Category Archives: Housing

Kahala Beach Apartments face uncertain future

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Kamehameha Schools has reportedly turned down a request from the association of apartment owners of The Kahala Beach condominium to extend the lease on the property beyond its scheduled expiration in July 2027, according to a current owner.

If the report is correct, and the decision is not reconsidered and reversed, it means the buildings and all 196 apartments will revert to Kamehameha Schools in ten years at the end of the current lease.

Apartments in the once prestige building at 4999 Kahala Avenue, located between the Waialae Country Club and the Kahala Hotel, have been selling at heavily discounted prices in recent years due to uncertainty about the building’s future.

The 196 condominium apartments, which range in size from 1,050 square feet up to 3,510 feet, still command high lease rents, despite their limited future. Lease rents for the current period are over $5,600 per month for the largest apartments, with most apartments paying at least $2,000 per month. The association has been in negotiations to set the new lease rent for the final ten year period of the lease, which begins in July, while simultaneously seeking a lease extension.

A group of Kahala Beach owners previously tried to qualify under the city’s former leasehold conversion law, which under certain conditions would force landowners to sell the fee simple interest to qualified lessees. That case went all the way to the Hawaii Supreme Court, which ruled against the apartment owners in a 2005 decision. The city repealed the law in that same year.

Both the Kahala Hotel and the Waialae Country Club are also subject to Kamehameha Schools leases. There is some speculation that Kamehameha may be considering a long-term plan that includes the eventual takeover of the entire area stretching from Waialae Beach Park to the eastern end of the golf course.

Two assessments of issues behind the housing crisis

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A couple of interesting articles looking at the issues in our current housing markets.

From Mother Jones: “Is Your City Being Sold Off to Global Elites?”

That’s certainly a question that goes directly to our situation in Hawaii. The article digs into the situation in Vancouver, British Columbia, with a history of urban diversity.

It’s midmorning on a Saturday in Richmond, a suburb of Vancouver, British Columbia, and this is maybe the 20th example we’ve seen of what locals call the “empty-house syndrome”—homes purchased by foreign nationals, many of them wealthy Chinese, and left to sit vacant. Some will eventually have occupants; Vancouver is a top destination for well-heeled emigrants. But often, the new owners treat the houses as little more than vehicles for spiriting capital out of China. By one recent estimate, 67,000 homes, condos, and apartments in the Vancouver metro area, or about 6.5 percent of the total, are either empty or “underused”—an appalling statistic, given a housing market so tight that rental vacancy rates are below 1 percent.

We certainly see those empty houses in Kahala when we walk on the beach in the mornings. Just in the stretch of houses we walk past daily, there are probably two dozen large empty luxury homes. And I’m sure there are many more empty units hidden in high-rise condominiums.

Anyway, Vancouver is experimenting with how to respond. We should be watching.

And the New York Times looked at another aspect of housing: “How Homeownership Became the Engine of American Inequality.”

The culprit here is the mortgage interest deduction, which lets home owners deduct the portion of their mortgage payments that go to interest on their loans. It’s a financial benefit that renters don’t enjoy.

A friend has proposed a homeowner’s surcharge dedicated to funding affordable homes, and calls existing homeowners perhaps the largest impediment to expanding the housing base.

Complicated issues here.

A fine bit of gerrymandering

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It’s the kind of spectacular example that will leave future reapportionment commissions swooning in awe, even though it’s a case of economic rather than political gerrymandering.

And here it is! A new economically-challenged district officially determined to be plagued by stubbornly high unemployment, according to the Department of Business, Economic Development, and Tourism.

Fantasy Land

I’m indebted to an article in Civil Beat this week for bringing this excellent example to my attention, but I fear the fine reporters at CB failed to appreciate its true brilliance. This isn’t your everyday fudging of the numbers. No, this is real heavy lifting, a world-class bit of boundary bending!

It seems there are some smart cookies over in DBEDT which, among many other things, administers the federal government’s EB-5 “cash for green-card” program in Hawaii. This is the program that allows foreign investors to put money into “qualified” projects and, in exchange, earn a green card allowing them to come to the United States.

Along came developer Jay Fang (also known as Zhe Fang), who wants to qualify his proposed new high-rise project for the EB-5 program, and to tap special benefits which come from investing in an area suffering from high-unemployment.

Unfortunately for Fang, his proposed project is a stone’s throw from the Keeaumoku Walmart, and just down the street from Ala Moana Center. It’s also just mauka of Kakaako, where a high end construction boom has been underway for years. The local unemployment rate is rock bottom.

But, it seems, DBEDT took it as a challenge. How they could take a proposed project in an area with extremely low unemployment, and in a city with unemployment well under 3%, and make it appear to to be in an area with an unemployment rate of at least 150 percent of the U.S. national average, thereby qualifying for the especially lucrative benefits of the EB-5 program?

Those tricky folks at DBEDT finally found a way to make it come out right!

They carved out that strange, lizard-shaped district encompassing the large, high unemployment districts on the west side of the island, and sweeping down to small, affluent census tracts over by Ala Moana, where developer Fang hopes to build his project. Average out the unemployment rates across those diverse census tracts, and DBEDT could certify the newly created district as a “Targeted Employment Area for the purposes of the EB-5 program.”

It’s the kind of effort that would make Texas legislators, well known for their gerrymandering prowess, glow with pride! And this from our home town boys in DBEDT, who appear to be at the top of their game!

And who says Hawaii state government can’t get things done!

State Supreme Court hits some bank foreclosures

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A post here last week discussed a recent federal court opinion that concluded condominium associations were not allowed under Hawaii law to pursue nonjudicial foreclosures against individual owners who failed to pay their regular maintenance fees.

But there was another recent foreclosure-related decision that could have much more of an impact.

In the case of Hungate v. Rosen, the Hawaii Supreme Court ruled that a bank conducting a nonjudicial foreclosure must publish a new public notice each time it postpones a scheduled foreclosure sale.

Apparently it was a common practice for banks to pursue nonjudicial foreclosures under the “power of sale” provisions in their mortgages, publish a notice of the planned sale, and then postpone it at the last minute. A new date would be set but not announced. Sometimes this would be repeated a number of times, and when the sale was finally held, the bank would be the only bidder present.

The Hawaii Supreme Court said that while the common language of these mortgages was ambiguous, the court was required to rule against the bank’s position.

The application of contract interpretation principles to resolve the power of sale clause’s ambiguity supports the conclusion that Deutsche Bank was required to publish postponement notices. “[A]ny ambiguity in a mortgage instrument should be construed against the party drawing the documents,” State Sav. & Loan Ass’n v. Kauaian Dev. Co., 62 Haw. 188, 198, 613 P.2d 1315, 1322 (1980), or in other words, “against the party who supplies the words[.]”

The original circuit court decision had dismissed claims against the bank, but the Supreme Court reinstated key claims, ruling that the bank should have announced any postponements and the new dates of planned foreclosure sales. And the court also ruled that the lower court should have allowed claims of unfair or deceptive trade practices to go forward. The case was remanded to circuit court for proceedings consistent with the ruling.

I was told that there could be thousands of nonjudicial foreclosures brought by banks that had the same defective notices.

There’s obviously a lot going on in the legal world.

Time to sort out just how all of the cases reconsidering previous nonjudicial foreclosures are going to affect the real estate market, title insurers, banks, lawyers, and those property owners who were foreclosed on.

Like the cases involving condominium associations, this isn’t likely to be pretty.