A state agency is set to vote on a second affordable rental housing subdivision developed in East Kapolei under a master plan envisioned for 2,300 homes on state land.

The Hawaii Housing Finance and Development Corp. is considering a proposal by a New Jersey-based developer to build 300 rental apartments on 20 acres near the Salvation Army Kroc Center as part of its East Kapolei II master plan.

Michaels Development Co. proposes building one- to three-bedroom apartments in two- and three-story buildings. Units would be reserved mostly for residents with low to very low incomes, and rent for as little as $551 a month.

The $109 million project would be financed largely with federal and state tax credits, according to the developer’s proposal.

Housing Finance, a state agency that facilitates production of affordable housing, is scheduled to hold a board vote today on whether to negotiate a development agreement with Michaels for the project.

The decision comes six months after the agency published a request for proposals seeking a developer to build and manage 300 units of affordable housing for at least 65 years under a land lease.

If selected, Michaels anticipates starting construction late next year or early 2015 and finishing in late 2018 or early 2019.

Michaels scored the highest among several competing bids based on project criteria set by the agency. Housing Finance spokesman Kent Miyasaki said the names and specific number of bidders could not be disclosed before today’s meeting.

Monika Mordasini, a Michaels vice president of development in Honolulu, said the East Kapolei project represents the second major endeavor for the company, which renovated the state’s largest public housing project, the Towers at Kuhio Park in Kalihi.

"This is kind of our next step," she said.

"We’re really excited about being part of the East Kapolei community."

The 20-acre site is the second parcel in the area offered for affordable housing development by Housing Finance.

An initial parcel was awarded by lease in 2007 to a local nonprofit developer, Mutual Housing Association of Hawaii Inc. But Mutual Housing has been slow to build 308 low-income rental apartments in a townhouse complex named Ko’oloa’ula because of financing difficulties that arose during the recession.

A first phase of Ko’oloa’ula with 120 units was completed in April, and attracted so much interest from prospective tenants that a waiting list was cut off after 886 applicants entered a lottery.

David Nakamura, Mutual Housing’s executive director, said the extreme level of demand was surprising.

"We expected strong demand, but even those numbers surprised us," he said. "There’s a big need for affordable units in the area."

Nakamura said construction on the final phase of Ko’oloa’ula with 188 units is projected to start next year for completion in 2015 or 2016.

That timing should provide a good transition leading to the Michaels project, which would be reserved for households with similar incomes to those renting at Ko’oloa’ula, Nakamura said.

Of the 300 units in the Michaels project, 228 would be reserved for households earning 50 percent to 80 percent of Honolulu’s annual median income, or $48,950 to $78,300 for a family of four.

Another 16 units would be reserved for households earning up to 30 percent of the median income, or $29,350 for a family of four. The remaining 56 units would be reserved for households earning up to 100 percent of the median income, or $97,900 for a family of four.

Monthly rent could be as low as $551 for a one-bedroom apartment or $764 for a three-bedroom unit at the lowest income level, and as high as $1,392 to $2,701 for the same-size units respectively at the top of the income range.

The Michaels plan also includes a park, a garden and a community hall for social services including a computer center and recreational activities.

If approved for the project, Michaels will be responsible for obtaining a county zoning change from agriculture to urban, paying a share of water and waste water infrastructure costs, and contributing to impact fees for schools, traffic and parks.

The area known as East Kapolei II is envisioned to become a community with 2,300 homes, an elementary school and a middle school on 404 acres of state land between the Ewa Villages Golf Course and the Ho’opili community planned for 11,750 homes.