The best use of real estate, the subject of debate in any development zone, is all the more crucial in Hawaii, where land values are at such a premium and the need for homes is so great.

State-owned land with potential to fill high-priority demands should not languish unused. This is why the Legislature is well within its rights to consider pursuing the transfer of a parcel near Kapiolani Community College that is owned by the University of Hawaii.

Under the current version of House Bill 2288, which has moved on to its final committee so that money can be appropriated, the 2.5-acre parcel would be condemned and shifted to the state Department of Hawaiian Home Lands inventory.

This is being proposed as the House and Senate also contemplate a $600 million allotment from the state budget for DHHL, a major commitment from lawmakers. They rightly want to see DHHL whittle its mammoth waiting list of Native Hawaiian beneficiaries — many waiting for a homestead for decades.

Only part of the Diamond Head parcel in question here is in use, and only to provide limited parking for the adjacent Leahi Hospital. It is zoned for residential use, a classification that would authorize up to 21 homes under standard city rules.

However, DHHL Director William Aila told lawmakers at a recent Senate joint committee hearing that the agency has its own zoning authority and is not bound by the same limitations.

Transferring the property could mean a substantial offering of homes in an urban area where there is high demand among beneficiaries. As part of the overall legislative effort to help address an unfulfilled obligation to Native Hawaiians, there is a strong argument in support of repurposing this land.

UH officials, who discussed conceptual ideas for a health-care facility with an educational component on the site, will have to come up with something more persuasive by the time the Senate Ways and Means Committee hears the bill.

State Sen. Donna Mercado Kim, who chairs the Higher Education Committee, raised the most pointed criticism, citing the rapid redevelopment of the Atherton YMCA property on University Avenue, as well as the expanded Clarence T.C. Ching Athletics Complex after the Aloha Stadium shutdown. This is evidence that UH can work fast when motivated, but did not do so with the Diamond Head site, Kim said.

To be fair, UH has done some preliminary assessment of the site in the past year and had hoped to advance the project in February. But that was put on hold when the bill was proposed, said Michael Shibata, director of strategic development and partnership at UH.

At present, DHHL seems to be in a better position to capitalize on the acquisition of the parcel. It is gearing up to receive a major appropriation in public funds, with plans for the use of that money. At the next hearing, DHHL should present its own proposals, so lawmakers can make an informed decision.

Some longstanding tension between Kim and the university leadership surfaced during the hearing, when the senator asked if a “friendly” transfer could be arranged.

“I believe that we should compensate the university, but in the interest of the entire state — and that’s certainly what the university would like — we should have some kind of friendly agreement,” she said. “I mean, the Legislature could always cut their budget, or do something to get them to be more friendly.”

That kind of stance is needlessly hostile and unhelpful. Still, it would be better for DHHL and UH to come to terms voluntarily. Condemnation means public funds wasted on legal costs, money that should be spent more productively on pressing priorities — which include more much-needed housing for Native Hawaiian beneficiaries.