Castle & Cooke Homes plans to start construction in October on the first of 472 affordable townhouses for sale and rent at the state's master-planned community Villages of Kapolei.

The developer today is holding a groundbreaking ceremony for the project that is expected to help ease an acute shortage of affordable rentals and for-sale housing on O'ahu, where home prices continue to rise.

Units are slated to be made available for purchase and rent in mid-2007, with delivery of the first homes in mid-2008 and completion of the project by the end of 2009.

"We are proud to be back and developing homes in the Villages of Kapolei," Harry Saunders, company president, said in a statement.

According to a study conducted for the state, there is a need for 30,000 affordable-housing units statewide — 17,000 rentals and 13,000 homes for purchase.

The Kapolei project covering 20 acres within the A'eloa, Iwalani and Malu'ohai subdivisions — also known as villages 2, 5 and 6 — is the last major installment of affordable housing at Villages of Kapolei.

The state Housing and Community Development Corp. of Hawai'i selected Castle & Cooke to develop the project in June 2005 through a public request-for-proposals process that sought the maximum number of units at the lowest expense to the state.

Castle & Cooke's bid, which estimates total development cost at around $100 million, involves private financing with some state tax credits and general excise tax exemptions. The state is contributing the land and major infrastructure improvements.

Of the 472 townhouses, 244 will be rental units and 228 will be sold fee-simple.

The homes are reserved for people with income levels between 60 percent and 140 percent of the annual household median income in Honolulu, which this year equates to $42,780 to $99,820 for a family of four.

Home prices and rents will depend on median-income levels and interest rates at the time homes become available.

If sold today, sale prices for two- and three-bedroom units would roughly be from $340,000 to $400,000. Monthly rents for one- to three-bedroom units would roughly range from $800 to $1,850.

Castle & Cooke said it will not be ready to accept applications from buyers and renters until the middle of next year. Most sales and rental tenant selections are expected to be held by lottery.

Castle & Cooke, developer of Mililani and Royal Kunia, developed the first residential subdivision at the Villages of Kapolei called Kumu Iki in the 1980s.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.