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Low-Income Housing Tax Credits

The Department of Hawaiian Home Lands is committed to providing affordable housing to Native Hawaiian beneficiaries. One way we are achieving this is by using Low-Income Housing Tax Credits (LIHTC) to build more homes. If you are renting a unit in one of these LIHTC-funded developments, it’s important to understand how your homestead lease works and what the LIHTC rules mean for you.

As a Native Hawaiian beneficiary, you will be issued a homestead lease for the land under your rental unit. This means you have the right to the land and, eventually, the opportunity to own the home. However, because DHHL used LIHTC financing to build these units, there are special rules that you must follow before you can own the home outright.

Schedule

DateEventLocation / GroupAwards #
May 17, 2025La’i’Ōpua RWOP Workshop –
Existing Tenants and Interested
Beneficiaries for Next Increment		Hawaii Residential Waitlistn/a
October 2025Hanapēpē RWOP WorkshopKaua’in/a

Frequently Asked Questions

Why Can’t I Own the Home Right Away?
LIHTC rules require that the rental unit remains affordable for a minimum 15-year compliance period. During this time, the unit must stay a rental and follow income and rent restrictions to ensure affordability for low-income families. This is a federal requirement, and it applies to all LIHTC-financed housing projects.
What Does This Mean for Me as a Beneficiary?

1. You must rent your unit for 15 years. Even though you hold the homestead lease for the land, you are still considered a tenant of the rental unit because of LIHTC regulations.

2. You must meet income eligibility requirements. LIHTC housing is designed for lowincome households. Each year, DHHL must verify that you meet income limits set by the program. If your income increases significantly, you may not qualify to stay in the unit.

3. Your rent is restricted. The rent you pay is based on LIHTC guidelines, ensuring it remains affordable for beneficiaries.

4. The property is managed by a third-party LIHTC property manager. They will ensure compliance with LIHTC rules, including tenant eligibility and rent restrictions

What Happens After 15 Years?

Once the 15-year LIHTC period ends, DHHL can transfer ownership of the home to you. At that point:

  • You will own both the home and the land under your homestead lease.
  • You will no longer be subject to LIHTC rental rules.
  • You will have full control over your property, just like any other homestead lessee.
Why Did DHHL Use LIHTC?

LIHTC is a powerful tool that allows DHHL to build more homes for more Hawaiians by leveraging federal funding. Without LIHTC, far fewer units could be developed, leaving more families without housing. By participating in this program, you are benefiting from affordable rent now while securing future homeownership on Hawaiian Home Lands.

DHHL Step-by-Step Process: LIHTC Rent with Option to Purchase

This guide outlines the general process from applying as a beneficiary for a Low-Income Housing Tax Credit (LIHTC) Rent with Option to Purchase home to eventually purchasing the home at a heavily discounted price in Year 15.

Step 1: Application Process

Check Eligibility

  • Must be on the DHHL waitlist as a qualified Native Hawaiian beneficiary.
  • Must meet LIHTC income requirements, typically 60% or below the Area
    Median Income (AMI).
  • Must be willing to rent under the LIHTC program for 15 years before purchasing. (YOU ARE A RENTER UNTIL YOU ARE ABLE TO PURCHASE)

Submit Application

  • Apply for the specific LIHTC Rent with Option project.
  • Provide income verification, credit check, and other required documentation.
  • Attend informational workshops to understand the commitment and
    process.

Selection Process

  • Applicants are selected based on income eligibility at 60% AMI and below.
  • Qualified applicants are placed on a waitlist.
  • Once all available units are filled, no additional applicants are accepted until further availability.
  • If selected, sign a lease agreement with the designated property
    management entity.

Step 2: Living in the Home as a LIHTC Tenant (Years 1-15)

Tenant Responsibilities

  • Pay monthly rent on time.
  • Maintain the home in good condition.
  • Follow LIHTC program rules and annual income recertification requirements.

Move-In & Lease Agreement

  • Once approved, sign a 15-year lease as a LIHTC tenant.
  • Monthly rent is below market value due to LIHTC subsidies.

Homeownership Preparation

  • Attend financial literacy and homebuyer education workshops
    • (Helen N. Wai,LLC)
  • Build credit and savings to prepare for the future purchase.
  • Keep track of rental history, as it may help with mortgage approval later.

Step 3: Preparing for the Option to Purchase (Years 10-15)

Begin Homeownership Readiness Planning (Around Year 10-12)

  • Work with DHHL and housing counselors to assess mortgage readiness.
  • Continue to build savings and credit to secure financing

Receive Option to Purchase Details (Year 15)

  • At Year 15, the beneficiary receives the right to purchase the home.
  • The purchase price is heavily discounted due to: LIHTC equity funding that helped subsidize construction. Infrastructure costs already covered by DHHL. The home’s original market value being nearly $1M, but beneficiaries pay far less due to these subsidies.

Secure Financing for Purchase

  • Work with a lender to qualify for a mortgage (potentially with DHHL or partner lenders).
  • Apply for down payment assistance if available.
  • Ensure all conditions of the lease-to-own agreement are met.

Step 4: Purchasing the Home (Year 15)

Finalize the Purchase

  • Sign a purchase agreement at the discounted price.
  • Complete the mortgage approval and closing process.
  • Transition from being a tenant to a homeowner on Hawaiian Home Lands.

Move Forward as a Homeowner

  • Own the home without LIHTC restrictions.
  • Continue to live in the home or pass it to a qualified successor.
  • Benefit from the long-term equity growth of homeownership.

99-Year Homestead Lease – New Law Update

  • A new law allows for a 99-year homestead award lease for the land under vertical construction (e.g., townhouses, single-family homes).
  • The lessee first receives the lease for the land, establishing their homestead rights.
  • The lessee will rent the vertical construction (the unit) under a separate agreement until the end of the compliance period (e.g., 15 years in LIHTC).

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