A long-planned rental apartment tower in Honolulu’s urban core for state Department of Hawaiian Home Lands beneficiaries is slated to begin construction next month after delays.

The $154 million project, dubbed Hale Moiliili, will provide 278 units for DHHL beneficiaries with very low to moderate incomes.

Apartments ranging from studios to three-bedroom units will serve households earning as little as 30% of the median income on Oahu and up to 100%. Monthly rents will be tied to incomes, and based on current levels would range from $657 to $3,460.

At one time, DHHL anticipated that the envisioned 23-story tower on land once occupied by Stadium Bowl-O-Drome could be done by this year. But efforts by the project’s developer took longer than expected.

“It was painful,” said Stanford Carr, a local developer heading up a partnership selected in 2020 by DHHL to carry out the project.

Carr said about a year was tied up over issues with a $59 million loan from the federal Department of Housing and Urban Development, which also involved the U.S. Department of the Interior and included whether fair housing rules tied to HUD-financed projects would be violated by Hale Moiliili being built exclusively for DHHL beneficiaries.

Now, final approvals for the financing, which also includes contributions from the state, should result in the tower breaking ground next month.

“Everything is locked and loaded,” Carr said.

Construction of Hale Moiliili is projected to be finished about two years from now and will allow DHHL beneficiaries, who must be at least 50% Hawaiian, to live in Honolulu’s urban core at below-market rental rates while awaiting an opportunity to receive a homestead lot for $1 a year.

DHHL has about 28,700 Native Hawaiians on its waiting list for homestead lot leases, but not everyone on the list is prepared to buy or build a home. Saving money on rent could help position more beneficiaries for future homestead lease awards as the agency pursues an ambitious push to deliver about 3,000 new homesteads spread over roughly 30 projects statewide using $600 million appropriated by the Legislature in 2022.

Historically, DHHL wasn’t able to offer rental housing under its rules. But that changed in 2019 after a long-discussed administrative rule revision, which allowed the agency to pursue development of its first high-rise rental housing project for beneficiaries.

DHHL has owned the Bowl-O-Drome property since 1995 via a transfer from the state Department of Land and Natural Resources as part of a legal settlement over payments owed to DHHL over use of state land.

The agency had contemplated redevelopment of the 1.9-acre site at 820 Isenberg St. since at least 2002. Bowling operations, which dated to 1955, ended in 2004. Subsequent uses of the property have included renting the site to a tow truck company as a base yard.

In 2019, DHHL solicited rental housing proposals from private developers and in 2020 picked a team led by Carr over four competing bids.

Under the arrangement, Carr’s team is financing the project and will own and manage the complex for up to 65 years under a land lease.

The Hawaii Housing Finance and Development Corp., a state agency that helps finance affordable housing, in 2022 approved the bulk of the project’s financing, including bonds, about $56 million worth of federal and state tax credits, and a $41.5 million loan using a special appropriation that year by the Legislature.

At the time, construction was expected to begin in early 2023 and finish by the end of 2024.

Kali Watson, DHHL director, congratulated Carr and his team for their perseverance and success.

“This project is a major step forward in addressing the housing needs of those on the DHHL waiting list, offering affordable rental units at below market (rates) to Native Hawaiian beneficiaries,” Watson said in a statement. “By moving forward with Hale Moiliili, DHHL reaffirms its commitment to easing the housing shortage and supporting the Native Hawaiian community through the development of another much needed and innovative affordable housing option.”