The pending urban renewal plan for the Kaka'ako peninsula represents the first time the state has tentatively accepted a development proposal for the area with housing, but it's not the first time the state has suggested that homes be part of Kaka'ako's waterfront.

For more than two decades, the Hawai'i Community Development Authority has been charged with determining the best use of the roughly 200-acre peninsula mostly owned by the state.

The Legislature in 1976 created the semi-autonomous state agency as an extraordinary tool to help reverse urban decay in Kaka'ako between Ala Moana and Pi'ikoi, Punchbowl and King streets.

It wasn't until 1982 that the agency was assigned control of part of the peninsula makai of Ala Moana. The rest of the industrial waterfront of warehouses, baseyards, maritime operations and a city dump were added to the agency's jurisdiction in 1987.

In general the agency has viewed housing as potentially playing a role in improving the tract by providing affordable housing or helping pay for public facilities like parks and creating a better sense of community.

The agency published its first development strategy for the peninsula in 1983, and envisioned that residences — an estimated 1,547 units — would rise on land beneath and mauka of where the University of Hawai'i medical school is today.

Residences in the 1983 plan were emphasized as an opportunity to develop affordable housing, and were to be part of a mixed-use neighborhood of commercial and light industrial activity.

MASTER PLAN CREATED

In 1990, however, the agency eliminated residential and industrial use from its Kaka'ako makai development guidelines when it adopted a 1989 Honolulu waterfront master plan by the Office of State Planning that said recreation and commercial uses were best for waterfront land.

The waterfront master plan, an initiative by then-Gov. John Waihee, considered housing for the area, noting that it could reduce public costs for waterfront improvements and would enhance a sense of community.

But plan authors concluded that housing (especially luxury residences) shouldn't be next to a major state park planned for the area, and that other envisioned uses like a 5,000-seat amphitheater would conflict with residents.

The Waihee administration waterfront plan laid out an ambitious development goal for Kaka'ako makai that included a 30-acre waterfront park, inland waterway system, sandy beach, retail shops, restaurants, an aquarium, amphitheater, performing arts center, museum, marine research center, enlarged harbor and cruise ship terminals at Piers 1 and 2.

Cost estimates ran more than $250 million, including infrastructure upgrades and expenses to relocate area businesses. To help pay for public improvements, much of the state's interior peninsula property was slated for private office building development.

Kaka'ako Waterfront Park was developed atop the mound of garbage and incinerator ash for $22 million in 1992, and a children's museum moved into an old incinerator building in 1998. A $24 million cruise ship terminal at Pier 2 is under construction.

But other waterfront plan ideas faltered. The office market dried up. Inland waterways were deemed not feasible, and building a beach at the 'ewa end of the peninsula was successfully blocked by surfers who feared the project would ruin an adjacent surf break.

ROLE FOR HOUSING

Plans for housing made a comeback in 1993 when the agency produced a new development strategy that promoted 1,500 units for middle-income families on state land in Kaka'ako makai.

Part of the idea was that a neighborhood with residents would encourage and help support private commercial development on adjacent state property. Commercial development, in turn, would earn the state revenue to help pay for the park and a projected $100 million of upgrades to infrastructure including sewers and roads.

Eric Masutomi, the agency's planning director from 1989 to 1995 who before that was the waterfront master plan's project manager under Waihee, said the public was generally supportive of the renewed effort to include housing on the peninsula because limits on home prices and buyer incomes would be imposed.

"There was a strict recognition that any housing down there should be affordable to local residents," he said. "That was a key item. I think most people supported the plan."

Other supporting factors for residential use were the elimination of potential conflicting uses like the giant amphitheater, and the dissipation of the late '80s luxury condo demand by Japanese investors that fueled an earlier fear of Kaka'ako makai becoming an enclave for wealthy nonresidents.

But the agency, then led by former city housing director Michael Scarfone, postponed adopting the revised plan for Kaka'ako makai in late 1994 when Ben Cayetano succeeded Waihee as governor.

Cayetano, who as governor selected several new agency board members, assumed an active role in the area's revitalization effort. His vision for Kaka'ako makai included a high-tech park, UH medical school, world-class aquarium and Bishop Museum science and technology center.

Housing, however, was not part of that vision. In 1998, the agency solicited private plans to develop 18 acres of state waterfront, attracting proposals that included a snowboard complex and high-tech park.

Agency directors selected a $138 million proposal for retail shops and restaurants surrounding a miniature golf course, carousel and 130-foot high Ferris wheel planned by local businessman and former politician D.G. "Andy" Anderson.

After intensive negotiations, agency directors in a 7-2 vote rejected Anderson's project on the grounds that it contained unrealistic financial assumptions.

Jan Yokota, agency executive director from 1996 to 2003, said it's hard to say whether housing would have made a significant difference in the 1998 development effort because the condo market was still relatively weak.

But as the housing market strengthened, Yokota resumed the effort to put housing back in the Kaka'ako makai plan.

"There was interest in including residences as part of the mix to activate the area — to make it a live-work-play area so it didn't fall prey to the downtown syndrome (where activity) goes dark at night," she said.

The agency adopted a waterfront business plan in 2002 that suggested residences should be moderately priced for white-collar workers.

"Waterfront residences will not compete with the high or low extremes of the market," the 2002 business plan said.

In 2002, UH began building a new medical school on state land on the peninsula, and the agency began negotiating to lease a 10-acre site at Point Panic to a developer wanting to build a $200 million aquarium and marine research complex.

After Gov. Linda Lingle took office in 2003, the agency continued to pursue changing its rules to allow housing in the makai area, and directors at a 2003 meeting voted to commission a study to further assess the issue.

Local consulting firm Mikiko Corp. produced the study, which noted the strong demand for condos and recommended that units in Kaka'ako makai could be sold for $350,000 to more than $4.5 million, or rented for $1,200 to $3,000 a month.

The study estimated that 60 percent to 70 percent of buyers and renters would be Hawai'i residents.

Late last year, the aquarium deal fell apart, and the agency in January solicited development proposals for 36.5 acres of state land, suggesting that residential use be included in anticipation of the agency amending its rules.

In September, the agency board approved the rule change after a public hearing that drew closely divided public testimony. A week later, the agency selected Alexander & Baldwin Inc. as having the preferred development plan over five others that also included condos.

A&B amended its plan earlier this month in response to community concerns, in part reducing the number of condos from 947 units in three 20-story buildings to about 630 units in two buildings.

The agency is scheduled to decide whether to proceed with A&B's amended plan at a Jan. 11 meeting.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.