State and city officials yesterday dedicated a 70-unit affordable rental housing complex in Waipahu that originally was intended as a fee simple condominium for gap-group families.

Mokuola Vista, an eight-story building at Mokuola Street and Kau'olu Place, will house families with income at or below 60 percent of O'ahu's median income. Rents will run from $505 for a family earning 30 percent of area median income to $925 for a family making 60 percent of median. Median income for Honolulu is $77,300 for a family of four.

More than 200 applications were received and a lottery was held last week. The first tenants are expected to move in late this month or early next month.

The land was provided by the Hawai'i Housing Finance and Development Corp., the state's housing agency. The nonprofit group Homes Hawai'i Inc. received a $12 million loan from the Dwelling Unit Revolving Fund, as well as $4 million from the Rental Housing Trust Fund and $20 million in state and federal low-income housing tax credits.

In return, Mokuola Vista is to remain affordable for 61 years.

This is the first project for Homes Hawai'i, a nonprofit with a volunteer board of directors.

The project was originally envisioned by the state as a for-sale building for gap-group families. But after the units had been on the market for a year, project developer GSF Inc. had secured less than 10 contracts, principal Gary Furuta said.

Furuta then partnered with Homes Hawai'i Inc., for which he is a limited partner and project manager, to lead the rental effort.

Without government assistance, developing rental projects in Hawai'i today does not pencil out financially, Furuta said.

"The costs are so high that to rent even market rent won't cover the costs of the construction of a building," he said. "If you bought a condominium and you tried to rent it out, you'd have negative cash flow."

Furuta added: "Almost every rental project around is an affordable-type project that's a partnership between the government and the private sector because the costs are too high and to pay it back, the rents just don't cover it, especially if you're going to go with low-income renters."

Furuta said he's hoping there will be other government-private rental partnerships in the area, given the number of applicants.

"This is an untapped market," he said.

Gov. Linda Lingle, who attended the dedication, said: "The state will continue to offer more incentives and find new ways to partner with private and nonprofit developers to build affordable housing statewide."