Category Archives: Housing

Kahala oceanfront condos face looming deadline

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Owners of apartments in the Kahala Beach Condominium are preparing to surrender their properties and walk away empty handed in just two years.

The original 60-year ground lease for the 196-unit oceanfront project expires on July 15, 2027, and ownership of the buildings will revert to the landowner, Kamehameha Schools, the charitable trust established in 1884 to benefit Native Hawaiians.

Apartments in the Kahala Beach, nestled between the Waialae Country Club and the Kahala Hotel and Resort, range in size from 1,050 square feet to 3,510 sq. ft., and are spread across four 4-story buildings on 6.7 acres, with over 460 feet of beach frontage.

Kamehameha Schools also owns the land under the neighboring Waialae Country Club and Kahala Resort and Hotel, but previously extended those leases to 2060 and beyond.

However, Kamehameha has declined to extend the Kahala Beach lease, and refused to consider several offers from the Assocation of Apartment Owners to purchase the fee interest.

Although individual lessees have purchased their condominium apartments, the leased land and any improvements (meaning the buildings themselves) revert to the landowner when the ground lease expires. Hawaii is one of the few places in the United States where leasehold residential properties are found.

This reality of just walking away is common with commercial leases. If a business lease isn’t renewed, the business owner simply packs up and moves on. But it is far less common for residential properties, given the idea that one’s home is their castle.

There haven’t been many examples of lease expirations leading to evictions. Owners of the Kailuan Apartments were evicted by Kaneohe Ranch at the expiration of their lease at the end of 2007. Although there was substantial negative publicity, the ranch proceeded with redevelopment of the property.

As the Kahala lease expiration nears, owners have reported Kamehameha Schools may offer month-to-month rebtals or short-term rental agreements, perhaps a year at a time, while working on a longer term development plan for the property.

During an extended legal battle over setting of the lease rent for the final 10-year term (2017-2027), consultants concluded the “highest and best use” would be an ultra-luxury condominium development that maximizes the site’s best attributes, such as its direct ocean frontage and allowable height and density. It’s current A-2 zoning imposes a 60-foot height limit, 50% higher than the current 40 foot building height.

However, redevelopment won’t be simple. The Kahala Beach condo was built a decade before the state enacted laws for coastal zone management to ensure access to and protection of the shoreline, and its development limits have become stricter over time. There has already been considerable erosion along the ocean side of the property which continues at a rapid pace.

With the effects of climate change and rising sea levels, the property is now in a designated high-risk flood zone. This requires a base flood elevation of 9 feet, which would reduce the size of any new development. Further, underground parking, as exists in the current buildings, would no longer be allowed for new construction on the site.

Other factors include stricter regulations for handling of stormwater, and new street regulations require wider roadways and fire truck turnarounds, which could impose additional limits.

These and other factors leave the future of the area in doubt. Only one thing is clear. Current owners in the Kahala Beach will have to surrender their apartments to Kamehameha Schools in 24 months, even if they are allowed to stay with temporary short-term rental agreements.

The building was a luxury address when it opened in 1967, but as the remaining term of the lease has dwindled, long-term owners have been fleeing, with just 34% of apartments now owner-occupied, according to the condominium’s latest biennial registration filed with the state. Many units are being used as high-priced vacation rentals.

Although the buildings appear relatively well maintained, visitors report apartment owners are now reluctant to invest in needed repairs and maintenance in their individual units, and conditions are deteriorating. Apartments have been selling over the last several years at what often seem like bargain prices for oceanfront living, except that lease rent and monthly maintenance fees can run over $5,000 monthly, and in two years the master lease will end.

What happens to Miske’s Portlock luxury home and other assets?

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It seems almost certain that the original indictment of Mike Miske, along with the three superseding indictments that expanded both the charges and the list of co-defendants, will soon be “vacated” or set-aside due to his death prior to sentencing and appeal, along with the government’s seizure an estimated $25 million or more of Miske’s personal and business property and assets.

Miske’s defense counsel filed a motion just a week after his death in December, and prosecutors have agreed that the law requires that the indictment’s disappear. Vacating the indictments as to Miske will not affect the convictions of nearly 20 co-defendants and associates who pleaded guilty prior to trial.

So what happens to Miske’s Portlock mansion valued for tax purposes at $7.5 million, along with a Kailua home, $4.3 million in cash and cashier’s checks, collectible cars (including a 2017 Ferrari F12 Berlinetta), art work, and other assets?

Contrary to conspiracy theories floating around, all this property will not automatically be returned to his family when the indictments, and his convictions, are voided.

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Dimensions of Hawaii’s homeless problem?

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Thanks to Nancy Cook Lauer over in Hilo for cutting through the smoke and mirrors on the question of counting the homeless.

