HILO, Hawai'i — The state has tentatively agreed to pay $2.3 million in a lawsuit by public housing tenants who say they were charged more rent than federal regulations allow.

The proposed settlement will affect tenants who lived in about 3,000 federally subsidized public housing units across the state, said Gavin Thornton, lawyer with the public interest law organization Lawyers for Equal Justice.

Tenants in federally subsidized projects cannot be charged more than 30 percent of their income for shelter, including utilities. For tenants who pay their own utility bills, the state must establish a utility allowance and reduce the tenants' rents by that amount.

However, the state acknowledged that the Housing and Community Development Corp. of Hawai'i had not adjusted the utility allowances since sometime before 1997, which caused some tenants' combined utility and rent payments to exceed the 30 percent cap, said Deputy Attorney General John Wong.

The class-action suit was filed in Kona Circuit Court in 2004 on behalf of Rodelle Smith and three other tenants in the Kona public housing complex Ka Hale Kahalu'u.

Shelby Anne Floyd, lead counsel for the lawsuit, said payments to the tenants under the proposed settlement could range from "a couple hundred dollars to perhaps more than $2,000."

Reach Kevin Dayton at kdayton@honoluluadvertiser.com.