So far, the proposed rule change, which is part of a bill before the Legislature that would widely revise condo regulations, has raised no public concern about possibly creating opportunity for residents to be squeezed out of a tight market that is becoming more ripe for speculation.

The consensus among condo associations, commission members and developers is that the owner-occupant rule has done little good since it was enacted in 1980, and that eliminating it would have little effect.

"At the heart of the rule, it has an attitude as something that helps local people find a home — and I'm all for that — but it doesn't do a damn thing about it," said local real-estate market analyst Ricky Cassiday.

Hawai'i has one of the country's highest mixes of condos to single-family homes, at about 25 percent, and one of the lowest rates of home ownership — second to last at 58.3 percent last year behind only New York and the District of Columbia.

But keeping the owner-occupant priority would do little to help buyers looking for a place to live, Real Estate Commission officials said, because owner-occupants are the overwhelming majority of buyers today and developers have their own incentives to keep it that way.

The law requires that half of all new condo units be offered for 30 days only to people who affirm that the unit will be their principal residence for at least a year. If these buyers sell, rent or lease the property before then, the state can impose a fine of $10,000 or take half of any proceeds.

The rule was created in response to the real-estate speculation in the 1970s when people, many of them local, were buying and immediately reselling condos for higher prices. Resort condos and single-family homes were excluded because residential condos are most attractive to first-time homeowners as well as investors.

In the late 1980s the rule was somewhat useful, reducing speculative purchases by Japanese investors, according to Cassiday. But investors also flouted the rule by posing as owner-occupants and renting out the units sometimes within days or reselling them for five-figure profits.

Public opposition absent

Despite anecdotal evidence of cheating over the years, the Real Estate Commission said it doesn't have the personnel for enforcement, and that no action has ever been taken against violators.

Commission executive officer Calvin Kimura also said that the number of consumer complaints on the issue over the past decade has been very small compared with the number of condos sold.

The commission also held public hearings in each county late last year, and received no public comments critical of the proposed rule elimination.

Still, Kimura said he knows repealing the law can be a touchy issue. "Hawai'i people hold real estate very dearly," he said. "Hawai'i people sacrifice a lot to have a home unlike other places."

Mitchell Imanaka, a local attorney who chaired a committee that reviewed the proposed condo law changes, said a speculator made money off him in the 1980s, when fresh out of law school he bought a condo that went from the developer to a friend of the developer to Imanaka.

"We certainly don't want to see condominium buyers victimized, but the current law doesn't serve anyone well," he said.

Imanaka noted that quick property resales by speculators, known as double-escrow deals or flipping, generally is not illegal. Hawai'i is the only state with a law intended to curb the practice by giving priority to owner-occupant buyers of new condos, the commission said.

Developers said there likely would be no significant change in sales without the rule, which they call an administrative hassle that requires them to publish special legal notices and track which buyers can buy which units.

Rick Hobson, vice president of sales and marketing for Gentry Homes, said investors probably are buying about 10 percent of Gentry homes regardless of whether the homes are subject to the rule or not.

Gentry requires buyers of single-family homes to declare if they don't intend to live in the property for at least a year, and limits such purchases to only a few.

"We want the majority to have the pride of ownership," Hobson said. "You can't beat pride of ownership to keep the neighborhood looking good. That's our responsibility as a developer — to make sure a community looks good over time and retains its value."

Satisfying homeowners first

At Haseko Homes, developer of single-family and condo townhomes at Ocean Pointe in 'Ewa Beach, all homes sold starting next month will contain a contractual right for Haseko to buy back a home at the original sales price if the owner rents or sells it within a year.

"It's a real penalty in an upwardly moving market," said Richard Dunn, executive vice president of Haseko Realty Inc. "What we're trying to say is there are a lot of real homeowners that need homes, and we'd like to satisfy their needs first.

"The market's really hot right now, and properties are appreciating," Dunn added. "In a very hot market, speculation does tend to occur ... we are just positioning ourselves with that in mind."

The bill to overhaul condo regulations, Senate Bill 2210, was passed by the second of two House committees on Thursday after Senate committee approvals. If the bill wins final approval and is signed by Gov. Linda Lingle, changes would take effect July 1, 2005, to provide for any fine-tuning in next year's Legislature.