The query began with a phone call. What affordable housing conditions had been placed on a 35-lot subdivision in Keaʻau, a stone’s throw from the Keaʻau High School, the caller wanted to know. Unable to find this information from any of the easily accessible sources, the caller turned to Environment Hawaiʻi.
We went to work.
As with several other housing projects that Environment Hawaiʻi has looked into on the island of Hawaiʻi, this one – Ola Hou – was developed by a company owned by Roland Higashi, his wife, and his daughter. By the time Graphic Images Hawaiʻi, Inc., acquired the 44 acres, it had already been rezoned for one-acre lots in an ordinance approved by the County Council in 2012.
At that time, the land was owned by Renaissance Development, LLC, a Honolulu firm whose two members, Henry Kwok and Robert Yoneoka, had purchased it in 2008 from KY International, Inc. The president and vice president of KY were (still are) Kwok and Yoneoka, respectively. Graphic Images acquired the land in 2017 in a Section 1031 tax-deferred exchange, as allowed by the IRS. The reported purchase price was $1.075 million.
In a recent county audit of the Hawaiʻi County Office of Housing and Community Development’s award of housing credits in return for development of affordable units, the county auditor stated that Renaissance Development had “obtained” four credits and had purchased three more, for a total of seven credits, all of which were redeemed to satisfy the 20 percent affordable housing quota for a 35-lot subdivision.
So exactly how were these credits acquired?
Affordable housing agreements are to be filed with the state Bureau of Conveyances. None was for this subdivision. They are also to be filed with the county Planning Department and made a condition of subdivision approval. None was found in Planning Department files for this subdivision.
Environment Hawaiʻi then requested the AHA from the Housing Office.
The OHCD responded with assorted documents totaling 52 pages. None, however, was an affordable housing agreement.
Instead, there was a copy of a 1998 zoning ordinance, allowing a 37-lot development on the 44 acres. Then the 2012 ordinance amending that, which limited the number of lots to 35.
There’s correspondence between the OHCD and Yoneoka regarding an effort to satisfy, in part, the affordable housing requirements by donating two lots to a non-profit. But that seems to have been contingent on the County Council amending the 2012 ordinance to allow two more lots (back to 37, as per the 1998 ordinance).
Yoneoka initiated the effort. In a letter August 12, 2014, to Alan Rudo, a county housing officer who last year pleaded guilty to fraud in relation to the award of housing credits, Yoneoka acknowledged that Renaissance is “required to provide a total of seven affordable lots,” of the 35 total, the seven lots equal to 20 percent of the total number planned. Of that seven, he wrote, “three transfer credits were obtained,” leaving a balance of four affordable lots. (The three were obtained from a company, DJAT, LLC, headed up by Allan Takase, that had earned a total of five credits in connection with building 18 units of housing intended for students in Hilo.)
“It is our intention to donate two finished lots to the county to fulfill the four-lot requirement, based on a 50 percent reduction of [the] requirement, according to Section 11-5(5),” Yoneoka wrote. That section of the Hawaiʻi County Code provides that developers who convey improved, finished lots to the county or a non-profit “shall be entitled to a 50 percent reduction of the affordable housing requirement.”
The Housing Office was agreeable to the plan. On August 19, Stephen Arnett, housing administrator at the time, responded to Yoneoka. “Upon fully executing and recording a written agreement with the County of Hawaiʻi, whereby Renaissance Development, LLC, agrees to convey two finished lots to a non-profit of the OHCD’s choice … the OHCD will notify the Planning Department that … the subject property qualifies for the 10 percent density bonus…”
Attached to the letter to Yoneoka was a “sample agreement” between the OHCD and EWM Enterprises, LP. This agreement, signed the previous year, allowed EWM to donate a finished lot to satisfy affordable housing requirements for a development in Kohala.
The plan was contingent on the county allowing two more lots to be developed in the subdivision, however. The OHCD pursued this, to the extent of drafting language to replace the 2012 ordinance and asking the then-planning director, Duane Kanuha, to propose it.
The OHCD had determined that the Ola Hou Estates subdivision could qualify for a “10 percent bonus density” if the number of lots was increased back to 37, Arnett told Kanuha. The ordinance adopted in 2012 “effectively eliminated the bonus density,” he noted. “Renaissance Development, LLC, is working with the OHCD to donate the two additional lots to a non-profit to provide more affordable housing in Puna and satisfy their affordable housing requirement.”
Nothing came of that proposal, leaving at four the number of housing credits that Renaissance – and later Graphic Images Hawaiʻi – was required to earn.
Susan Kunz, OHCD administrator, acknowledged last month that there was, in fact, no affordable housing agreement for the Ola Hou subdivision.
The EWM Agreement
But more needs to be said about the EWM affordable housing agreement and how the use of the lot-donation option can fall short of addressing affordable housing needs.
In June 2013, the Housing Office and EWM Enterprises executed a housing agreement intended to satisfy affordable-housing requirements for a 10-lot subdivision in the district of North Kohala.
The Housing Office determined that EWM could meet the requirements of Chapter 11 by donating one developable lot to Hope Services Hawaiʻi, Inc. The affordable housing agreement – the same that was proffered as model language to Renaissance – included a statement that beyond that donated lot, the developer would “bear no responsibility for actual development of affordable housing units.”
“This agreement shall run with the land of the property … and be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns,” it states. “This agreement shall be recorded against the land … by developer at the Bureau of Conveyances.”
Less than a month after the agreement was signed, EWM conveyed the property to Hope Services. The deed makes no mention at all of the restrictions called out in the affordable housing agreement.
The agreement does allow for release of the property from these conditions once they are fulfilled – which, in this case, apparently meant after the transfer of a lot to Hope Services. In August 2014, EWM recorded a release from the affordable housing conditions.
In June 2015, Hope Services sold the one-acre lot at 54-401 Kapua Place for $150,000. The buyers were two married couples from California. They proceeded to build a small but elegant tiny house on the property. In 2019, the property was sold again – to a couple living in Montana. The recorded purchase price: $350,000.
No affordable housing whatsoever was built as a result of the agreement the county worked out with the developer.
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Rudo Sentencing
Delayed to September
The sentencing of Alan Rudo, the former county housing staffer who last summer pleaded guilty to federal charges of wire fraud, has been continued to September 19. The pretrial conference for his three associates – Rajesh Budhabhatti and attorneys Gary Zamber and Paul Sulla Jr. – has been set for July 24 before Magistrate Judge Kenneth J. Mansfield in Honolulu.
In a related development, the federal government has recognized the leasehold claim of Honuaʻula to seven acres of land in Kealakehe that is proposed for an affordable housing development.
West View Development, one of the companies set up by Rudo, Budhabhatti, Zamber, and Sulla as part of their fraudulent schemes, remains the owner of record. Hawaiʻi County has filed a petition with the federal court arguing that it should receive title to the land as well as around $940,000 in cash seized from Rudo and 45 affordable housing credits.
The court has yet to rule on that petition. Meanwhile, property taxes on the West View land have gone unpaid since February 2022.
— Patricia Tummons
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