The law

Governor Josh Green signed Senate Bill 2061 on June 22 as Act 121, Session Laws of Hawaii 2026. It builds on Act 97 of 2025, which established a pilot leasehold condominium programme within the Hawaii Community Development Authority.

Under the programme, at least 60 percent of residential units must be affordable to households earning no more than 140 percent of area median income. Units must be owner-occupied and may be sold only to qualified local residents.

Act 121 adds eligibility requirements and owner-occupancy safeguards intended to hold affordability over the long term. It supports a planned HCDA pilot project in Kaka'ako at the corner of Kapi'olani Boulevard and Ward Avenue.

What a 99-year lease actually does

The central cost problem in Hawaii is land. Separating the improvement from the land and conveying only a long-term leasehold interest removes land value from the purchase price, which is how the state can bring a unit within reach of a household at 140 percent of median income without a per-unit subsidy of comparable size.

The trade-off is equity. A leasehold owner builds wealth on the structure and on the remaining lease term, not on land appreciation — and the value of a 99-year lease declines as it runs down, most sharply in its final decades. That is precisely the mechanism that keeps the unit affordable for the next buyer, and it is also what makes leasehold politically contentious in Hawaii, where earlier leasehold conversions left owners exposed at lease expiry.

The owner-occupancy and local-resident restrictions address the other failure mode, which is resale of subsidised units into the investment market.

What Act 121 changed in the pilot itself

The Kaka'ako pilot predates Act 121. HCDA acquired two parcels totaling 26,626 square feet at 875 Kapi'olani Boulevard and 610 Ward Avenue in January 2025 for a planned 370-unit project, Ko Laila, with 60 percent of units reserved for households at or below 140 percent of area median income — for a Honolulu family of four, $212,800 — priced from $368,100 to $725,300, against market-rate units running to $1.4 million.

That project was paused in late 2025 over weak buyer interest, driven in part by a since-removed provision that barred owners from ever renting or subleasing their unit. Act 121 replaced the perpetual ban with a requirement that at least 60 percent of units remain owner-occupied for a minimum of ten years from initial purchase, with the authority empowered to set penalties up to a forced sale for violations. HCDA's executive director, Craig Nakamoto, said the change gave the agency 'some flexibility' and that the project is now moving toward presales targeted for early 2027.

What a 99-year lease still leaves open

What happens at the end of a 99-year term, and how the lease rent is set and escalated over that period, are the provisions that will determine whether this model works over the long run; they were not detailed in the materials Estate Wire reviewed. The bill also exempts design, development and construction contracts for these units from the state's public-procurement code, chapter 103D, while still requiring prevailing wages for laborers on the job site.