There could be fewer moderate-priced homes in the Ward Village master-planned community in Kakaako if the state approves a request from project developer Howard Hughes Corp.

The developer submitted a petition Thursday to the Hawaii Community Development Authority, asking the agency to clarify whether developers can satisfy affordable-housing rules by making rental units available to moderate-income households for twice as long as required in return for building perhaps half as many affordable units.

A decision on the issue from HCDA, which governs development in Kakaako, would apply to other projects in the area and could dramatically affect the diversity of housing in the urban Honolulu hotbed for luxury condo tower development.

Part of HCDA’s rule for affordable housing says 20 percent of high-rise condominium units developed in Kakaako must be affordable to residents earning no more than 140 percent of the annual median income in Honolulu, which equates to about $94,000 for a single person or $134,000 for a family of four.

Developers also may satisfy the rule with rental units affordable for residents earning no more than 100 percent of median income (about $67,000 for a single person or $96,000 for a family of four) for at least 15 years.

Hughes Corp. wants to know whether it can build less than 20 percent affordable rental units if it keeps the units affordable for 30 years.

Race Randle, the company’s director of development, said moderate-income residents would benefit from such a trade-off because it would reduce housing costs longer.

However, fewer affordable units would be produced.  

Included in the Hughes Corp. petition is a question of whether a developer has the flexibility to change an affordable housing tower project from condos to rentals or vice versa.

Hughes Corp. is interested in changing its planned affordable tower at 988 Halekauwila St. from condos to rentals.

A decision by the HCDA clarifying its affordable housing rule won’t automatically amend the 988 Hale kau wila project because it was issued a permit as a condo, according to HCDA Executive Director Tony Ching.

However, Hughes Corp. could seek to have the permit amended or redone in a process that would involve public hearings.

The 988 Halekauwila tower was approved with 424 condo units, of which 375 were going to qualify as affordable housing.

Randle said the monthly cost for a 2-bedroom condo is $3,200 compared with $1,850 for a rental under HCDA rules.

Under HCDA rules, an affordable housing condo cannot be resold within 10 years without a penalty, but after that a buyer may sell his unit at the market price.

Randle said Hughes Corp. is pursuing the potential change after market research for the 988 Hale kauwila tower approved by HCDA in July 2013 showed that there were five times as many renters than buyers meeting HCDA income requirements.

"There is a dramatically higher need for rentals than for-sale (units)," he said. "We are responding to the need. It only makes sense."

Affordable-housing advocate Chuck Wathen agrees that there is far greater need for affordable rentals than affordable condos on Oahu. But he said affordable housing should remain affordable in perpetuity when it is produced as part of government requirements that give developers other benefits.

In the case of Kakaako, HCDA grants developers density and height bonuses over a base zoning that limits buildings to 65 feet, and in return requires public benefits that include affordable housing and money or land for park space.

Wathen said a choice between more homes that are affordable for a shorter time versus fewer homes that are affordable for a longer time is a philosophical question. But in his view the "lesser of two evils" is fewer units for a longer affordable term.

HCDA is scheduled to discuss and decide on the rule clarification request at a meeting Wednesday.

The master plan for the Hughes Corp.’s Ward Village allows up to 4,300 homes in 22 towers. The affordable housing at 988 Halekauwila equates to about 9 percent, or just under half, of HCDA’s affordable-housing requirement for Ward Village.

During HCDA public hearings to consider 988 Halekauwila, Hughes Corp. received some criticism about packing so much affordable housing onto one parcel on the edge of its 60-acre property.

At one hearing, Renee Ing said Hughes Corp. was segregating moderate-income residents into the tower positioned 120 feet from an affordable rental tower called Kauhale Kakaako developed by HCDA.

Hughes Corp. had two other towers approved by HCDA last year, including one luxury tower called Waiea fronting Ala Moana Boulevard. Hughes Corp. has declined to disclose penthouse unit prices in Waiea, though one person who bought a unit in the building said the grand penthouse is priced just under $100 million.

Hughes Corp. said the construction of affordable housing is subsidized by sales at Waiea and a nearby tower called Anaha. About 70 percent of the units in those two towers are sold.

The developer said its aim is to create a neighborhood that has something for everyone, and added that 988 Halekauwila will have aesthetically pleasing exterior and interior design elements and unique amenities consistent with the quality of Ward Village.

If Hughes Corp. is allowed to make 988 Halekauwila a rental tower, Randle said he anticipates construction could start next year and be finished about two years after that.