Owner Western United Life Assurance Co. also won permission to put up to 180,000 square feet of commercial and retail space at the site mauka of the intersection of Ponahawai and Komohana streets in what may turn out to be a major new shopping area.

However, the council imposed some restrictions on the commercial portion of the project, disallowing any single store that would be larger than 45,000 square feet. That restriction means it will not be possible for a "big-box" retailer to open there, because the largest retailers need more space, said County Planning Director Chris Yuen.

The project will develop one of the last large wooded areas near Hilo's urban core, an area that now serves as a buffer between four existing neighborhoods. The project was initially opposed by residents in the surrounding areas, but gained a degree of acceptance as the council imposed various restrictions on the project.

Those restrictions included reducing the amount of commercial development allowed at the site, and imposing height restrictions so that the apartments would be no more than two stories tall.

"I just hope that the developer is responsible and does what he's supposed do," said Cheryl Reis, a resident who lives within 300 feet of the project. "We look forward to having another nice neighborhood."

The project was favored by Mayor Harry Kim's administration, in part because it would provide housing in urban Hilo at a time when rental and affordable housing has been in short supply.

Yuen has argued that a development there makes more sense than building on land outside Hilo and forcing people to drive to and from town for work.

"We're looking to create more housing opportunities right in Hilo, and that's the advantage we see in the project," he said.

Yuen said he intends to ask the council to approve a bill soon requiring that new Big Island developments price 20 percent of their units in the affordable range.Yuen said he will propose that the new requirements apply to all projects that have not yet fulfilled their county housing obligations, which would mean the 20 percent mandate would apply to University Terrace.

As a condition for the rezoning, the council is also requiring the developer to extend Ponahawai by nearly a mile to Mohouli Street, which is expected to cost about $5 million and improve traffic flow in the area.

Western United Life hired former Big Island Mayor Stephen Yamashiro as project manager, and Yamashiro hired his former county planning director, Virginia Goldstein, to work on the rezoning application.

The 7-2 vote in favor of the project yesterday was one of the last pieces of business the nine-member council will handle before five new council members are sworn in Dec. 6.