Front Street Apartments to remain affordable following dismissal of developer's appeal

On July 5, 2022, the Ninth Circuit dismissed with prejudice on the appellant’s own motion an appeal filed by Front Street Affordable Housing Partners (FSA), the developer of the Front Street Apartments. The dismissal confirms that FSA may not end unilaterally the rent restrictions that prevent it and subsequent buyers from raising rents or selling the project unencumbered by the rent restrictions. 

Located in Lahaina, Maui, the Front Street Apartments project was built in 2001 to provide affordable rental housing to low income residents of Maui. It is one of the few affordable housing complexes left on Maui. In return for $15 million in state funded tax credits, the developer, FSA, promised, by covenant, to keep the apartments affordable for 51 years.

However, after just 15 years, FSA asked the state’s financing agency, Hawaii Housing Finance & Development Corporation (HHFDC), for permission to end the restrictions 36 years early. HHFDC rubberstamped the developer's request. Because the ending of rent restrictions could have led to doubling or tripling of rents and the eviction of low-income tenants who were unable to pay, the tenants filed suit, explaining that HHFDC’s approval violated applicable law.

In August 2020, Hawai'i Federal District Court Judge Jill Otake ruled that FSA was obligated to honor its commitment to keep rents affordable through 2051, and that an attempted “release” of the low-income restrictions between it and HHFDC was unenforceable. FSA appealed the decision in 2020. The case was scheduled for oral argument before the federal Ninth Circuit Court of Appeals on July 8, 2022.

However, on July 1, 2022, FSA filed a voluntary motion to dismiss the appeal with prejudice, which the appellate court granted on July 5, meaning FSA cannot further challenge Judge Otake’s ruling.

Hogan Lovells counsel Joe Lambert, who served as lead counsel on the case, said: “While we were confident in our position and prepared to argue the case before the appellate court, we are pleased FSA has dropped its appeal and that Judge Otake’s order confirming that the rent restrictions cannot be removed unilaterally remains in full force and effect. I am proud of the work our team did on this case and am thrilled that Front Street will remain affordable through 2051, as the developer promised it would.”

Mike Tuttle, a Front Street resident and a plaintiff in the case, noted: “The incredible stress for so many people, not knowing if they would lose their home, has really taken its toll. It’s hard to put into words the level of joy and relief we all feel now that it’s over, but it’s extremely sad that it had to come to this. I thank God for all the wonderful people at Hawaii Appleseed, Lawyers for Equal Justice, the lawyers at Hogan Lovells, and attorney Lance Collins, for saving this affordable housing complex.”

Chi Guyer, one of the residents at Front Street, added: “It is wonderful to know that we [will] continue to have a home here at FSA and mahalo to the attorneys for coming to the aid of the folks who live at FSA who have, for over 4 years, waited with baited breath to learn whether or not our homes would be here for us. Many thanks for saving affordable housing at FSA.” 

Ray Kong, Legal Director of the Lawyers for Equal Justice, said: “This case is an important reminder about the dire need for affordable housing in Hawai’i. We need to ensure that projects like Front Street remain affordable, not only through the promised dates, but we need to think ahead, for Front Street and other housing like it, about how to keep these units affordable when the restrictions expire. We cannot wait until the rent restrictions expire. We need to plan ahead and take action now.”

“Judge Otake's decision ensures that public officials can have confidence that when they approve affordable housing agreements with tax breaks and credits, that subsequent owners can't back out of their end of the bargain decades later," said Maui attorney Lance D. Collins. 

The Hogan Lovells team representing the tenants throughout the four-year litigation include counsel Joe Lambert, partner Cate Stetson, associate Cory Wroblewski, paralegal Heather Briggs, and others. The tenants were also represented by Victor Geminiani, Ray Kong, and others of the Honolulu nonprofit Lawyers for Equal Justice, and Maui attorney Lance D. Collins.