A new kind of Department of Hawaiian Home Lands subdivision — small farmland homesteads — should be done this time next year about 5 miles south of downtown Hilo.

The state agency Monday held a groundbreaking ceremony to subdivide 10 acres of Big Island farmland in Panaewa into 16 half-acre homesteads where DHHL beneficiaries can live and produce food for their own needs.

The project is DHHL’s first subsistence agricultural homestead project to begin construction following more than five years of work to allow agricultural homesteads without a requirement to farm on a large scale.

Construction, including grading the area and putting in roads, a water system and drainage, is expected to cost $2.5 million.

Michael Kaleikini, a Hawaiian Homes Commission representative for Hawaii island, said in a statement that he was pleased to see work start and knows that beneficiaries are excited about the new opportunity.

William Aila Jr., commission chairman and DHHL director, said a lot went into developing the new program over the past several years, including beneficiary consultations, agency rule changes and funding from the Legislature.

“The road to developing DHHL’s Subsistence Agricultural program has been a long one for both beneficiaries and the department,” he said in a statement.

Previously, DHHL agricultural homesteads were typically at least 5 acres and required a business plan and cultivation of at least two-thirds of the land.

Such requirements geared toward commercial farming presented difficulties for the agency, which provides residential, farming and ranching homesteads under 99-year leases at $1 a year to beneficiaries who are at least 50% Native Hawaiian.

Under the subsistence agricultural program, farm lots can be up to 3 acres, and some farming must take place.

The agency, which has a wait list of nearly 29,000 beneficiaries seeking homesteads, instituted the new program in part to serve more beneficiaries, given that most people seeking homesteads on islands other than Oahu are interested in farmland leases, including about 7,300 on Hawaii island.

Beneficiaries who have been waiting for farmland homesteads on Hawaii island the longest will have the first opportunity for a lease at the Panaewa project.

DHHL also has a far larger subsistence agriculture homestead project planned in Honomu about 10 miles north of Hilo with up to 375 lots between 1 and 3 acres. Construction on an initial phase of 16 lots at Honomu is expected to begin later this year.