After five years of planning, a nonprofit corporation broke ground yesterday on a $40 million, 163-unit Pearl City affordable housing complex for seniors.

The first phase of Hale Mohalu II, set to wrap up in about two years, will offer one-bedroom units for $401 to $668 a month to seniors who earn 60 percent or less of area median income.

The complex, next to the current Hale Mohalu senior rental housing complex, will be on a 4.2-acre parcel of state land with a storied history: The grounds — along with those under the project’s sister complex — used to be the home of the Hale Mohalu state residential treatment facility for Hansen’s disease patients.

"This is really a sacred site," said Wally Inglis, president of the Coalition for Specialized Housing, which is building the new complex and also owns and operates Hale Mohalu.

Affordable housing advocates applauded the new project yesterday, saying there is a dire need statewide for such projects as more baby boomers reach retirement age.

"The high cost of housing, particularly in Hawaii, remains one of the biggest obstacles for seniors looking to maintain some level of financial security," said Bruce Bottorff, associate state director of AARP Hawaii.

Several dozen seniors who attended the groundbreaking ceremony said they were happy to see the project moving forward.

Ray Garcia, 71, who has lived at Hale Mohalu for four years, said despite his low rent of $595 a month, he still struggles to make ends meet. He doesn’t know how he would make it if he had to pay more for housing.

"I’m on a fixed income," Garcia said. "Everything else goes up except my income."

The coalition announced plans for the project in 2006, but work was delayed in part because of trouble finding financing. To make the project a reality, the nonprofit cobbled together funding from a host of sources including state tax credits, bonds and rental housing trust fund loans and grants, along with bank loans.

The project site, a vacant lot accessed from Kame­ha­meha Highway, brought back memories yesterday for a handful of Hansen’s disease patients who attended the groundbreaking.

The state operated the Hale Mohalu facility for Hansen’s disease patients at the location from 1949 to 1978.

Patient Norbert Palea spent much of his childhood there.

Palea was 9 when he first arrived at the Pearl City facility. He left in 1972.

"A lot of my friends were here with me," said Palea, 69. "Most of them are gone today."

Patient Elroy Makia Malo lived at the Pearl City facility from 1949 to 1956, through his teen years, and said he has vivid memories of its small school, recreation area, store and perimeter fences.

"I am glad to see it being used," he said.

When the state moved to close Hale Mohalu 33 years ago, some patients refused to leave, triggering a five-year battle over the property. The facility was eventually razed. Patient Bernard Puni­kaia, one of those who fought against the closure, went on to advocate for the coalition’s plans to build the 210-unit Hale Mohalu senior complex on the site in 1996.

Inglis said it’s important the site be used for the good of the community. Some Hansen’s disease patients moved into Hale Mohalu when it opened, and Inglis welcomed others to the new complex once work is complete.

"This," he said, "is the healing process."