Hundreds of new homes sold each year at below market prices on O'ahu once again are restricted to buyers with low to moderate incomes under city affordable-housing program rules reinstated today after a six-year suspension.

The change applies to mostly Leeward O'ahu housing projects on former agriculture land, where private developers agreed, in consideration for zoning changes, to sell a percentage of homes at prices set by a city formula.

Under the formula, homes can be priced as low as $234,700, compared with O'ahu's recent median single-family home sales price of about $600,000.

The below-market homes are restricted to buyers with an annual income under $81,300 based on a family of four. Other reinstated provisions of the program include rights for the city to buy back affordable homes at slightly higher prices if owners sell within 10 years, and rights for the city to share in price appreciation on sales after 10 years. A requirement that affordable-unit buyers live in the unit has been in place all along.

The restrictions may not last long, however, because the city Department of Planning and Permitting recently reversed its recommendation to reinstate the rules suspended since 1999.

Councilman Nestor Garcia also has introduced a resolution to re-suspend the income limit, buyback and shared appreciation provisions in the program.

Councilwoman Barbara Marshall, however, said the restrictions are needed to help low-income residents afford homes that cost 25 percent more than they did a year ago.

"I have more concerns than ever about low- to moderate-income families' ability to buy in Honolulu," she said.

Developers were expected to have built about 800 homes under the program during the city's fiscal year that ended June 30.

From 1999 through June 2003, private developers produced an average of 850 affordable homes a year under the program, which excludes government-sponsored projects such as Villages of Kapolei and affordable homes built under other city and state rules.

Developers and industry observers said the recent meteoric rise in home prices, combined with tight inventory, has led more-affluent buyers to compete for affordable homes, often beating out moderate-income buyers who have fewer choices.

According to a study prepared by local research firm SMS for the Land Use Research Foundation, 40 percent of the affordable homes produced from 2001 to 2004 went to buyers with incomes over the city's limit.

The study suggested that reinstating the income requirement would increase competition for market-priced homes and push those prices even higher because of limited inventory.

The foundation study also said that the buyback and shared-appreciation rules hurt affordable home owners if they want to move, because they don't receive full market value that would allow them to buy a comparable home on the open market.

Henry Eng, city planning and permitting director, cited the market study as part of why his department no longer supports the restrictions. The study was published in July, after Eng's department recommended reinstituting the restrictions in February.

Eng also said that there were concerns over administering the reinstated rules, and that other recent city and state efforts to provide affordable housing can be more effective.

Another danger to reinstating the restrictions is that a slowdown in O'ahu's housing market could make the affordable homes difficult to sell and therefore discourage home developers from building.

During Hawai'i's slump in the 1990s, falling home prices made the "affordable" homes impossible to sell because market-price homes didn't cost much more and didn't come with resale restrictions.

That prompted city officials to amend the housing ordinance in 1999 to allow purchases of affordable homes regardless of income and suspended resale rules. The suspension was extended in 2001 but scheduled to expire today.

Under the city's formula, which is tied to Honolulu's median household income and interest rates, affordable-home prices can be as low as $234,700 for a family of four earning $54,250, which is 80 percent of the median income, and a 5.5 percent interest rate.

A buyer earning up to the median income of $67,750 could buy a home for $293,100. Earning up to $81,300, or 120 percent of the median, qualifies for a $372,929 home.