The city’s push to create more affordable housing to ease Oahu’s housing crunch took one step forward Friday by breaking ground on a 26-unit, three-story walk-up for low-income renters in Makiki in Honolulu’s urban core.

“Today is just the beginning,” said Paul Lam, principal developer of Lam Capital LLC, who was motivated by the city’s Bill 7, which makes it easier for private developers to increase Oahu’s inventory of affordable units. The measure provides tax incentives and property exemptions for 10 years while expediting planning and permitting with no fees.

The project at 1427 Ernest St. will offer 24 studio apartments and two one-bedroom units ranging in size from 230 to 420 square feet. Monthly rent has not been disclosed, but is aimed at tenants who earn 80% of the area median income, and will include water, power and garbage costs.

Construction is scheduled for completion in June for occupancy in August.

“This is essential to solving the housing crisis,” Lam said before he and other dignitaries used golden shovels to symbolically turn the first soil on the vacant and narrow 5,388-square-foot parcel surrounded by high-rises.

Mayor Rick Blangiardi said, “This feels like a Christmas present.”

Bill 7 was approved in 2019 and signed into law by then-Mayor Kirk Caldwell to “create a temporary program to accelerate the construction of affordable rental housing” on apartment and business mixed-use-zoned properties by relaxing zoning and building code standards and offering financial incentives to developers, the ordinance states.

The measure further recognizes that for decades “the City and County of Honolulu has grappled with a critical shortage of affordable rental housing. This problem grows worse by the year and threatens to undermine our quality of life and permanently erode the city’s social and economic foundations so as to jeopardize its order and security.”

A handful of Bill 7-inspired projects are in the pipeline, and their success will inspire more developers to get involved, according to Honolulu Council member Tyler Dos Santos-Tam, whose current district includes the Ernest Street project.

“It’s the beginning of the second wave of Bill 7 projects,” Santos- Tam said. “This is exactly the type of product we’re missing.”

Lam already has plans to build a 25-unit project on Kinau Street, a 90-unit project on Pensacola Street and a 53-unit project on Alapai Street. Including the Ernest Street project, nearly 200 affordable units are expected to come online in town just through Lam Capital.

“I’m very encouraged by this type of legislation, so I jumped on the bandwagon,” Lam told the Honolulu Star-Advertiser before Friday’s groundbreaking.

Lam paid about $1.2 million to buy the Ernest Street property 18 months ago but worries Bill 7 might discourage future developers because it is scheduled to expire in 2024.

“I hope the mayor and City Council will immediately extend Bill 7 so we have confidence to stay on this path,” Lam told the Star-Advertiser. “Then start working on amendments to the bill so we can see scaled development. … I think the mayor is doubling down on Bill 7 and the development of affordable housing … so I applaud the mayor for that.”

Dawn Takeuchi Apuna, director of the city’s Department of Planning and Permitting, said the Ernest Street project received a “special assignment inspection” in November, effectively allowing it to move forward with construction prior to obtaining a building permit — as long as other city permits are obtained and fees paid.

Under Bill 7, Lam’s Ernest Street project did not require City Council approval, Take­uchi Apuna said.

If and when the project receives a certificate of occupancy, Lam may apply for a Bill 7 grant, which provides up to $9,000 per unit rented to households earning 60% to 100% of the area median income or up to $15,000 per unit rented to households earning below 60% of the area median income, Take­uchi Apuna told the Star- Advertiser. The city’s Department of Budget and Fiscal Services issues the grant after DPP determines eligibility, she said.

In the meantime, according to the city, 27 affordable housing projects have been green-lit under Bill 7, and five have obtained all permits to proceed to construction.

The Ernest Street project is surrounded by rental units and has easy access to bus lines and a westbound entrance to the H-1 freeway.

Lam told the Star- Advertiser he hopes to see Honolulu evolve into “a more walkable city.”

“That’s why I got these properties in these locations, because it’s accessible to bus stops and public transportation and using electric vehicles and scooters, that type of thing,” he said.

Ian Ross, chair of the neighborhood board that represents Makiki, Lower Punchbowl and Tantalus, likes the idea of more affordable housing in Honolulu’s urban core.

“The neighborhood board has repeatedly ranked homelessness and affordable housing among the top two priorities we have for the community,” Ross told the Star-Advertiser before Friday’s groundbreaking.

But he hopes future projects are presented before neighborhood boards to provide feedback and concerns.

“Crucially, they are more substantive than a lot of other projects,” Ross said. “I’d like to see a positive role that the neighborhood boards can play. But I do recognize that there’s red tape that has been cut to expedite (projects). In principle, more affordable housing and housing faster is really crucial, but I really wish we did have a better ability to weigh public input on this.”