On Kaua‘i, the Biggest Home Developer Is the County

Nestled next to farmland and older residences, three affordable rental projects are emerging from the red dirt in Kaua’i’s western town of ‘Ele’ele.

The rentals, part of the county-led 550-unit Lima Ola affordable subdivision, is an example of how Kaua‘i County’s Housing Agency has become a major developer and facilitator of new homes on the island.

The Housing Agency and its private developer partners are expected to begin construction on 288 affordable homes this year. Combined with the 221 units that broke ground in 2023, the agency and its partners are set to add 509 affordable homes to the rural island’s housing stock.

That’s a major increase from past years, says Adam Roversi, the agency’s director. From 2012 through 2022, for example, the county built about 410 affordable homes.

Adam Roversi has served as the Kaua’i Housing Agency’s director since 2019. | Photo: Noelle Fujii-Oride

“It’s a record, let’s put it that way,” Roversi says of the new homes. Another 860 affordable homes are in the works across the island and are expected to break ground in 2025 or later.

More homes are direly needed on the Garden Isle, where so few new ones are built that the island’s housing stock has remained stagnant for the last five years, causing prices to skyrocket, according to UH’s Economic Research Organization. A 2019 state study said the island needed about 800 new homes a year from 2020 through 2025; that number includes affordable, market-rate and luxury homes.

“Both politically and economically, it’s a good time for the county to be doing what it’s doing,” says Roversi, who leads a staff of 23, eight of whom focus on development. He points to expanded federal and county funding for affordable housing projects. “There’s a lot of political momentum to try to do different, out-of-the-box things.”

More Homes Needed

At the turn of the millennia, a shift began in the types of private housing projects being built on Kaua‘i, with more high-end luxury developments and fewer projects affordable to locals.

Ka‘āina Hull, the county’s planning director, attributes the shift to regulatory barriers and infrastructure requirements. For example, large developments have often been required to build new wastewater treatment plants, waterlines and roads.

“The only people who could pay for them were the high-end luxury folks,” he says. “And so some of these regulatory barriers and infrastructure costs, and this is just my perspective, created the barrier for our local housing.”

He adds that his department in the last five years has “taken a blowtorch” to Kaua‘i’s zoning ordinance and eased lot coverage, setback, density and other requirements. The other step to getting more homes is addressing infrastructure, he says.

D.R. Horton Hawaii, part of the largest homebuilding company in the U.S., built 151 homes and duplexes in its Ho‘oluana at Kohea Loa subdivision in Hanamā‘ulu in 2019. Of those units, 32 were targeted at households earning up to 140% of the area median income, or $143,100 a year for a family of four.

The subdivision is part of the 440-unit Kohea Loa project on 53.7 acres of private land. But the last three phases are on hold until water access issues are resolved, the company wrote in an email. Affordable units in those phases are anticipated to be sold at 80% to 100% of the area median income, or $96,500 to $102,200 for a family of four.

A community organization sued the county water department in 2018 over a proposed 18-inch waterline that would serve Puhi, Līhu‘e, Hanamā‘ulu and Kapa‘a – including the new Ho‘oluana at Kohea Loa subdivision. The state Supreme Court ruled in 2022 that the department didn’t do a thorough environmental assessment. The Kaua‘i Department of Water wrote in an April email that it is finalizing negotiations on the scope of work and fees to prepare an environmental document for the potential impacts and areas affected.

The cost and availability of infrastructure are key reasons why housing projects don’t pencil out for developers, says Milo Spindt, who advises nonprofit developers Permanently Affordable Living Kaua‘i and Kaua‘i Habitat for Humanity. “So if someone with very big … deep pockets who thinks very long-term with their investments can’t do it, who can?” asks Spindt, who is also a Realtor and serves on the Hawaii Habitat for Humanity Association board.

“He wanted desperately for the county to acquire land that he could entitle and set up for future development,” says Gary Mackler, who worked as a housing development coordinator for 24 years. That led to the county’s 2010 purchase of 75 acres of agricultural land from McBryde Sugar Co. for $2.5 million.

That land is home to the four-phase Lima Ola project in housing.

“We’re not producing market housing to make profits; we’re producing housing to serve residents.”

— Gary Mackler, former Housing Development Coordinator, Kaua’i County Housing Agency

Small Housing Loss

According to UHERO’s Hawai‘i Housing Factbook, Kaua‘i saw a “very small” net housing loss of about 400 units over the past five years. Justin Tyndall, assistant professor of economics at UH Mānoa and a member of UHERO, says some of that loss may be due to more housing units being used as vacation rentals. About 17.5% of Kaua‘i’s housing units were listed as active vacation rentals in 2023, up from 16% in 2022.

Kaua‘i issued about 160 to 180 residential building permits each year from 2020 through 2023, according to UHERO data. From 2016 through 2019, the county issued 200 to 400 permits.

Little new housing means there aren’t enough homes to go around, so prices are high. In March, the median sales price on Kaua‘i was $1.6 million for a single-family home and $770,000 for a condo, according to the Kaua‘i Board of Realtors.

