Hawaii’s Legislature is on the verge of approving the concept of an affordable, leasehold condominium project on state land. It’s just one, as opposed to the large-scale housing program long championed by state Sen. Stanley Chang, but that one, advanced as a pilot project, could be the lead-in for more if successful.

This is an idea whose time has come, given the urgent and growing need to create more affordable housing in the islands, and should be advanced to the governor.

The idea, branded as ALOHA Homes (Affordable Locally Owned Homes for All), is to build and sell the leasehold condos at no long-term cost to Hawaii taxpayers. It was first introduced at the Legislature in 2019; this year’s bill has advanced further than in any other year, and is headed to conference committee.

Senate Bill 865 establishes a pilot program to develop the condo project, offering units under a 99-year land lease.

The condo would be built on state land, eliminating the cost of buying a site and significantly reducing total costs. The state would contract with a private developer to build the condo tower, and the developer would recoup costs through unit sales.

A recent study by the Hawaii Budget and Policy Center, a branch of the nonprofit Hawaii Appleseed Center for Law &Economic Justice, concluded that it would be worthwhile to test a small-scale project on non-ceded state land. (Ceded lands are former Hawaiian kingdom lands.) The study found that the state could produce two-bedroom, leasehold condos for $400,000, as compared to $600,000 for a fee-simple condo built by a private developer. Leasehold condos at that price would be affordable to households earning about $80,000 a year, or 80% of the median income in Honolulu.

The trade-off for that lower price would be eventual return of the property when the 99-year lease expires. Concerns about the concept include a dwindling incentive to maintain a property that will eventually return to state ownership. However, the study also predicts that buyer demand for these condos would be high. That follows, since in 2022 the median price for previously owned condos sold on Oahu was $510,000.

Other concerns also need to be addressed. For one, SB 865 began life with the intent of having the Hawaii Public Housing Authority (HPHA) handle the project. However, a House Housing Committee amendment moved oversight of the pilot program to the Hawaii Community Development Authority (HCDA). The HCDA has produced high-rise rental housing projects in Kakaako, giving it more background in managing similar current projects — but a full explanation of this shift is due.

By contemporary standards, building leasehold condos may seem unconventional. Although hundreds of condominium units remain under lease in the state, they are not as attractive to buyers and so command lower prices. Nonetheless, leasehold condominiums made up around 12% of the sales market last year, according to data from the Honolulu Board of Realtors — and lower prices are a goal, in this case.

Finally, constructing leased, owner-occupied homes on state property is a new tack for Hawaii, so there is no ironclad guarantee that it will be fully budget-neutral or that all potential hurdles have been addressed.

The Legislature must use all tools at its disposal to ensure public funds are invested wisely, here as with all projects. However, this is no time for timidity, when the lack of affordable housing for median- and below-median income households is increasingly forcing Hawaii residents to leave the state. The time is right to support this bold and innovative trial program.