A City Council subcommittee has asked Hawai'i's congressional delegation to help overcome a federal regulation that could stall the $131 million sale of Kukui Gardens.

The five-member Affordable Housing and Economic Development subcommittee voted unanimously yesterday in favor of a resolution that asked the delegation to work with the owners of Kukui Gardens and parties interested in buying the 857-unit affordable-housing complex near Chinatown.

A sale was put in jeopardy last month, when the U.S. Department of Housing and Urban Development said that, under a federal regulation, any revenues would have to be spent on more affordable housing.

Officials are seeking a waiver to the rule, and those involved in negotiations say it appears talks are moving forward.

"I think we're going to overcome it," said Carol Anzai, president of the Kukui Gardens Association and a longtime tenant.

However, Anzai, other tenants and advocates said yesterday they would only support a rule waiver if the Kukui Gardens Corp., which owns the property, agrees to a plan that would keep half of the 22-acre complex affordable. The proposal calls for the other half to be developed by San Francisco-based Carmel Partners.

City Council members agreed the restriction should only be waived if the proposal favored by tenants goes through, and incorporated the language into its resolution.

Kukui Gardens Corp. had intended to transfer proceeds of the sale to an affiliated nonprofit, the Clarence T.C. Ching Foundation. A representative could not be immediately reached yesterday.

The sale was originally set to close in February, but has been pushed back several times. It is now expected to close in November.

Drew Astolfi, lead organizer for Faith Action for Community Equity, who has been active in keeping Kukui Gardens affordable, said it appears federal officials are interested in relaxing the rule.

"We are seeing progress," Astolfi said.

He also said the resolution will help show HUD the Kukui Gardens plan has broad support in Honolulu and should go forward.

Local developer Clarence Ching built Kukui Gardens in 1970 with federal funding. It is one of the state's largest affordable-rental projects, with about 2,500 low- and moderate-income residents.

In exchange for the financing, HUD required the units be kept affordable until 2011. Kukui Gardens Corp., which was set up as a nonprofit to operate the project, announced in January 2006 its intent to sell the complex because it couldn't afford to make needed repairs.

The original plan was to sell the entire complex to Carmel, which wanted to redevelop the property. But after an uproar, Carmel agreed to a plan that would keep half of the units affordable.

Reach Mary Vorsino at mvorsino@honoluluadvertiser.com.