Sales are expected to begin early next year for a second "workforce housing"condominium tower in Kakaako aimed at moderate-income residents after a state agency approved the project at the mauka end of South Street on Wednesday.

The 410-unit tower representing a second phase of a project called 801 South St. won unanimous approval from the nine-member Hawaii Community Development Authority, the agency regulating development in Kakaako. The vote was 6-0 with one recused, one absent and one seat vacant, awaiting the appointment of a new board member.

Numerous concerns were raised over the plan for the so-called Tower B at 801 South St., including affordability, traffic, density and the partial demolition of a historic building that once housed the Honolulu Advertiser and Honolulu Star-Bulletin newspapers.

However, HCDA officials concluded that the tower plan conforms to agency rules and the character of the neighborhood envisioned for high-rise urban living.

Ryan Harada, a principal with 801 South St. developer Downtown Capital LLC, said he was pleased with the board’s decision. "We look forward to bringing the same type of housing for people that we did in phase one,"he said.

Harada projected that unit sales would begin in the first quarter with construction in the second or third quarter.

An initial phase of 801 South St., a 635-unit tower where prices ranged from $250,000 to $500,000 for studio to two-bedroom units, attracted relatively little opposition last year. For Tower B, the HCDAreceived nearly 1,000 written comments supporting or opposing the project.

The board vote came at the end of a roughly four-hour public hearing that

followed a similar public hearing in October. At Wednesday’s meeting, 13 people expressed support, 19 expressed opposition and three said they had concerns.

One of the biggest issues raised was the affordability of Tower B condos preliminarily priced from $329,400 to $692,300 for one-bedroom to three-bedroom units.

Under HCDAworkforce housing rules, condo prices in the $700,000s qualify as affordable to households earning up to 140 percent of Honolulu’s annual median income, which equates to $84,574 for a single person, $96,656 for a couple or $120,820 for a family of four.

Ariel Salinas, an engineer for the federal government who lives in the Royal Capitol Plaza tower next to the 801 South St. site, challenged HCDA methodology for calculating maximum affordable prices aimed at moderate-income buyers. "Does that even sound right?"he asked regarding a $715,000 maximum price for a two-bedroom unit. "It’s not."

HCDAExecutive Director Anthony Ching acknowledged that the affordability calculations allow for "rather robust"prices. But he said allegations by Salinas that the agency was

using "fuzzy math"to set maximum prices are off base. "It’s clear that (Tower B) pricing is below what’s allowable,"he said.

Sherman Louie, owner of air-conditioning contractor Air Masters, told the agency that in his view Tower B has affordable prices, especially given estimated monthly maintenance fees of $275 to $350.

Downtown Capital, a local firm led by Marshall Hung, designed the project with no pool and few amenities to keep maintenance fees low.

Brad Ho, an insurance agent, said Tower B appears to be right for the middle class. "It will house our workforce in a place where they’re going to be working,"he said.

Much of the support for the project has come from people affiliated with the construction industry. On the flip side, much of the criticism has come from Royal Capitol residents who stand to have views blocked by 801 South St.’s two towers along with two parking garages that exceed height limits.

Downtown Capital received HCDA approvalto build a 10-story parking garage for Tower B that exceeds a 65-foot height limit by 42 feet. The developer received similar approval for a 10-story parking garage next to the first tower in December 2012, saying it would save $10 million and was necessary to deliver units in the moderate price range.

Clustering two 400-foot towers and two roughly 100-foot parking structures on the 3.7-acre site has been criticized as too dense.

"It’s a real concrete wall(going)up there,"said Royal Capitol resident Webster Nolan.

801 South St. received a 100 percent density bonus as a HCDAworkforce housing project that receives no government financial assistance and makes at least

75 percent of its units available to households earning between 100 percent and 140 percent of the median income.

Downtown Capital agreed to offer all units for an initial 60 days only to buyers within the income limits, but after that can sell units to buyers regardless of income.

To address criticisms over traffic, the HCDAis requiring the developer to prepare a traffic impact analysis report and work with the city on any recommended mitigation measures.

Another area of concern involves demolishing part of the historic News Building — the makai half that once housed a printing press and has fewer architecturally significant features — to make room for Tower B’s parking garage.

The Historic Hawai’i Foundation and other historic preservationists opposed the demolition plan. But the state Historic Preservation Division of the state Department of Land and Natural Resources accepted the demolition plan as long as the building is documented and federal guidelines are followed for integration with the condo project.

Downtown Capital plans to sell the remaining piece of the News Building to Hawaiian Dredging Construction Co., the contractor for 801 South St. Hawaiian Dredging has a tentative plan to restore the building that dates from 1929 and use it as its headquarters. The conversion would represent a third phase of 801 South St.

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