A mix of progress and missed opportunities: affordable housing efforts at the 2024 legislature
Lack of affordable housing has been a critical issue for Hawaiʻi residents for more than 50 years. The past decade has seen the problem grow significantly, with the gap between housing costs and wages and affordability widening every day. The devastation brought by the Lahaina wildfires made things even worse, destroying some 3,000 precious housing units, including 142 low-income affordable units at Front Street Apartments which Hawaiʻi Appleseed helped preserve as affordable through 2051.
The 2024 legislative session saw the introduction of close to 300 bills related to housing, reflecting the urgency and complexity of the issue. While significant progress was made with some key legislation, measures aimed at direct assistance for those most affected by the housing crisis were often sidelined.
Instead, the focus remained predominantly on supply-side solutions to the housing shortage. Senate Bill 3202 takes aim at exclusionary zoning rules by allowing two accessory dwelling units (ADUs) by-right on residential property, while House Bill 2090 allows for commercial properties and zones to be used for residential purposes. Both measures look to increase the overall number of housing units available in the hopes of bringing down costs by increasing supply. While these measures are important for long-term stability as the state works to meet future demand, they do nothing to address the immediate needs of renters facing housing insecurity today. Both bills were signed into law by Governor Green.
By contrast, demand-side policies look to stabilize the market today by increasing access to existing housing and keeping people stably-housed long-term. Based in part on Appleseed research into a successful pandemic-era rent-relief and mediation program, SB3332 would have extended the notice period for end-of-rental agreements, and would have required landlords to engage in mediation before filing in eviction court. HB1339, meanwhile, would have given tenants longer notice of a landlord’s intent to raise rent or not renew a leasing agreement.
Neither bill made it to the governor, but measures like these are critical to protecting local residents’ ability to access housing in today’s global market. Establishing a permanent rent relief fund should be a centerpiece of this area of housing policy. If we continue to overlook essential demand-side measures that would provide stability to Hawaiʻi residents, while only focusing on supply-side policies, we could very well end up with more housing units that are nevertheless still out of reach for the average resident. We know this because it’s been a fundamental problem with Hawaiʻi’s housing policy for decades. We must remember to implement policies that ensures the new units we build or restore that come onto the market are actually accessible and affordable.
Progress in the 2024 Session
SB3202 (Act 039) restricts counties from perpetuating exclusionary zoning by allowing up to two ADUs, by-right, on residential property (provided the necessary infrastructure is in place to support the units). Ultimate decision-making authority over projects is retained by the counties.
HB2090 (Act 037) allows for commercially-zoned properties to be used for residential purposes (again, infrastructure allowing).
HB1763 (enrolled to governor) closes a financing loophole within the state’s Hawaiʻi Housing Financing & Development Corporation (HHFDC). Currently, Rental Housing Revolving Fund (RHRF) loans are subject to an artificially low interest rate that is incredibly beneficial to the developer. These loans can be forgiven for almost any reason. This has created a financial drain of public money for projects that are successful and profitable. HB1763 would allow for loan forgiveness only if the corporation forecloses on a project, effectively removing language which previously allowed RHRF to function as a grant program instead of a loan program.
SB2133 (Act 034) allows HHFDC to issue bonds for housing project infrastructure and to finance the development of regional state infrastructure projects. Investment in infrastructure upgrades is long overdue for Hawaiʻi. Infrastructure is vital for housing construction, and its deficit is a major factor in slowing down project development statewide. It will take a multi-billion dollar investment over years to secure all the freshwater, wastewater, and road upgrades necessary to meet Hawaiʻi’s housing needs. Having the state take charge of financing and developing regional infrastructure projects takes the burden off of developers, and can create better opportunities to develop housing in areas closer to jobs.
SB2066 (Act 038) allows 201H exemptions to go to projects which commit 100 percent of the units exclusively for qualified residents for the entire life of the project. 201H exemptions are sought after by developers to make the development of housing quicker and less costly. Currently, 201H requires a 50%+1 affordable housing requirement with a price restriction period anywhere from 2 to 30 years, depending on the project. 201H has been good for development, but the affordability requirement typically creates smaller sized units that are only $200-$300K cheaper than market rate, and rarely exceed two bedrooms. This bill could give developers the opportunity to access 201H benefits without affordability requirements, as long as all units are sold to current residents for the lifetime of the building, though many questions about how this would play out remain.
Missed Opportunities in the 2024 Session
HB2364/SB3053 would have increased the conveyance tax on investment properties and would have dedicated a portion of the funds to regional infrastructure projects. This proposal would have increased the tax on home sales for properties which are sold at $2 million and above for non owner-occupied units, and at $4 million and above for owner-occupied units. The proposal would have also created a dedicated source of funding for the Dwelling Unit Revolving Fund to commit to regional infrastructure projects. The current practice for infrastructure upgrades is to have private entities do them piecemeal, which is inefficient and costly. This proposal would have encouraged the state to do regional infrastructure projects and work towards filling the more than $1 billion gap in necessary infrastructure for housing development.
HB2642/SB3332 would have extended the period of notice for ending a rental agreement, and would have required landlords to engage in mediation prior to initiating eviction proceedings. The proposal did not include rent relief. This is the third iteration of Act 57 (2021), a temporary, pandemic-era policy that made mediation mandatory between landlord and tenant before a formal eviction process. This process required both parties to come together in a less intense setting than court with the goal of coming to an agreement that avoids an eviction. Act 57 featured a rent relief fund that ensured landlords could be made whole, which our research shows dramatically improved the success of the program. Neither bill in 2024 included a rent relief fund attached to the mediation requirement, despite compelling testimony from multiple community partners explaining why it is so critical.
HB1339/SB1464 would have extended the notice period for a landlord to notify fixed-term tenants of their intent to raise rent or terminate a rental agreement. Extending this notice period would give renters a better ability to financially prepare for a rent increase, or to look for alternative living arrangements without undue cost to either party.
HB2007 attempted to introduce an ongoing movement across the U.S. that would allow for religious, educational, and medical institutions to build dwelling units on their lands, as long as those lands are within the urban land use districts (the movement is sometimes referred to as YIGBY, or Yes In God's Back Yard). This bill would have expanded the types of locations on which housing could be built across the state. Nonprofit institutions, particularly religious ones, often have excess land and sometimes have a desire to assist in creating housing opportunities for the community. Our antiquated zoning rules currently restrict their ability to do so.
SB1170 (Act 031) requires counties to issue affordable housing credits for affordable units that are constructed under HHFDC programs. While this bill was signed into law by Governor Green, we believe it was a missed opportunity nonetheless. The bill attempts to capitalize on the benefits of 201H without becoming entrapped in county gridlock, an idea well-worth consideration. However, the language of this bill creates problems. First, not all counties have a current affordable housing credit system. Second, there is ample evidence that the issuing of affordable housing credits does not facilitate the creation of affordable housing units, which was the main argument of this legislation.
Overall, the 2024 legislative session in Hawaiʻi highlighted both progress and missed opportunities in addressing the state’s worsening housing crisis. Key bills like SB3202 and HB2090 represent crucial steps forward toward increasing our housing supply, but the failure to advance demand-side solutions such as HB2364 and HB2642 creates a significant gap in what should be a holistic housing policy paradigm. As Hawaiʻi continues to grapple with the complex dynamics of housing affordability and availability, it is clear that a more balanced approach that incorporates both supply- and demand-side measures, is essential.
