Kukui plaintiffs cite HUD letter
A federal lawsuit aims to preserve affordable rentals downtown
The U.S. Department of Housing and Urban Development has yet to receive a formal request from Kukui Gardens Corp. to pay off the HUD-backed mortgage on its Kukui Gardens rental housing complex in downtown Honolulu.
But if it does, HUD will ensure that the property will continue as rental housing for low- and moderate-income families through 2011, according to a letter from Beverly Miller, director of HUD's Office of Asset Management.
The letter is included in a federal lawsuit filed yesterday on behalf of the current Kukui Gardens residents. The lawsuit seeks to block the mortgage prepayment. The nonprofit Faith Action for Community Equity is also a plaintiff.
HUD Secretary Alphonso Jackson, Kukui Gardens Corp. and Carmel Partners Inc., a California real estate company that has agreed to buy the 857-unit Kukui Gardens from Kukui Gardens Corp., are named as defendants in the lawsuit.
May 1, 2011, is the date the current mortgage is scheduled to be paid off. It is also the date HUD oversight to keep the rents affordable for low- and moderate-income people ends.
Kukui Gardens Corp. issued a notice to its tenants in July, informing them of its intent to prepay its mortgage on or after Dec. 22.
"Besides being a terrible time, it's a terrible thing," said Nancy S. Young, housing committee chairwoman for Faith Action for Community Equity.
The department can approve prepayments as long as the owners of the housing projects enter into use agreements to continue to provide rental housing for low-income families through the date of the original mortgage, under a HUD policy first approved in 2004 and renewed this year.
But that contradicts federal law, which prohibits the HUD secretary from approving prepayments on projects that continue to meet a need for rental housing for low-income families in the area, said Gavin Thornton, attorney for the Kukui Gardens tenants.
"And if there's anywhere where there's that need, it's in Hawaii right now," he said.
The lawsuit challenges the HUD policy and the department's anticipated approval of the Kukui Gardens mortgage prepayment.
Rents will rise under a use agreement, Thornton said. And prepayment will allow Kukui Gardens Corporation to sidestep current requirements to sell its project to a nonprofit corporation and deposit the proceeds into a trust for low-income housing.
Kukui Gardens Association President Carol Anzai said the tenants were forced into filing the lawsuit yesterday.
"This is absolutely not how we wanted it to go. We just want to save our homes. And because they're not working with us," she said.
Gov. Linda Lingle approved a law this year that allows the state to use its powers of condemnation to intervene on the sale of Kukui Gardens. Negotiations are ongoing.
Officials of Kukui Gardens Corp. have no comment on the lawsuit because they're still reviewing it, a spokeswoman said.