Maui tax credit development must stay affordable for 31 years

A federal court in Hawaiʻi ruled that a low-income housing tax credit project on Maui must remain affordable for the next 31 years, siding with tenants in a case they brought against a developer and the state housing agency.

Lahaina Front Street Apartments, a 142-unit development built in 2001 using federal housing tax credits, cannot be converted to market-rate housing or sold without the tax credit program's rental restrictions, U.S. District Court Judge Jill Otake ruled Wednesday.

Otake's opinion said the Hawaiʻi Housing Finance & Development Corporation's decision to release Front Street Affordable Housing Partners, the project developer, from requirements to keep the property affordable was unenforceable.

The developer in 2002 had entered into a restrictive covenant, governed by both Internal Revenue Code Section 42 and state law, that required the property to remain affordable for an extended use period of 51 years, unless its ownership was terminated through foreclosure or instrument in lieu of foreclosure, according to the opinion.