State lawmakers approved a plan to use the state's condemnation powers to preserve hundreds of affordable rental apartments at the Kukui Gardens housing complex downtown.

The measure was approved yesterday by House and Senate conferees, and it also calls for the state to partner with an affordable housing developer to retain most of the project's 857 apartments for low- and moderate-income tenants.

"Now we have a fighting chance," said Carol Anzai, president of the Kukui Gardens Association and a tenant for 33 years.

"Our people can sleep a little bit easier knowing that there are so many people supporting us."

Kukui Gardens Corp., the nonprofit owner of the 22-acre apartment complex, put the affordable housing project for sale in January, raising concerns that a new owner would tear down the complex and build more expensive housing that will displace hundreds of low-income tenants.

People familiar with the sale have said that San Francisco-based real estate investment company Carmel Partners has signed an agreement to acquire the project in a deal valued at $130 million. The closing is subject to approval by the U.S. Department of Housing and Urban Development.

Kukui Gardens Corp. previously stated that the buyer will not redevelop the property and will keep rents near existing levels at least until 2011.

Steve Gilley, Kukui Gardens Corp.'s broker, said through a spokesman that the sellers were surprised by the approval of the measure. Gilley declined further comment, saying Kukui Gardens' board, which will meet this weekend to discuss the legislation, needs additional time to assess the impact of the measure.

The bill calls for the state to enter negotiations with the existing owner to acquire the property using revenue bonds or tax credits. The bill must be approved by the full House and Senate before it can go to Gov. Linda Lingle to be signed into law.

Rep. Michael Kahikina, chairman of the House Housing Committee, said the measure sends a strong message the Legislature wants to preserve affordable housing projects in the state.

"This bill is important because any plan to address our affordable housing programs must include the preservation and maintenance of our affordable housing stock," added Sen. Ron Menor, chairman of the Senate Commerce, Consumer Protection and Housing Committee.

The 36-year-old Kukui Gardens outside of Chinatown is one of the largest affordable rental projects in Hawai'i, built with funding from HUD.

In exchange for HUD financing, the owner agreed to keep the units affordable until 2011.

The apartment complex, which houses about 2,500 residents, charges tenants between $444 and $1,100 a month for one- to four-bedroom units.

Retiree Yuitung Ng, a Kukui Gardens tenant for more than 20 years, said he's relieved that lawmakers approved the bill, saying he would have difficulty finding an affordable apartment on his fixed income.

"I'm happy now because now they (the sellers) have to consider our needs," Ng said.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.