Affordable-housing advocates in state government appear poised to try out an unconventional idea to address Hawaii’s chronic shortage of homes for moderate-­income households.

Building and selling leasehold condominiums on state land at no long-term cost to Hawaii taxpayers was first floated at the Legislature in 2019, and this year a bill to produce such housing has advanced further than similar bills introduced every year since.

Senate Bill 865 would establish a pilot program to develop one condo project for sale on state land under a 99-year land lease in an effort to demonstrate whether the concept is a viable solution to increase the long-term supply of affordable housing.

The bill overwhelmingly cleared full votes in the House of Representatives and Senate, but with tweaks from each side that mean an agreement on a final version must be reached by a House-­Senate conference committee if the legislation is to be sent to Gov. Josh Green for signing into law.

Sen. Stanley Chang (D, Hawaii Kai-­Kahala-Diamond Head), lead author of the bill, who has championed state leasehold condo development for five years, is confident that an agreement can be reached.

“I’m very optimistic,” he said.

Chang, who chairs the Senate Committee on Housing, would like to see some aspects of the bill changed but said he supports the crux of the House draft to have the Hawaii Community Development Authority, a state agency that has produced high-rise affordable rental housing projects in Kakaako, produce one leasehold condo project to test the idea’s feasibility.

If the bill fails to become law this year, a leasehold condo could still come about through the Hawaii Public Housing Authority, which is seeking a master developer to lead redevelopment of nine public-housing projects with at least 9,000 additional rental apartments and 1,000 leasehold condos, including what’s envisioned as an initial 300-unit condo with a 99-year land lease at Mayor Wright Homes in Kalihi.

According to Chang, HPHA embracing the leasehold condo concept was a product of discussing the model in recent years.

Chang initially promoted the plan at the Legislature in 2019 after researching a similar model used by the government in Singapore to provide lifetime housing at an affordable cost for residents.

Leasehold condos in Hawaii would not be new. Private developers produced many such projects decades ago, and though most were converted to fee-simple ownership, some still exist today.

The benefit of leasehold condo development by the state, according to Chang and other supporters, is that the biggest cost of homeownership in Hawaii — land — gets removed without any long-term financial expense to the state because the cost to develop each condo tower would be recouped through unit sales.

Chang branded his plan as ALOHA Homes (Affordable Locally Owned Homes for All), and it aimed to produce numerous high-density leasehold condo towers on state land within a mile of city rail stations on Oahu.

The concept has been described as game-changing, ambitious, bold and outside the box. Yet every year since 2019, one or more ALOHA Homes bills have fallen short of realizing the goal, though more lawmakers appear to have warmed to the idea after a feasibility study was produced in 2021 and updated in 2022.

The study by the Hawaii Budget and Policy Center of the nonprofit Hawaii Appleseed Center for Law &Economic Justice concluded that the state could produce leasehold condos with two bedrooms and two bathrooms for $400,000, in contrast to $600,000 for a comparable fee-simple condo built by a private developer.

The report also found that buyer demand for such a product would likely be high.

A $400,000 price would be affordable to households earning about $80,000 a year, or 80% of the median income in Honolulu, according to the report. In 2022 the median price for all previously owned condos sold on Oahu was $510,000.

The analysis, however, also concluded there could be a big problem with the concept at or near the end of the land lease term when a homeowner would lose their home to the state.

Under the leasehold condo model, home buyers pay monthly maintenance fees to maintain the quality of the property, similar to fee-simple condo ownership, and the state would receive ownership of all units at the end of the 99-year land lease.

In Singapore the government buys out leaseholders near the end of a lease. Doing this in Hawaii, the report said, would be inconsistent with the premise of the concept being revenue-neutral to the state. A further concern, the report added, is that owners could try to convince or force the state to sell them the land under their homes.

In addition to concerns raised in the report, the state Office of Hawaiian Affairs has consistently objected to leasehold condo development on ceded lands, where OHA is entitled to a share of any revenue produced on such land once belonging to the kingdom of Hawaii in order to benefit Native Hawaiians.

Still, Hawaii Appleseed testified on a leasehold condo development bill in 2022 to say it would be worthy to pursue a small-scale project on nonceded state land.

SB 865, if enacted into law, could produce such a test project.

“I think 99-year leaseholds makes us all nervous, so we need to see if it’s viable,” Rep. Troy Hashimoto, chair of the House Committee on Housing, said during a March 21 public hearing by the committee, which amended the bill to be a test project on nonceded land produced by HCDA. “It’s a pilot and we’ll see what will happen.”