The city is close to acquiring ownership of the land under a Kane'ohe apartment complex, one of the final steps before the city can begin selling off all 12 of its affordable-housing properties, Mayor Mufi Hannemann said yesterday.

The city, which shut down its Housing Department in 1998, announced in February that it would be looking to sell the city-owned buildings to entities that specialize in owning and managing affordable housing.

The 160-unit Kulana Nani complex in Kane'ohe is the first on the list, partly because the land-ownership issue makes it one of the most difficult to deal with.

"The city does not own the fee, so the big hangup thus far has been an ongoing effort with the landowner so the city can acquire the fee so we can put out a request for proposals," Hannemann said. "Once we do this, I've always felt that it would be much easier for us to tackle the other housing properties that we have."

The update came at a news conference called by the mayor to address a number of subjects, including an audit criticizing the city's housing program and accusing city officials of raiding the housing special fund.

Hannemann said those money transfers happened under previous administrations, and that he has a policy against raiding special funds. "It did not happen under my watch," he said.

He said that while the city is planning to sell off its affordable housing units, it has also been using federal grants to help underwrite new affordable-housing projects by private developers and the state.

"While the city has not assumed the role of developer, that hasn't meant we are not aggressive in supporting the expansion of O'ahu's inventory of affordable housing," he said.

Craig Watase, chairman of the Mayor's Affordable Housing Advisory Committee, said the panel offered the city many ways to help make more affordable-housing units available without spending too many taxpayer dollars.

"It's going to take some time, but I think there are some low-hanging fruit the mayor is capitalizing on...like the preservation and rehabilitation of the existing affordable housing," he said.

The mayor said the city is closer than it's ever been to closing the deal with owner Kamehameha Schools to buy the fee to the Kulana Nani land and has asked his staff to get it done as soon as possible.

"Then we move toward (selling) the 1,257 units the city has in its 12 properties," he said.

Kulana Nani is meant to be the test of putting the affordable units under private ownership, since the object is to keep them as rentals that are affordable by federal standards, with limits on rent increases.

The city decided to divest itself of its affordable housing stock after two advisory panels recommended that the units would be better under private management than kept by the city, which no longer has anyone specializing in public housing.

"While the city had the best intentions in establishing a housing program, its duplication with state government efforts, ever-changing real estate market condition mismanagement eventually led to voters calling for the end of the city's foray into housing back in 1998," Hannemann said.

However, even without a department, the city still owns the properties that subsidize the tenants' rent at the cost of $3.5 million a year to taxpayers.

In the meantime, the city has not kept up with basic maintenance.

"We are now attempting to make the best of a bad situation ... by turning over properties to non-government organizations that have the resources and experience to properly manage these projects," Hannemann said.

Reach Treena Shapiro at tshapiro@honoluluadvertiser.com.