Real-estate developers are proposing to convert 210 acres of prime but fallow Maui farmland into a largely rural 550-unit subdivision with 310 houselots and 240 townhomes in Wailuku.

The plan would help alleviate a Central Maui housing shortage but could inflame concerns over water use and traffic.

The planned subdivision called Pu'unani also is expected to become part of the debate over using high-quality, but vacant, agricultural land to develop homes, including badly needed affordable housing, on an island with the state's highest housing prices.

Towne Development of Hawai'i Inc. and two partners recently petitioned the state Land Use Commission to re-classify the 210-acre site from agricultural to rural and urban use. The commission will schedule public hearings on the proposal, which also would need Maui County Council approval for community plan and zoning changes.

Towne envisions developing 240 townhomes, 90 single-family house lots, 214 half-acre house- lots and six 1-acre houselots for a total of 550 potential residences. A 14.6-acre park also is part of the plan.

Lucienne De Naie, chairwoman of the Sierra Club's Hawai'i Chapter, said Pu'unani would be one of the largest subdivisions proposed or under construction in the area, and would have a major impact on traffic and water use.

"Traffic is a big concern ... and we're a long way from knowing how much water we have," she said. "It seems like we're planning by wishful thinking."

But De Naie also said she hears a constant clamor from residents wanting work force and affordable housing. "Every day I hear the same thing," she said. "We're at a crossroads, and we need to take care of the people who live here first."

Maui home prices in the recent real-estate boom have routinely set statewide records, and in June, median sale prices were $758,000 for single-family homes and $675,000 for condominiums.

Pu'unani would include a mix of market-priced and below-market homes, but no rough price estimates are being made because the project is in such an early conceptual stage, said Mike Munekiyo, a planning consultant with Munekiyo & Hiraga Inc. working with Towne.

Under county guidelines, 30 percent of the project, or 165 units, would be sold at prices affordable to buyers earning no more than 120 percent of Maui's median income, or $78,840 for a family of four. The county and developer, however, could negotiate a different affordable housing agreement.

Munekiyo said Towne is preparing an environmental impact statement that will include a traffic study. The environmental review also would address water supply, which is expected from a new well being developed in Waikapu that draws from the 'Iao aquifer where there has been concern of overpumping.

"Water is an issue," Munekiyo said, adding that the developer will assess possible alternate water sources.

Converting high-quality farmland for housing is expected to be of lesser concern because of the site's proximity to residential areas.

The project site had been used by Wailuku Agribusiness Co. to grow sugar cane until 1988, and thereafter was leased to Maui Land & Pineapple Co. for pineapple cultivation until 2003, according to Towne's filing.

Today the property is vacant and bordered on only one side by agriculture land. The residential subdivisions Kehalani, Wailuku Heights II and Waiolani Mauka face other sides of the property.

"The conversion of agricultural lands to rural and urban uses is prudent and reasonable given the property's location," Towne said in its land-use filing.

Towne added that large-scale farming is no longer appropriate or economically viable on the site given its location, and that the loss of a small portion of Maui's agriculture land is outweighed by benefits to housing supply and job creation that the project would bring.

Small-scale farming, Towne said, would still be permitted by owners of the proposed rural lots. "We don't want to discourage (farming) if the owners want to pursue that," Munekiyo said.

The developer said in its land-use petition that it anticipates starting the project in 2009 if it can obtain approvals. An estimated timetable for completing the subdivision has not been made.

Partnering with Towne are Endurance Investors LLC, a company involving Steve Goodfellow of Maui construction firm Goodfellow Bros., and Association of II Wai Hui, a partnership led by Lloyd Sodetani of Maui Realty Co. Inc.

According to property records, Sodetani and Endurance Investors bought a 60-acre piece of the site in 2002 for about $2.3 million. Towne has an option to buy the roughly 150-acre balance from owner Wailuku Kuikahi LLC, which bought the property in 2004 for $4.5 million.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.