A state plan is being advanced to foster development of nearly 28,000 new homes around planned city rail stations in Iwilei and Kapalama.

The estimated $1.6 billion endeavor includes roughly $850 million in infrastructure improvements possibly shared by the state, the city and private property owners, and a $750 million or so state office tower project that includes housing.

The Hawaii Housing Finance and Development Corp. recently published a draft environmental impact statement for the two interconnected projects geared to support transit-oriented redevelopment and help address a severe lack of affordable housing in Honolulu’s urban core.

“Honolulu’s housing crisis has caused a shortage of affordable housing, especially within the proximity of downtown Honolulu, the civic and urban center of Oahu,” the report said. “As housing costs increase, the lack of affordable housing has the potential to displace many residents who live in the Iwilei-Kapalama area or hinder those who are looking for housing close to their place of work in urban Honolulu as well as secondary impacts such as lengthening commute times, exacerbating traffic, increasing pollution and other environmental impacts … and decreasing quality of life for commuters.”

Development is anticipated to get underway in the next five years, and to be done in phases over the next few decades or so.

However, uncertainties exist that could affect the timing of actual development, including the availability of funding, regulatory approvals and market conditions, the report noted.

Tower project

The smaller of the two projects, a state office and affordable-housing complex in two towers on state land makai of Aala Park, represents a twist on a development plan called Liliha Civic Center that has been envisioned for over 30 years.

Liliha Civic Center received a $1.7 million legislative appropriation for planning and design work around 1990. At that time, three 12-story office buildings for use by state agencies and nonprofit organizations were envisioned on 5.7 acres of state land partly occupied by a historic former railroad terminal building at the corner of North King Street and Iwilei Road.

Construction on what was then estimated to be an $88 million project with 492,000 square feet of office space was expected to begin in 1992. But an economic downturn that soon emerged, along with a decision to move some state offices to Kapolei, derailed the project.

The idea to develop Liliha Civic Center was never totally abandoned because over the last three decades, the state has had to lease private office space to accommodate various agency personnel needs. But reviving and driving the office tower project in Iwilei forward has been challenging.

About a decade ago, lawmakers debated the merits of buying an existing downtown office tower, Alii Place, for about $90 million instead of moving ahead with what was then a $270 million office project on the Iwilei parcel, which was reduced to 3.8 acres from 5.7 acres after development of a low-income senior rental housing tower on part of the site. At that time, the state was paying about $11 million a year to lease office space.

Plan revival

In 2018, HHFDC, a state agency that primarily helps finance affordable housing, agreed to work on a housing and office concept for the property with the state Department of Accounting and General Services, a state agency that manages state office space and had previously led the Liliha Civic Center development effort.

A new agreement had to be signed in 2020 due to a lack of prior funding for work, and HHFDC’s board approved spending up to $5 million from a housing fund to produce a master plan and environmental study for the project as well as for regional infrastructure improvements needed for Liliha Civic Center and other high-density redevelopment around planned city rail stations in Iwilei and Kapalama that could benefit state, city and private landowners.

The redesigned Liliha Civic Center project calls for up to 219,000 square feet of state office space and 600 homes for rent and/or leasehold sale in two towers up to 31 stories rising 300 feet.

A 13-story parking structure clad with housing units also is part of the project. The historic Oahu Railway & Land Co. terminal depot building, which dates to 1925, would be preserved on the site along with a former OR&L office and storage building that dates to 1914.

The state has a current need for 261,000 square feet of office space, which includes space it leases and additional space it could use, according to Joseph Earing, DAGS planning public works manager.

“DAGS is hopeful that this important mixed-use residential housing and civic center project will be able to move forward in the next few years,” he said in a statement.

Completion of the complex is projected within five to 10 years. Building the complex is estimated to cost between $695 million and $790 million, not accounting for future inflation.

To accommodate Liliha Civic Center and other higher-density housing around the city’s planned Iwilei rail station and a neighboring station slated for Kapalama next to Honolulu Community College, an infrastructure improvement master plan is part of the same environmental report produced by PBR Hawaii for HHFDC.

Infrastructure work

The report said planned upgrades to utility, road and drainage infrastructure will enable development of nearly 27,500 new homes along with changes to almost 2 million square feet of existing commercial, industrial and other real estate uses over the next several decades.

Major private landowners expected to be involved in transit-oriented redevelopment around the two rail stations include Kamehameha Schools, the Harry and Jeanette Weinberg Foundation and Castle & Cooke Hawaii. The state also is a major landowner and has redevelopment plans for public housing complexes in the area, including Mayor Wright Homes.

The report anticipates work will be done in four phases over the next 30 or more years, with an initial phase from 2025 to 2030.

The last leg of the city’s Skyline rail system, a six-station segment from Kalihi to Kakaako, is slated to begin operating in 2031.

Infrastructure improvements are estimated to cost between $855 million and $862 million.

The costliest piece of such work is expected to be sewer upgrades at $264 million, followed by drainage at $202 million, electrical upgrades at $178 million and roads at $146 million. Estimates for water system infrastructure, walkways and bikeways total about $72 million.

“Improvements to these infrastructure systems are critical to support affordable housing goals, economic development opportunities, and improved resident access to jobs and services,” the report said.