Hawaii County audit says affordable housing reforms largely complete

Hawaii County says it has fixed six of seven weaknesses in its affordable housing credit program, but one last code change still has to move through the County Council before the system is fully rebuilt after a corruption case that shook confidence in how Big Island housing deals were approved.

County Auditor Clare McAdam released the follow-up review Monday, covering March 2023 through May 2026. The report says the Office of Housing and Community Development strengthened internal controls, expanded staff training, improved oversight and compliance monitoring, and added more documentation and review procedures. County Housing Administrator Kehaulani Costa said those changes are meant to improve accountability, transparency and long-term program integrity.

The audit lands on a program that has been central to Hawaii County housing policy since 1988. Chapter 11 of the county code gives developers seven ways to satisfy affordable housing obligations, including building units, conveying land or infrastructure, or purchasing credits. County audit materials say purchasing credits is the most common method, used in about 44% of satisfactions, which makes the program especially important in places where new homes are already hard to pencil out, from Hilo to Waikoloa.

That scrutiny was intensified after July 2022 media reports raised fraud allegations and the County Council ordered a performance audit in September 2022 through Resolution No. 467-22. The original audit, issued in February 2023, examined the issuance and use of affordable housing credits, the full accounting of credits issued, outstanding, transferred or redeemed, and the written policies and procedures used by OHCD. County officials later paused work with consultant Keyser Marston Associates until the audit was complete, then reconvened to finish the market assessment and Chapter 11 review.

The stakes were laid bare by the criminal case at the center of the scandal. Former OHCD employee Alan Scott Rudo, who worked there from 2006 to 2018, admitted taking about $1.9 million in bribes from Hilo attorneys Paul Sulla Jr. and Gary Zamber, along with former Big Island businessman Rajesh Budhabhatti, to secure county approval of affordable housing agreements that benefited their companies. Those deals involved Luna Loa Developments LLC, West View Developments LLC and Plumeria at Waikoloa LLC, and the companies received more than $11 million in land and excess affordable housing credits even though no homes were built.

A federal jury in Honolulu convicted Sulla, Zamber and Budhabhatti on June 4, 2025. Rudo was sentenced to 46 months in prison on May 29, 2026, while Sulla received 60 months, Zamber 70 months and Budhabhatti 90 months. Sulla’s and Zamber’s Hawaii law licenses were suspended. The county’s remaining recommendation, still in process, is to revise the relevant parts of Chapter 11 with the County Council, a step that will decide whether the repaired credit program can move more cleanly from policy promise to actual homes.