Housing Department submits report on unspent Affordable Housing Fund appropriations

The Maui County Council’s Budget, Finance and Economic Development Committee has gotten a written response from the Department of Housing about nearly $12 million in unspent and unencumbered funds in the County’s Affordable Housing Fund.

The questions came up during a March 18 Budget Committee meeting, chaired by Council Member Yuki Lei Sugimura, who asked at that time for answers about each project, in writing, from the department. Now, in a letter dated April 9, Housing Department Director Richard Mitchell has provided those answers.

First was the Haggai Institute, of which $3,935,000 was unspent, although $1,565,000 was encumbered, according to a letter from Budget Director Lesley Milner. The former institute located on Lipoa Street, across from Kīhei Elementary School, was purchased by the state in late March 2024. The property was originally developed as the 178-unit Maui Sun hotel.

In early August 2024, the facility began being used as housing for wildfire survivors when eight families moved into the former hotel, renamed as Hale ʻO Lāʻie.

Mitchell said the Council appropriated $5.5 million for building renovations, and the former Department of Housing and Human Concerns executed a $1.565 million grant agreement at the request the Hawaiʻi Housing Finance and Development Corp., which bought the property on behalf of the state.

The County executed a memorandum of agreement with the state housing corporation last year to convert the use of the property from hotel to affordable housing, teacher housing and a public pre-kindergarten, Mitchell said.

“The scope of the grant agreement allows for lifesaving, and necessary ground and site improvements to the property,” he said. “The work completed as of April 7, 2025, includes pool deck and bridge replacement, elevator modernization, and a skylight replacement.”

He reported “one draw” from the grant in the amount of $486,046.98. “The County will seek future funding for the project to comply with the terms of the memorandum of agreement between HHFDC and the County,” he said.

For the Kuʻikahi Village project, reported earlier as “not going forward,” Mitchell said that Council appropriated $6 million in fiscal 2024 for that 202-unit workforce home project. Units planned for the project included for-sale, multi-family, duplex, townhome, live-work, studio and single-family for below-moderate to above-moderate income households.

In 2022, the Council approved the project, but in January 2023, the project developers “indicated (an) approximately $20 million in gap funding was needed from the County to develop Kuikahi.”

The balance of the County’s Affordable Housing Fund was insufficient to cover the request, so the project went unfunded in the administration’s fiscal 2024 budget, Mitchell said.

However, in April 2023, the Council appropriated $6 million for Kuikahi as a line item in the fiscal 2024 budget, he said.

In November 2023, the Council and administration discussed “substantial revisions” to the project, including shifting it away from a residential workforce housing project to a 100% multifamily rental project.

The revised project plans would require “sufficient development funding” and “new entitlements from the Council,” Mitchell said.

In December 2O23, Kuikahi developers applied for additional project funding for the revised development through the County’s Affordable Housing Fund, and “the DHHC convened an independent committee to rank and prioritize the project applications received during the request for applications process.”

“The committee prioritized the projects based on project readiness, ability to leverage other sources of funding, expertise, and need,” he said.

The Kuikahi project did not rank high enough among other projects to be included in the administration’s budget amendments for submission to the County Council, Mitchell said.

“It was unclear whether the original Kuikahi project could secure additional sources of funding in FY 2024,” Mitchell said. “The budget amendment was drafted to also remove the $6 million appropriation in the FY 2024 adopted budget to provide adequate funding to the top two projects. The administration proposed adding the original funding for Kuikahi in his FY 2025 budget proposal.”

In March last year, the administration proposed $6 million for the revised Kuikahi project, but the Council did not approve it, he said.

Mitchell said that during the Council’s regular meeting earlier this month (April 4), “the Council considered a time extension for two more years go to complete the original Kuikahi and entertained discussions with the developer to revisit the revised Kuikahi project.”

Ultimately, after extensive discussion, the Council deferred action on the time extension request until its April 17 meeting. A video of that meeting is available here.

According a proposed resolution for the time extension: Since the beginning of the project’s initial conceptual design in November of 2019 and today, “there have been supply chain disruptions, material cost increases, labor shortages, wage increases, runaway inflation and contractor price jumps. These outside events increased the project’s costs by over 20% from its original projections.”

“The department welcomes additional funding proposals from the Kuikahi development team in future Affordable Housing Fund application funding rounds,” Mitchell said.

Regarding a $1 million feasibility study for affordable housing on a County-owned parcel in Waikapū, the County was not able to secure a consultant for that project. However, “the department is open to completing feasibility studies on the parcel.”

As for $637,593 in unspent funding for the Hawai’i Community Development Board for Hale o Pi’ikea II, Mitchell said the Council appropriated $2,150,000 in fiscal 2024 for development of that rental project in Kīhei. The County executed a grant agreement with the board in the amount of $1,512,407.

The former Department of Housing and Human Concerns was able to save $637,593 in County funds by using allocations from the National Housing Trust Fund. That fund supports increasing the housing stock for extremely low-income families earning up to 30% of the area median income.

And, for a master plan and feasibility study for 5th Street in Uinaʻi project, the Council appropriated $250,000 for a master plan for the affordable housing project on County-owned land in Lānaʻi City.

“The DHHC did not execute a contract for the funds because a partnership was formed with the Ikaika ‘Ohana, a nonprofit developer, to develop housing under the updated master plan from 2O18,” Mitchell said.

In February 2024, the department submitted a request to Congress to fund the Lānaʻi project’s offsite water and wastewater infrastructure, he said.

In November 2024, the Council adopted a resolution approving of the County’s intent to enter into a memorandum of agreement with Ikaika ‘Ohana to the develop the Lānaʻi project and a Nāpili parcel, Mitchell said.