $50,000 to $75,000 those 42 credits add up to $2.1M to $3.15M.  That’s some fence.  

A search of the Hawaii Awards & Notices Data System shows no DHHL contract relevant to fencing at the La'i 'Opua site. 

Affordable housing credits are the subject of relentless political rhetoric and posturing.  But when it comes to implementation, suddenly everything goes dark.  From the Auditor’s report:

As a major landowner, the state can release land for housing projects. The Department of Hawaiian Home Lands (DHHL) has become one of the largest affordable housing developers throughout the state of Hawai'i. The Hawaiian Homes Commission Act of 1920, as amended (HHCA), authorizes the DHHL to enter into project development agreements to develop available lands for homestead projects.

DHHL created the Affordable Housing Credits Policy to provide guidelines for determining the value of credits, clarifying terms and conditions applied, and subsequently transferred to other entities pursuant to Act 141, Session Laws of Hawai'i (SLH) 2009, which is codified in Hawai'i Revised Statutes (HRS) 46-15.1 (b). Act 141 is effective [Repeal and reenactment on July 1, 2024. L2019, cBO, §§1. 2.]

HRS 46-15.1 (b) requires counties to recognize housing units developed by DH HL and issue affordable housing credits to DHHL. Credits are transferable and can be applied within the same county in which the credits are earned. Counties are directed to issue credits on a one-for-one basis to DHHL for existing and future projects. Until HRS 46-15.1(b) is repealed or amended, credits will continue to be a part of the affordable housing process.

DHHL credits create obstacles for OHCD because issuance is beyond the department's control, and there is no mechanism to recognize credits continually.

DHHL credits don't have the same radius restrictions that county-originated projects have. This contributes to turning localized credit availability imbalances into a countywide problem as credits could be used to fulfill obligations anywhere on the island of Hawaii. In one instance, DHHL built 42 affordable housing units, obtained 42 credits, and transferred those credits to a developer in exchange for building fencing around an endangered plant preserve near La'i Opua Village, Phase 5 (2016). Several potential problems accompany non-cash forms of payment. For example, it can circumvent competitive procurement, sidestep a project's budget, carry tax implications, etc. The extent and effect are beyond the scope of this audit.

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