A 2,300-home community planned on Hawaii island called The Villages of Aina Le’a will be allowed to proceed after a state judge overruled an April decision by the state Land Use Commission blocking the project because of a missed deadline to complete affordable housing.

Circuit Court Judge Elizabeth Strance ruled on Friday in favor of the project’s two developers, which filed lawsuits appealing the LUC’s decision to revoke its earlier approval of urbanizing 1,060 acres near Waikoloa for the estimated $1 billion project.

Strance found the LUC acted improperly and that enforcement of development conditions should be left to the county. "It’s the court’s view that the LUC lost sight of its mission," she said according to a transcript.

Bob Wessels, managing partner of developer DW Aina Lea Development LLC, said the judge’s ruling will restore project investors’ confidence and allow delivery of housing strongly supported by Hawaii County officials.

"We’re just extremely happy," he said.

Bruce Voss, an attorney representing the project’s other landowner and developer, Bridge Aina Le’a LLC, called Strance’s ruling a historic one with broader implications because it clarifies circumstances for the LUC imposing conditions and revoking prior approvals.

"This decision removes a dark cloud over not only this project, but on other projects, too," he said.

Joshua Wisch, a spokesman for the state attorney general’s office representing the LUC, expressed disappointment. He said Strance’s ruling is "probably worthy" of an appeal, though a decision on whether to appeal hasn’t been made.

Efforts to develop the Aina Le’a site date back more than 20 years when California-based developer Signal Puako Corp. received LUC approval in 1989 to build 2,760 homes and agreed to make 60 percent of the homes affordable to moderate-income buyers in line with state housing policy at the time.

Signal never developed the land, and a subsequent attempt by Japanese developer Nansay Hawaii Inc. also failed.

Bridge Aina Le’a, an affiliate of U.S. Virgin Islands-based real estate and lending firm Bridge Capital, bought the project site in 1999 and unveiled a plan in 2005 to develop a community with 2,300 homes, two golf courses, a regional shopping center, a public school and 26 acres of park space.

Bridge asked the LUC to reduce the affordable-housing requirement to 20 percent in line with Hawaii County policy, and the commission agreed. But the commission also imposed a five-year deadline to build 385 affordable homes by November 2010.

The developer expressed confidence about finishing the affordable homes within three years but encountered unexpected financial difficulties and permitting delays, including a new requirement in late 2007 to produce an environmental impact statement in the wake of a legal ruling over the Hawaii Superferry.

DW Aina, a firm based in Nevada, bought land under the affordable-housing component from Bridge in 2009 with intent to expedite construction and acquire the rest of the project later. But DW Aina finished or nearly finished fewer than 60 homes by the deadline.

DW Aina sought a deadline extension with support from county officials and community members who said the need for jobs and new homes was more important than an arbitrary deadline. But the LUC voted 6-2 in April to revoke the 1989 approval reclassifying the land for urban use.

Aina Le’a’s developers argued that the LUC was being unfair given that affordable-housing requirements were reduced from 60 percent in at least seven other projects — including Kukui’ula on Kauai and secondary phases of Mililani, Royal Kunia and Ko Olina Resort & Marina on Oahu — without imposing construction deadlines.

"Bridge and DW Aina have shown that the LUC treated them differently from other similarly situated developers," Strance said in the transcript.

Wessels said 143 people have reservations to buy affordable homes and that he anticipates that infrastructure including roads can be completed for the first homes by June.