A Low-Income Housing Complex Is Ready To Rebuild After Lahaina Fire. It Just Needs $36M

The $64 million Kaiaulu o Kupuohi apartment complex for low-income families in Lahaina was reduced to rubble less than a year after it was built, one of more than 2,220 structures destroyed by the Aug. 8 wildfire.

But while much of the town still looks like a war zone, the 89-unit, five-story complex — with views of the ocean and West Maui Mountains — is on a fast track to be rebuilt.

It is the first and only property in the roughly five-mile burn zone to obtain a county building permit. The insurance money is in the bank. Almost all of the debris has been removed. And a general contractor, Honolulu-based Maryl Group Construction, is in place.

Tenants could be moving back into it by June 2025, the developer says, likely paying rents somewhere between $602 for a one-bedroom to $1,766 for a three-bedroom unit.

“We just need $36 million,” said Tom Fischer, executive vice president of Ikaika Ohana, the project developer.

That’s the gap between the $44 million that is left from insurance proceeds — after paying $5.8 million for expedited cleanup work that the developer did on its own — and the current $80 million cost of rebuilding the complex. The cost went up more than 25% in the 40 months since the original price was set due to increases in building materials and labor costs.

On Tuesday, Ikaika Ohana and its investors met with county officials and members of the Hawaii Housing Finance and Development Corp.

“We’re trying to get people to the table to see what we can do,” Fischer said before the meeting. “I’m hopeful that in this meeting, someone’s going to say they’re going to by proclamation or ordinance or whatever, approve a $36 million line item for this project so we can get going.”

While that didn’t happen, Fischer said the meeting was productive, adding that “everyone is trying to find a way to move forward.”

Fischer will make his case for funding before the Maui County Council on Thursday when it takes up the new Department of Housing budget for the fiscal year starting July 1.

The original project on Kupuohi Street in the Lahaina Business Park — located on the edge of the burn zone where the water has been deemed safe and its underground utilities weren’t destroyed — was financed primarily by Hunt Capital, the Bank of Hawaii and federal, state and county funding. At its blessing in December 2022, the project was heralded as a much-needed source of affordable housing for households earning 60% or below the area median income, which at the time equated to making no more than $48,660 for a single person or $69,480 for a family of four.

Some people living in the units were at 30% AMI, “which is considered low-low income,” Fischer said.

Since the disaster, Fischer said Ikaika Ohana has been moving at warp speed because it has a 25-month window to rebuild the complex under a timeline mandated by the IRS that oversees the federal tax credit program for low-income housing.

“We have to be done by Sept. 30, 2025,” he said. “It’s a cliff. If we’re not done at this point in time, all of our tax credits would then be recaptured and our investors would lose all of their tax credit equity.”

The state requested an extension, but it has not received a response.

The company is also moving quickly because it wants to get the 89 families — about 300 people — who were living in the building back into stable housing. Fischer said that while it is fortunate everyone was able to make it out alive, many are now living in hotels, couch-surfing or sleeping in tents or cars.

The county has been supportive of the rebuild, he said, with several departments working with the developer to expedite the process. The building permit was issued Dec. 21.

“The housing project is one of the closest to being shovel-ready for rebuilding in West Maui,” said Saumalu Mataafa, deputy director of the Maui Department of Housing and Human Concerns.

Fischer said he and other company officials and investors also thought the state was supportive of the rebuild and were expecting to discuss their $36 million funding request when they attended a Feb. 14 meeting with the HHFDC, which had provided $17.1 million in Rental Housing Revolving Funds during the original construction.

But he said they were blindsided by HHFDC telling them the complex had been underinsured. Fischer said the company insured the complex to the maximum it was allowed, and that HHFDC and the other investors signed off on the insurance coverage.

“If there was a better insurance policy on the market, we would have obtained it,” Fischer said during testimony last week at a Maui County Council budget committee hearing.

In a written response, HHFDC said it never signed off or approved of the insurance coverage. It also said that with Ikaika Ohana having a gap in its insurance coverage, “We cannot provide a project grant as it requested.”                    

Fischer said while the project investors allowed insurance proceeds to be used for the cleanup, they will not allow those proceeds to be used on construction until the gap funding is secured.

On Tuesday, a crew was working on the final remediation of the site, which included demolition of the remaining podium deck where it attaches to the footers with rebar.

When that work is completed in the next couple of weeks, Fischer said, “We’ll have gone as far as we can without funding. … We’re kind of at a standstill.”

He said it’s disheartening given the great progress so far.

As soon as the company was allowed back on the property in October, a crew of about 30 people that included general contractors and professional engineers worked on a remediation plan that was made easier because the building was new and did not have lead or asbestos.

Instead of waiting for the Army Corps of Engineers, the company quickly created an alternative debris removal plan that was approved by the county, allowing the non-recyclable debris to be taken to the Central Maui Landfill.

The crew assessed what could be saved of the property, which included the subsurface infrastructure, the podium columns and footers, parts of the elevator shafts and most of the retaining walls — a value of about $8 million in materials and labor but worth considerably more with the time savings of about a year.

There could have been much more to save of the building, which featured 20 one-bedroom, 34 two-bedroom and 35 three-bedroom apartments.

A day after the fire, photos show that at least half of the building appeared to be mostly intact, but it seems no effort was made by the Maui Fire Department to put out the blaze which continued until nothing was left except for the columns, the podium deck, an elevator shaft and two stairwells.

“If we were able to drop a couple buckets of helicopter water on top, would the rebuild price have been less?” council member Tamara Paltin asked Fischer last week.

“It was a terrible tragedy in Lahaina,” he said. “I’m certain it was quite chaotic in the scene on the 8th when the wildfire was raging. But to your point, I think the 9th, 10th and 11th, we just sort of observed really no activity to try to put the fire out. And the building literally just disintegrated over a three-day period.”

Fischer said the company would not be requesting more funding had the remaining part of the building been saved.

“We should do the right thing and build it back,” Paltin said after last week’s meeting.

The Maui Fire Department did not respond to a request for comment.

Ikaika Ohana, which has a track record of completing affordable housing projects throughout Hawaii, also is well underway on another 200-unit affordable complex in Lahaina called Kaiaulu o Kukuia. It suffered moderate wind, smoke and ash damage from the disaster, but the first phase is expected to have people move in by the end of the year.

The county said there are 12 other building permit applications pending in the burn zone.

Civil Beat’s coverage of Maui County is supported in part by a grant from the Nuestro Futuro Foundation.