Affordable housing is expanding a foothold in one section of Kakaako with construction about to begin on a 42-story tower offering mainly midpriced condominiums.

The developer of the planned Ililani high-rise held a ceremony Wednesday to bless the site at 615 Keawe St. ahead of construction slated to begin next month.

“We are very excited to proceed with this project,” said Ken Chang, a local architect developing the tower.

Chang obtained state and city benefits in return for reserving 165 of the 328 Ililani condos for sale to local moderate-income households at prices from $312,000 to $657,100.

Robin Markle, an agent with real estate firm Locations serving as the project broker, said 564 applications were submitted to compete in an upcoming lottery to buy the 165 one- and two-bedroom units with 511 to 799 square feet of living space.

“It’s been really well received,” she said.

Ililani, expected to take about two years to build, is joining a cluster of nearby affordable housing.

The planned tower on an L-shaped lot fronting Keawe and Halekauwila streets is between the senior rental housing tower Pohulani Elderly and the Halekauwila Place rental apartment tower serving low-income households.

Within a block of the Ililani site are three other affordable-housing complexes — the Keauhou Lane midrise with moderate- priced rentals, the Na Lei Hulu Kupuna midrise for seniors and the nearly complete 14-story Nohona Hale rental tower for low-income residents.

Also, another three affordable-housing projects are two blocks from the Ililani site — a pair of condo towers known as 801 South, a midrise rental complex called The Flats at Pu‘unui and the midrise condo 400 Keawe.

Roy Amemiya, city managing director, complimented the Ililani project for adding to Honolulu’s affordable-housing inventory and providing opportunities for local residents to stay in Hawaii instead of moving away in search of a more affordable place to live.

“Affordable housing is certainly one of the challenges we have here in the islands,” he said at the blessing. “Young people have a hard time affording a place to live.”

Chang said Ililani aims to address this issue.

“The families that are local and are not able to afford to live here is a major problem,” he said.

In return for making half the tower affordable for moderate-income households under a state formula, Chang received exemptions from state Kakaako zoning rules and county permit fees.

Exemptions included $470,000 in waived county permit fees along with zoning exemptions provided by the Hawaii Housing Finance and Development Corp. that allowed the tower to be more than twice as dense and closer to an adjacent tower than rules allow.

Because the 165 condos are priced below market rates, buyers of these units must agree to share appreciation with HHFDC, a state agency, when they sell their unit. Also, the agency has the first right to buy a unit if the owner elects to sell within 10 years. Owners also may not rent out their units.

Chang said the other 163 Ililani units are among the lowest for market- priced condos sold in the Kakaako and Ala Moana areas in the last three or four years.

These units with two bedrooms, two bathrooms and 784 square feet to 826 square feet of living space are priced from $700,500 to $905,500 and became available for sale in recent weeks.

Amenities planned for the tower include a recreation deck on the roof of a nine-story parking garage featuring a lawn, community garden, splash pool, grills and an outdoor movie screen. A multipurpose room, coworking space and 10 cars for sharing at discounted rates through carshare firm Hui also are planned.

“We’ve priced the market units also to be available and affordable for the working folks in the community,” Chang said.

At Ward Village in Kakaako, several new market-priced towers built in recent years have had average prices of $1 million or more.

Elsewhere in Kakaako or the Ala Moana area, market prices at a few new condos in recent years have ranged from about $500,000 to $989,500 at Kapiolani Residence, from $357,000 to $1.4 million at Keauhou Place and from $580,000 to $1.4 million at The Central Ala Moana.

The median price of previously owned condos sold in the area this year through September was $660,000, according to the Honolulu Board of Realtors. That means half the sales were for less and half for more.