“I feel like younger people 10 years ago could reasonably afford a home with a normal job on Kaua‘i and now there’s no way,” says state Rep. Luke Evslin, who represents southeastern Kaua‘i and is chair of the state House Committee on Housing. He adds that it’s even hard to recruit doctors because they can’t afford housing either.

But Tyndall says county leaders appear to be aware of the housing problem and have made reforms, including reducing regulations and getting the county to facilitate and produce affordable housing developments.

Producer of Affordable Housing

Around 2005, then-Mayor Bryan Baptiste began meeting with major landowners to talk about acquiring private land. He saw that many of the good development sites were being taken by the private market for market-rate housing projects. But residents needed housing that was more affordable.

“He wanted desperately for the county to acquire land that he could entitle and set up for future development,” says Gary Mackler, who worked as a housing development coordinator for 24 years.

That led to the county’s 2010 purchase of 75 acres of agricultural land from McBryde Sugar Co. for $2.5 million. That land is home to the four-phase Lima Ola project in ‘Ele‘ele, the county’s largest affordable housing undertaking.

Mass grading and utility and infrastructure installation began in November 2020 for the first phase, which will comprise 38 single-family and 117 multifamily homes.

“The one thing that got us there is persistence, even to this day, and now we’re seeing the dividends of that effort,” Mackler says. He also serves on the boards of the Hawai‘i Housing Finance and Development Corp., the Kaua‘i Housing and Development Corp. and the Hawai‘i HomeOwnership Center’s Community Land Trust.

Rep. Nadine Nakamura, who represents the island’s north and east sides, says Lima Ola is a model for the state. “This is what it takes to do development in Hawai‘i,” she says.

“We’re really lucky, I think on Kaua‘i, that we have an aggressive housing (agency). We have prioritized where we want affordable housing to be and we’ve identified the infrastructure needed to carry it out. So, you know, the next step is to figure out how we’re going to pay for that infrastructure and partner with the (state) and the feds to try to get whatever money we can. And that’s what’s happening.”

“We’re really lucky, I think on Kaua’i, that we have an aggressive housing (agency).”

— Nadine Nakamura, State Representative, Kaua’i

Roversi says the county’s goal is that affordable housing on county-owned land, like Lima Ola, be affordable in perpetuity through ground leases for rental projects and limited appreciation leaseholds for ownership projects.

“If we’re successful in continuing with that model, it kind of establishes a separate bifurcated housing market, that we have a pool of homes insulated from market forces, because the county owns the land,” he says.

The Housing Agency plans to replicate Lima Ola in Waimea and Kīlauea, where the county recently acquired land. And Roversi hopes to acquire property in other areas, including the Līhu‘e town core since the county’s general plan calls for most future development to happen in that area.

Housing Agency’s Role

The Kaua‘i County Housing Agency was established in 1976. Its early projects included collaborations with the state and a nonprofit housing developer. Together, they developed 14 single-family homes in Po‘ipū’s Weliweli subdivision, and 50 single-family homes each in the Līhu‘e Town Estates and Kapa‘a Meadows subdivisions.

Ken Rainforth was hired at the Housing Agency as a project coordinator in 1979 and worked in a variety of positions, including housing director, before retiring in 2009. He says the agency initially focused on administering Section 8 and other federal grants to nonprofits that served low-income residents. He began looking for funding so the agency could do more of its own development projects. “

To me, it’s just common sense to go after money and build your own projects,” he says.

Ken Rainforth helped create 5,000 housing units while working for the Kaua’i County Housing Agency from 1979 to 2009. | Photo: Noelle Fujii-Oride

Over the decades, the agency has also had a hand in multifamily and self-help housing, new and improved lots, and senior housing projects.

Developments supported by the Housing Agency took off after Hurricane Iniki, which devastated Kaua‘i in 1992. Chad Taniguchi, who served as the Housing Agency director from 1990 to 1995, says about $41 million in post-storm federal and state relief funds led to the creation of 581 housing units over a decade.

Today, many of its projects target low-income earners who make 60% of the area median income or less, or no more than $72,400 for a family of four.

In many cases, such as with Lima Ola, the Housing Agency is the lead developer; in that role, it identifies county-owned land or purchases land for affordable housing projects.

Along with that, it obtains any needed zoning approvals, solicits community feedback and conducts environmental reviews before issuing requests for proposals to select a private developer who will lease the land, typically at $1 per year.

The county will also put in needed infrastructure, expedite permits, and waive many county building fees. Roversi says those fee waivers can equal nearly $20,000 in savings per unit if the project is located near existing sewer lines.

The county also provides partial funding for projects, which helps them get additional points on their state financing applications. The number of points a project receives largely determines where it’ll rank among other applications. The highest-ranking projects are further evaluated to determine the amount of low-income housing tax credits needed to make the project feasible.

On the other end of the spectrum, the county is a secondary participant in projects initiated by private developers on private land. The county provides some funding, plus fee waivers and expedited permitting.

Roversi says there have been more of these types of projects in the last three years. Before that, only Kaua‘i Habitat for Humanity was originating affordable housing projects on its own land, he says. Under Kaua‘i Habitat’s model, partner homebuyers, plus volunteers, construct the homes, which helps to keep costs down.

