When the owners of the Kukui Gardens rental complex announced they were selling the Downtown project in January 2006, tenants were fearful that a new owner would raze all 857 low-cost apartments and displace hundreds of low-income and elderly tenants.

But nearly two years later, the Chinatown project has become a model for bipartisan government and private sector efforts to preserve affordable housing in Hawai'i.

"When the sale was first announced, I thought that we did not have a chance. Never in my wildest dreams did we think we would succeed," said Carol Anzai, president of the Kukui Gardens Association and a tenant for 34 years.

"I totally believe that this is a victory for the community."

On Dec. 18, owner Kukui Gardens Corp. will complete the $131 million sale of the 22-acre project to San Francisco-based Carmel Partners.

While a few remaining details are still being worked out, the sale will result in the preservation of nearly half the units as low-income housing for at least 55 years.

The remaining units, which will be owned by Carmel, will remain at existing rents until 2011.

After that, rents will increase gradually to serve households earning no more than 140 percent of the area's median income.

Kelly Arrington, a Kukui Gardens resident since 1983 and a single mother of four, said the efforts by tenants, community leaders and elected officials have kept many low-income residents from joining the ranks of the state's growing homeless.

Had it not been for Kukui Gardens' low rents, Arrington said she would be like a lot of local renters who are forced to move from apartment to apartment every time their rents increased.

"This buys time for a lot of us," Arrington said.

Chris Beda, Carmel's chief investment officer, said his company simply plans to own and operate apartments on its 12-acre segment, which is bordered by Vineyard, Liliha and 'A'ala streets.

Carmel previously said it planned to down existing buildings and develop hundreds of market-priced units as well as a large amount of retail space and other commercial uses.

But Beda said the previous plan was in response to questions from state officials last year and that Carmel now has no plans to redevelop the site.

"This has been a long and complicated deal. The public nature and the politics involved made it more complicated," Beda said.

A spokesman for seller Kukui Gardens Corp. declined comment.

Built in 1970 by local developer Clarence Ching with funding from the U.S. Department of Housing and Urban Development, Kukui Gardens is one of the state's largest affordable-rental projects with about 2,500 residents.

Ching, who died in 1985, agreed to keep the units affordable until 2011 in exchange for the HUD financing.

But in January 2006, Kukui Gardens Corp. said it needed to sell the complex because it couldn't afford to make repairs that would cost as much as $12 million.

The company announced in April 2006 that it was selling the apartments to Carmel, whose original plans called for the demolition of the project to make way for 3,700 residential units and 235,000 square feet of retail and office space.

The uproar over the potential loss of affordable housing prompted the state lawmakers to pass a bill calling for the use of eminent domain powers to acquire the buildings.

The bill was signed into law last year by Lingle and since then, Carmel has agreed to preserve the property's affordable units.

State legislators, led by Senate President Colleen Hanabusa and House Speaker Calvin Say, followed up by approving $25 million in financing.

The Legislature still has to approve $26 million in financing next year.

To be sure, some advocates believe the current plan doesn't go far enough.

City Councilman Rod Tam, one of the early organizers behind the effort to save Kukui Gardens, said the state should have condemned the property to ensure that the entire project would remain affordable.

"I still think the whole of Kukui Gardens should have been kept affordable," Tam said.

Drew Astolfi, lead organizer for the nonprofit group that represented Kukui Gardens' tenants, said the deal marks a watershed in grassroots efforts to save low-cost housing in Hawai'i.

Many HUD-financed and city-owned affordable housing projects are now at risk of being sold or redeveloped.

The efforts by Kukui Gardens' tenants, the local community, Hawai'i's elected officials as well as the private sector "is proof that these projects can be saved," said Astolfi, whose group Faith Action for Community Equity, or FACE, plans to work with tenants of other affordable projects to preserve the low-cost housing.

"It was a rare political moment where everybody from both sides of the aisles got together to address one of the biggest issues on the Islands," Astolfi said.

Correction: A picture with a previous version of this story was misidentified as that of Clarence Ching, the developer of Kukui Gardens.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.