Housing for all: The role of ADUs in strengthening Hawaiʻi’s communities

Hawaiʻi has a housing supply problem. Rental or for-sale, affordable or market rate—we face a lack of inventory that affects residents across the board. This is not a new issue. Since the territorial era in Hawaiʻi, the shortage of housing has been an ongoing concern for both the legislature and the public. 

Last legislative session marked a significant step forward with the passage of Act 39, which allows for two accessory dwelling units (ADUs) by right on residentially zoned land—subject to regulatory and infrastructure considerations.

This legislation aligns with successful trends across the nation aimed at dismantling exclusionary zoning laws that have historically restricted housing access to only those who can afford single-family homes. By permitting more infill housing in residential neighborhoods, Hawaiʻi has taken a step toward addressing its long-standing housing crisis. 

However, it is worth noting that systemic issues, such as the concentration of wealth among older generations, have compounded housing challenges for younger residents. Millennials, in particular, have faced barriers to traditional milestones of success, such as homeownership and family planning, due to rising costs and limited inventory. This wealth disparity has created a market where investment buyers often outcompete local residents, particularly younger buyers seeking their first homes, further diminishing the availability of homes for local residents. 

In 2023 the National Association of Relators reported that first-time buyers fell to 24 percent, down from historical average of 40 percent. In this context, ADUs can be a practical response to these changing demographic needs and economic realities in our complex housing landscape. For younger generations facing financial constraints and preferring smaller household sizes, ADUs provide an affordable entry point into established neighborhoods. These units can accommodate various needs, from multigenerational families to young professionals or renters seeking more affordable options, and can help reverse trends of community fragmentation, strengthening and fostering connections instead. 

A model ADU home constructed temporarily on the lawn of the Hawaiʻi State Capitol as part of a demonstration.

Instead of requesting geographical exemptions to get children into high opportunity public schools, families could afford to actually live in the community served by the desired school. Individuals who want to remain in the community they grew up in but can’t afford a million dollar home could do so. Allowing for ADUs offers kūpuna homeowners options to generate income or provide housing for family members so their children and grandchildren can remain in Hawaiʻi while contributing to Hawaiʻi’s housing stock. Additionally, ADUs can help address social isolation among kūpuna by creating opportunities for closer family connections or live-in caregivers. This arrangement not only enhances emotional well-being but also provides practical solutions for aging in place within supportive environments. 

This flexibility makes housing more accessible and responsive to the needs of Hawaiʻi’s residents. Additionally, ADUs can provide significant economic benefits by stimulating local industries such as construction, architecture, and home improvement. Each ADU project creates jobs and contributes to Hawaiʻi’s broader economy, demonstrating the far-reaching ripple effects of enabling this type of housing.

What Happens Next

While Act 39 opens the door to increasing housing supply, building ADUs is not a simple or inexpensive endeavor. Homeowners face significant costs associated with hiring architects, contractors, securing materials, and paying for labor. Even with the legal barriers reduced, the financial barriers remain significant. Not every homeowner who wants to construct two ADUs will have the resources to do so. 

Hawaiʻi also has a notoriously rigorous regulatory environment. Even with legislation like Act 39, there are many barriers from inception to actualization of an ADU project, including time-consuming permitting processes, high impact fees, securing a loan, and strict requirements for infrastructure upgrades. These challenges narrow the likelihood of project success for many homeowners. 

Evidence suggests that the most effective approach combines three elements: 

• Supportive regulatory legislation; 

• Accessible financing options; and 

• Structured voluntary deed restrictions.

To unlock the potential of Act 39, Hawaiʻi should establish financing programs for homeowners interested in developing ADUs on their property. This could take the form of favorable low-interest construction loans or outright grants. In exchange, these units could be deed-restricted to ensure they serve working residents of Hawaiʻi. 

A deed restriction is a legal provision recorded in the property’s deed that limits how the property can be used or who can occupy it. It is often used to ensure that housing remains affordable or accessible to specific groups, such as local residents or low-to-moderate income families, by placing conditions on the sale, rental, or occupancy of the property.

Voluntary deed restriction programs aimed at providing a secondary “local” housing market are becoming increasingly common across the U.S. For Hawaiʻi, adapting these programs could involve tailoring restrictions to prioritize long-term residents or those with local employment ties, ensuring that the benefits align with the state’s cultural and economic landscape. By incorporating Hawaiʻi’s unique needs these programs can support community preservation while addressing the housing shortage. 

Ski towns in Colorado, like Vail and Aspen, have employment-based restrictions on pre-existing units. These programs compensate homeowners upfront in exchange for a deed restriction that limits future occupancy to individuals working in the town. This applies to both rental and for-sale properties. 

After California’s legislature passed its ADU law, San Diego implemented an “affordable ADU bonus” program to incentivize construction of affordable units. This program allows homeowners to build two additional ADUs if one is rented at an affordable price. The program has dramatically increased ADU construction, reviving the “bungalow court” urbanism previously restricted by zoning laws. 

Similarly, Kauaʻi County’s Additional Rental Unit (ARU) program offers exemptions from permitting fees—up to $20,000—in exchange for an affordable restriction on ADUs.

By pairing Act 39 with accessible financing options and streamlining regulatory processes, Hawaiʻi can empower homeowners to contribute to the housing supply while ensuring these new units remain affordable and benefit local residents. A construction grant or loan attached to deed-restricted ADU units would only be the first step in making ADUs realistic for existing residents. To succeed in addressing Hawaiʻi’s affordable housing crisis, counties should consider streamlining permitting processes, having pre-approved plans for ADU design, providing exemptions from impact fees, and adopting more flexible standards around parking and setbacks.

Limited uptake by homeowners, high construction costs, and regulatory hurdles made it difficult to demonstrate the potential impact of ADUs. The reality is that we haven’t gone far enough in encouraging individual homeowners to take action. With a comprehensive approach that includes financial incentives, regulatory reform, and community empowerment to directly address our housing crisis, Hawaiʻi can turn its housing challenges into opportunities for growth and equity.