Hawai'i Community Development Authority

Pacific Business News

Hawai’i affordable housing pilot could resume as bill eases leasehold restrictions

A 99-year leasehold pilot project to create more affordable housing was put on pause at the end of last year, but could resume with the passage of Senate Bill 2061, which would remove some restrictions originally attached to the project that were driving down buyer interest.

The bill passed its final reading on May 8 and is now awaiting approval by the governor. SB2061, introduced by Sen. Stanley Chang is an amendment to SB865, introduced by Chang in 2023, that introduced the leasehold program and appropriated $1.5 million to HCDA for the pre-development work.

HCDA acquired two properties totaling 26,626 square feet in January 2025 for the pilot project. The two properties are currently home to a Jack in the Box, located at 875 Kapiolani Blvd., and the Galiher Office Building at 610 Ward Ave., which has a mural of former President Barack Obama painted on the side of the building.

The project is set to provide 370 units, with 60% set aside as reserved housing for residents earning at or below 140% area median income, which for a family of four in Honolulu is $212,800. The other 40% of the units would be sold at market rate, and there would also be commercial space in the development.

The 99-year leasehold program offers affordable and market condominium units on state-owned and county-owned land in urban redevelopment sites to be sold to qualified residents under the leasehold.

HCDA Executive Director Craig Nakamoto previously told PBN that if the amendment passes, HCDA will begin pre-sales if the market conditions are right. If the pilot program is a success, then the plan is to replicate it for other HCDA-owned sites.

The project was paused due to concern of a lack of buyer interest in the units because of the market competition, economic uncertainty, high interest rates and restrictions.

The original bill required that all units under the 99-year leasehold must be owner-occupied as residential use in perpetuity for the entire lease, which is longer than HCDA’s usual two to 10 year living requirement and shared equity.

The amended bill would adjust the owner-occupant restrictions to only be applicable to the reserved units and would reduce the owner-occupant timeline requirement to 10 years instead of in perpetuity.

However, the bill stipulates that at the time of the initial sales, 100% of the units in the project, market and reserved, must be offered for sale for owner-occupied residential use only. But, after 60 days, if there are any unsold units, up to 40% of the market units may be sold to Hawaii state residents without the owner-occupant requirement.

If the bill passes, fewer restrictions could drive up buyer interest, and in turn, resume the project. Without the amendments, the rising cost of construction makes the cost of the leasehold units compared to the fee simple units in other projects nearby too close to justify the restrictions that come with a leasehold.