Part of a Team

Mackler joined the Housing Agency in 1993 to help with Hurricane Iniki relief. His position was funded by the Federal Emergency Management Agency and was only supposed to last five years. He ended up staying on as the housing development coordinator until he retired in 2017.

He says the county government during his early years treated affordable housing as any other project needing approvals. That changed around 2005 when the government created a housing task force.

Heads of the county housing, planning and water agencies, and other officials, met regularly with each other and with private developers to discuss affordable housing projects, get updates and address issues. Those meetings continue today. Later, the county created a policy to expedite certified affordable projects for permitting. That expedited process can save six to 12 months, says Mackler, who describes his role in the process as that of a navigator.

“I think what happened slowly was there became more buy-in among the county representatives and the reviewers to understand that we’re just here to build units for your kūpuna, for your auntie, your uncle, your nephew, your niece, your son, your daughter,” he says. “We’re not producing market housing to make profits; we’re producing housing to serve residents. And that really, I think, was the start of having a more supportive county apparatus.”

Makani Maeva, president of Honolulu-based Āhē Group, says those meetings with government officials make her feel like she’s part of a team. Āhē Group has built four affordable rentals on Kaua‘i and has two more under construction.

She says project risks are eased when the county does the pre-development work. Low-income rental projects like hers, she says, can only charge a certain amount of rent, yet the cost to build can increase due to unexpected delays, environmental issues or community opposition.

And, she adds, it’s helpful that the county lines up its timeline for selecting contractors for county-initiated projects with the February application deadline for most state financing programs.

“They give us the tools that we need to go and compete aggressively for those funds that are available statewide,” says Craig Watase, president of Mark Development. “But you know, they want us to come there and build housing.” His company has developed five housing projects on Kaua‘i since the 1970s.

Watase and Maeva both say they appreciate the county’s support of developer-initiated projects on private land. For example, Mark Development and another Honolulu developer, ‘Ikenākea Development, plan to build a 154- unit apartment complex in Līhu‘e, and Āhē Group is building a 75-unit apartment complex in ‘Ele‘ele.

Roversi says he’s been getting more calls from developers interested in building on the island. “I have hopes that we’ve built a reputation of being a cooperative and helpful environment for affordable housing developers and the word is getting out,” he says.

“They give us the tools that we need to go and compete aggressively for those funds that are available statewide.”

— Craig Watase, President, Mark Development

Past and Future

The Kaua‘i Housing Agency’s development of affordable housing is reminiscent of the larger role that the City and County of Honolulu and then-Hawai‘i Finance and Development Corp. played on O‘ahu in the 1980s and ’90s.

Under then-Mayor Frank Fasi, Honolulu spearheaded the development of the 600-acre ‘Ewa Villages, which included restoring plantation communities and building new homes and community facilities. And HFDC was the overall developer of the 890-acre Villages of Kapolei.

In March, its successor, the Hawai‘i Housing Finance and Development Corp., selected developers to plan and develop up to 900 affordable rentals and for-sale homes in one of the last undeveloped portions of that part of Kapolei.

Additionally, the Hawai‘i Public Housing Authority is planning to create 10,000 new affordable units by redeveloping state-owned properties, and the state Department of Hawaiian Home Lands has been developing homesteads for Native Hawaiian beneficiaries for decades.

“We would like to spread our activity around the entire island so that every community is benefiting from what we’re doing.”

— Adam Roversi, Director, Kaua’i County Housing Agency

However, as local governments step deeper into this space, there could be concerns about government competing with private developers, says Spindt, the affordable housing advisor. There’s also a question of whether a local government, like the one on Kaua‘i, should be focusing on middle-income housing, a category of housing that’s not eligible for many state and federal subsidies.

He says he doesn’t have answers to those questions, but the big challenge is that Kaua‘i County’s government can’t make up the island’s housing shortfall on its own.

“The county can play a part in it, and I think they are playing an important part, and I do support the idea that all other counties in Hawai‘i and throughout the nation should have some role in preparing land for development,” he says.

Rainforth says he had a hand in about 5,000 housing units during his 30 years with the Kaua‘i Housing Agency. He still remembers how he felt when he first saw families do their final inspections of their new homes.

Photo: Noelle Fujii-Oride

“The joy of that family is just, I can’t describe it,” he says. “So later on when we were doing other projects, I made sure that my development staff had that same opportunity to do the walkthroughs with the new homebuyer. … It’s just really stimulating to be with somebody when they’re buying their first home. It’s just incredible.”

Maeva is wrapping up construction on part of her 75-unit Kai Olino project. And her two rental projects at Lima Ola are expected to accept tenants in the fall.

She says watching residents move in and become part of the surrounding community are her favorite parts of being a developer.

“It matters, right? It makes a difference,” she says. “And so it’s just a feeling when people are moving in. I’m so happy when kids have bedrooms, when people aren’t worried about their rent going up, or the house being sold. It’s a long-term solution. And it’s almost like a little bit of a peace. You know, you can feel it and you can see it, and people appreciate it.”