HCDA authorizes supplemental financing and buyback plan for Ulana Ward Village reserved units

HONOLULU — The Hawaiʻi Community Development Authority voted July 2 to authorize the executive director to implement a supplemental financing and buyback plan for reserved housing units in the Ulana Ward Village project at 828 Owyhee Street (tax map key 12-1-053-001). The board approved the plan by roll call vote, 9-0.

The action permits the executive director to apply one of four staff-proposed responses if a reserved-unit owner seeks to sell during the unit's regulated term: (1) HCDA or a designated partner purchases the unit (the current policy); (2) HCDA designates a substitute buyer through a procured broker and effectuates an owner-to-owner sale; (3) HCDA buys the unit and places it in managed affordable rental for the remainder of the regulated term; or (4) HCDA waives buyback but requires immediate payment of the shared-equity amount if the owner rents the unit. Staff said options 1 and 3 may require supplemental financing.

The proposal was presented by Lindsay Doy, asset manager for HCDA, who told the board the Ulana project is “coming online at the end of this year” and includes “just under 700 reserved housing units,” with regulated terms set under HCDA’s 2005 rules that range “from 2 to 10 year regulated terms.” Doy said the majority of units are five-year terms: about 500 units; roughly 52 units have two-year terms; and about 144 units have 10-year terms.

To provide liquidity, Doy said HCDA had discussed a loan arrangement with a sister agency and “they've generously offered to loan us some of their dwelling unit revolving fund, DIRF, up to 3,000,000” for the first two years. Doy said HCDA’s reserve housing subaccount is currently about $11,000,000 and that, if used together with other sources, staff estimated a pool of approximately $40,000,000 would be available to support buybacks, broker procurement, and related costs.

Board members pressed staff on how long affordability could be extended if HCDA re-enters a unit. Doy said any restarted regulated term would be limited by the 2005 rules and that “10 years would be the maximum.” Members also asked whether HCDA would manage rentals in perpetuity under option 3; staff responded that management would be for the original regulated term (for example, five years for a five-year unit) and that perpetuity would be difficult to commit to because of uncertain long-term costs.

Several members raised concerns about homeowners’ expenses contributing to potential buyback requests. Doy and other board members noted higher mortgage interest rates and increases in homeowners association and insurance costs as drivers of financial stress for buyers who qualified under earlier, lower-rate assumptions. Doy said closings for many units begin around November–December, and that buyers have been moving through loan approvals with interest rates in the 6–7% range compared with roughly 4.7% during earlier qualification discussions.

The board voted on a motion that authorized the executive director to implement the supplemental financing and buyback plan and to “undertake all tasks necessary to effectuate the purpose of this action” except for (1) adding additional buyback options beyond those described, (2) using other means of supplemental financing beyond the described proposals, (3) using other HCDA special funds, or (4) changing the buyback expenditure limit without separate board approval. The motion was moved and seconded and passed by roll call, nine yes, zero no.

Staff said the authority will evaluate each potential buyback case by case and apply the option best suited to the unit’s circumstances, including consideration of wait lists maintained by the developer, Howard Hughes — Ward Village. For some units staff said the Hawaii HomeOwnership Center or the Hawaii Housing Finance and Development Corporation (HHFDC) may act as partners on buybacks under existing agreements.

The board took no public testimony on this item. The motion authorizes staff to proceed with the financing and buyback framework but preserves board review for any changes that would expand buyback options, alter financing sources beyond those discussed, or increase expenditure limits.

The HCDA’s Kakaʻako Authority meeting convened at 9:01 a.m. and adjourned at 9:34 a.m.