Leasehold condo plan could work

Senate Bill 865 establishes a pilot program to develop the condo project, offering units under a 99-year land lease.

The condo would be built on state land, eliminating the cost of buying a site and significantly reducing total costs. The state would contract with a private developer to build the condo tower, and the developer would recoup costs through unit sales.

A recent study by the Hawaiʻi Budget & Policy Center, a branch of the nonprofit Hawaiʻi Appleseed Center for Law &Economic Justice, concluded that it would be worthwhile to test a small-scale project on non-ceded state land. (Ceded lands are former Hawaiian kingdom lands.) The study found that the state could produce two-bedroom, leasehold condos for $400,000, as compared to $600,000 for a fee-simple condo built by a private developer. Leasehold condos at that price would be affordable to households earning about $80,000 a year, or 80 percent of the median income in Honolulu.

The trade-off for that lower price would be eventual return of the property when the 99-year lease expires. Concerns about the concept include a dwindling incentive to maintain a property that will eventually return to state ownership. However, the study also predicts that buyer demand for these condos would be high. That follows, since in 2022 the median price for previously owned condos sold on Oʻahu was $510,000.