Did you hear? Hawaii has solved its homeless problem.

The solution was so obvious it’s amazing no one thought of it sooner. Just stop counting them!

That’s right, this year, when the Jan. 22 Point in Time Count rolls around, Hawaii agencies will count only those homeless already in shelters. The vast majority of our unhoused population – those living under storefront awnings, tents, umbrellas and tarps on the sidewalks, under and even in the trees – nah, no need to count ‘em.

And here I thought the purpose of the annual homeless population count was to assess the need for more shelters, more treatment options, more housing even. Well, guess what? No need!

Thank you, Nancy.

Read her full post here.

Honolulu’s proposed “Empty Homes” tax will accomplish little and create a lot of collateral damage

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Bill 46, CD2, the proposed tax on empty homes, is on the agenda for the City Council’s regular meeting on Wednesday, December 11 for third and final reading. This means that the council is expected to vote the bill up or down at this meeting. Their action will have consequences that will reverberate through the community for years.

I’m opposed to this measure, although the idea that we can magically solve the housing crisis by finding and filling homes left empty for one reason or another is appealing. It just isn’t realistic.

Many supporters of the bill believe that it targets those homes bought by out-of-state or foreign investors, who flaunt their wealth by casually buying and holding these empty properties.

In fact, the bill targets a wide range of residential properties, and it creates an assumption that the dwelling units are empty unless the owner can prove they were actually occupied at least six months out of the year.

As critics have raised issue after issue, the bill has been amended to create numerous exclusions or exceptions. A bewildering number of hard-to-understand exceptions, including a broad exception for properties owned by people who live and work in Hawaii, including their empty second homes.

The exceptions, obviously necessitated by the need to make the bill acceptable, dramatically reduce it’s breadth and scope, along with any hope that it will make any dent in the housing crisis.

Several things need to be underscored.

1–The proposed “tax” is not really meant to produce income. It isn’t like a surcharge on existing property tax rates. It is, simply, an incredibly high penalty that will have to be paid not only by outside investors, but by local people who find themselves unable to meet the complex bureaucratic requirements to obtain exemptions they are otherwise entitled to. With median home prices hovering around $1 million, property owners will be paying $30,000 and up for homes declared “empty” because they miss a deadline, can’t meet the demands for documentation that haven’t been defined yet, and have to pay approximately 10 times their normal real property tax payment. It’s hard to call that a simple “tax” with a straight face. It’s a punishment, a penalty.

2–The burden of proof is flipped against the individual homeowner. As a property owner, you won’t be “innocent until proven guilty.” The city will assume your home is empty and subject to the penalty unless you prove to their satisfaction that it is not empty, using as-yet-undetermined paperwork to support your claim within the short time periods called for by the bill.

3–I doubt this point is understood. This isn’t a one-time application for an exemption. It is an application process that will have to be repeated every single year for every property. Remember what a pain it was to renew your drivers license after Honolulu moved to a “Read ID” requirement, where you had to prove your residence, dig out utility bills, tax returns, or other items to prove you live where you say you live. That was bad, but you only have to do it once. The empty home application dance will have to be repeated each and every year. And, if you’re late or make a mistake, the hammer of that huge penalty will come crashing down.

That’s an annual burden for any homeowner, and an annual nightmare for those employees tasked with sorting through all the claims.

4–We know that most city offices and departments are understaffed and barely able to keep up with their current workloads, and often fall behind, like the now notorious Department of Planning and Permitting. How is the tiny real property tax office and its small group of staff and appraisers going to cope with an annual inundation of paperwork? Not well, is my prediction. And, in the process, there’s going to be a lot of collateral damage. Some people will lose their homes in the process, or their situations will cause new rounds of scandal.

Take a simple example. There is an exemption for property owned by someone undergoing medical care or being cared for in a location other than their home for more than six months in a tax year. But is that owner in a nursing home or convalencent hospital going to be able to submit their annual application to claim their exception? It’s more likely they will get out of the hospital or facility and find that they now owe the city and additional $30,000+ for leaving their home empty, and either pay it or else. It’s not a pretty picture. And similar scenarios involving other exceptions are not difficult to foresee.

5–The bill is modeled after a similar empty home tax in Vancouver, Canada. There experience has been mixed. Vacancy rates have declined modestly, although how much is due to the tax isn’t clear. But rental costs have not gone down. Housing is no more affordable than it was without the tax. The same thing is likely to happen here.

Public interest advocate Natalie Iwasa spelled out some of her opposition to Bill 46 in a Civil Beat commentary (“A Vacant Homes Tax Is Not Good Public Policy“).

It’s an intriguing idea with far too many real world problems to work efficiently and fairly.

It’s time for the council to step back from the brink and rethink how to make housing more affordable and available. This tax bludgeon isn’t the way.