Owners of secondary residences that were isolated, damaged or destroyed during the 2018 Kilauea eruption will be able to apply next week for the county to buy their properties.
The three-phase Voluntary Housing Buyout Program, funded by $107 million in Community Development Block Grants from the U.S. Department of Housing and Urban Development, already has received extensive interest during its first phase, which allowed owners of a primary residence affected by the eruption to apply for a buyout.
Now, the program is gearing up for its second phase, which begins Monday and allows owners of secondary residences to submit applications.
The program operates under the Internal Revenue Service’s definition of a secondary residence, which is a home lived in by the owner between 14 and 200 days of the year or at least 10% of the days rented out per year.
Under the terms of the program, eligible applicants can receive payouts for their properties equivalent to the property’s value in 2017 up to $230,000. More than 70% of the region’s properties were valued at less than $300,000 in 2017, so most eligible properties shouldn’t hit the buyout cap.
“We’re actually pretty close to the 100% mark for Phase 1,” said Julie Leialoha, program manager for the county’s CDBG Disaster Recovery projects, adding that 299 primary homeowners in lower Puna submitted buyout applications during Phase 1, with an additional 19 late applications submitted since Phase 1 ended.
Disaster Recovery Officer Douglas Le said records from before the project launched indicated there were 294 primary residences in lower Puna that would be eligible, but after the vetting process started, it became clear that there were some properties that, for a variety of reasons, hadn’t been reflected in the initial number.
Leialoha said there are, at most, only a few eligible homeowners who have not submitted applications for the first phase of the program, and she expects a similar level of interest for the second phase.
She said the county’s initial damage assessment indicated there were 318 secondary residences affected by the eruption.
“To be quite honest, I wasn’t sure what we’d be expecting,” Leialoha said. “I knew there would be very high interest in the program. Especially once we started getting applications, our phones were ringing off the hook with people interested in the program. For the most part, they’re very happy with the program. They’re just really happy there’s a program like this that’s never been done before.”
However, work on the first phase continues. Leialoha said 107 applicants have been fully vetted and are determined to be fully eligible, which means their cases can transition to preparing financial information before an actual acquisition offer can be made.
She said the program is on track to make its first buyout offers by the end of the year.
There are 171 other applications “in the hopper” that still need their paperwork vetted, and the 19 Phase 1 applications submitted during the interstitial period will get priority attention when the program boots up again Monday.
“Any primary home application gets priority during the next phases,” Leialoha said, adding that secondary home applications will get priority if submitted during the third phase, which begins on May 2, 2022, and allows owners of undeveloped properties to apply.
Although Phase 1 applicants who applied between phases will not have to resubmit applications, Le said Phase 2 applicants who submitted materials early will have to submit them again when the application period opens.
Because the second phase covers secondary residences, Le urged potential applicants to be honest about certain things such as the rental status of the property.
Le said that whether a property was a long-term rental will not necessarily affect the payout for the property, but the recovery team would like to know if there are former renters who might need their own assistance.
Le said the household income of an applicant does influence their application’s priority, but does not disqualify the applicant. Under HUD’s CDBG terms, 70% of the program’s funds must be used to support low- to moderate-income residents, but applicants in higher income brackets can still apply.
If a person has received aid through federal assistance projects such as Small Business Administration loans or Federal Emergency Management Agency grants, that person is still eligible for the program and their payout will not be affected, Le said.
However, if a person has received an insurance payout for property damaged in the eruption, the recovery team must consider the “reasonableness” of how those funds were used.
“It’s a determination we have to make on a case-by-case basis,” Le said. “If they bought a yacht and parked in in Monaco … we’d have to take a hard look at that.”
Leialoha said applicants will need to submit income verification for everyone in their household for 2021, regardless of whether they were present during the 2018 eruption. Leialoha reassured applicants the county will not share such information, but it is necessary for the process.
There are some types of properties that are ineligible for the program. Full-time vacation rental properties — which the owner did not live in for any significant amount of time — are not eligible, nor are businesses with no residential component.
Leialoha also said there have been some applicants in Phase 1 that were deemed ineligible, mostly because they were found to not be the actual owner of the property or a title change has taken place between 2018 and now.
“If they know they have rights to the property, they should seek legal counsel … but we cannot help them with that at all,” Leialoha said.
“One of the reason we have all these presteps is to identify these types of challenges before we reach, say, an escrow table,” Le added.
Leialoha said the recovery team hopes to make contact with initial applicants within about two weeks of Monday. Applicants can choose for the initial meeting to be held in person, via Zoom or over the phone, and the 14-person recovery team will work to accommodate participants’ needs. The subsequent formal intake meeting will require signatures from applicants, Leialoha said, but mail-in options are available.
Leialoha urged applicants to remain in contact with the county during the process, saying that it’s “prudent for everyone to get this done as quickly as possible.”
Applicants can withdraw from the process whenever they want. Leialoha said there have been two withdrawals so far. And even if an applicant withdraws, they can opt back in during an active application phase.
“If anyone has any questions, please reach out to us,” Leialoha said. “We’re here to help.”
The application form for Phase 2 will be available to download at tinyurl.com/58fbd5dd, where applicants can also find a list of required documents. For further assistance, applicants can contact the program team at ( 808) 961-8996.
The application period for Phase 2 ends Jan. 31, 2022.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.
