Alexander & Baldwin Inc. plans to build an affordable senior rental apartment complex in Kakaako near Ala Moana Center with 72 one-bedroom units.

The rental complex on the corner of Piikoi and Kona streets is intended to satisfy a state requirement that A&B provide affordable housing in return for maximizing the density of a condominium tower the company is building nearby. The condominium will be built between existing luxury Hawaiki and Ko‘olani condo towers.

The five-story rental building will be reserved for seniors age 65 and older who earn no more than 60 percent of the median income on Oahu, which is regarded as low income and equates to a limit of $41,700 for a single person or $47,640 for a couple.

Partnering with A&B to operate the project will be the nonprofit Pacific Housing Assistance Corp., which will lease the land for $1 a year.

Marvin Awaya, Pacific Housing executive director, said the project will help satisfy a large and growing need for affordable senior rentals, especially for a site so close to Ala Moana Center’s bus terminal and nearby medical centers.

"There is no doubt that there is a need here," he said. "Look around. There’s not much elderly housing going up in Honolulu."

Awaya said a recent study estimated that 3,279 senior residents in Honolulu need rental housing. Land and development costs, however, make senior rentals tough to develop.

A&B’s building is projected to cost $19 million, part of which will be sought through low-income housing tax credits issued by the state, the federal Housing and Urban Development and loans, according to Awaya.

The project would become the first rental complex for seniors built by a private developer to satisfy affordable-housing requirements of the Hawaii Community Development Authority, a state agency governing development in Kakaako.

HCDA rules require developers to produce 20 percent of residential units at moderate prices for people earning up to 140 percent of Oahu’s median income in return for exceeding standard development density limits and a 45-foot height limit in the area bounded by Ala Moana Boulevard and Punchbowl, King and Piikoi streets.

Most Kakaako high-rise projects, including one previously by A&B called Keola La‘i, have satisfied the requirement with moderate-priced condos.

HCDA rules permit rental apartments provided rents remain within affordability limits for 15 years.

A&B has committed to keeping the senior rental project at affordable rates for at least 50 years, which makes the project desirable for that reason as well as because it adds diversity to the mix of residences being built in Kakaako, said Anthony Ching, HCDA executive director.

The A&B rental project will not be the only senior residences in Kakaako. HCDA, which receives some funds from developers to satisfy various requirements, has built three projects with senior rentals: Na Lei Hulu Kupuna, Pohulani and Honuakaha.

Awaya anticipates that construction could start on the A&B project by September 2012 if financing and permitting go smoothly.

A&B also anticipates starting construction next year on a 345-unit condo tower on the nearby site. Rights to build the 40-story tower were acquired by A&B in July 2010 when it bought the two parcels from an affiliate of California-based development firm Woodridge Capital LLC.

Woodridge’s affiliate, K2 Investors LLC, had planned to build a 295-unit luxury condo plus 64 moderately priced units on the two parcels.

A&B envisions unit prices in its planned tower will range between $600,000 and $900,000.

If design and planning work proceed as expected, unit pre-sales could begin by the end of the year.