Executive Summary

Housing affordability has been a growing concern for Hawaiʻi’s politicians since the 1970s. In a campaign speech, then-Lieutenant Governor Tom Gill warned that the legislation of that era would fail to ensure housing for Hawaiʻi’s working class, and that Hawaiʻi would only further become a “paradise” destination to those who can pay for it.

Today, as rents continue to rise, 78 percent of our extremely-low income residents—those earning less than 30 percent of the Area Median Income (AMI)—are either seniors or part of the workforce. That’s less than $27,510 as an individual or $39,300 for a family of four. Some 70 percent of these renters pay more than 30 percent of their income on rent. Additionally, recent research finds that median rent increases of $100 a month were associated with a 9 percent increase in homelessness. Low-Income Housing Tax Credit (LIHTC) projects are some of the only forms of rental housing that enact rent stabilization methods (rent increase limitations) based on AMI every year.

There is an urgent need for the government to make larger investments in funding affordable rental housing. Projected housing demand estimates that some 4,000–5,000 additional affordable rental units must be added to our housing supply each year for the next five years to meet residents’ needs. 

A review of projects approved by the Hawaiʻi Housing and Finance Development Corporation (HHFDC) over the last five years shows ongoing and growing demand for funds from the Rental Housing Revolving Fund (RHRF). In all five of those years, the RHRF ran up against the $38 million allocation cap from the conveyance tax. In 2022, HHFDC approved over $320 million of RHRF to 13 projects which will eventually produce 1,989 affordable units, dependent on permitting and other approval processes.

To meet this increasing demand, we also need to increase our investments into the Dwelling Unit Revolving Fund (DURF), which is used by the state to develop the infrastructure it needs—sewer, electrical, roadways—to meet our housing demand. 

DURF was established in 1970 by Act 105. Funds are meant to be used for “acquisition of real property; development and construction of residential, commercial and industrial properties; interim and permanent loans to developers; and all things necessary to carry out the purposes of the Housing Development Program.” DURF funds have largely been used for much needed infrastructure investments connected to individual housing developments. In addition, use of DURF funding requires units to be sold or rented at below market rates. 

In 2019, the American Society of Civil Engineers rated Hawaiʻi’s overall infrastructure a D+ in an infrastructure report card. The report noted that “the majority of Hawaiʻi’s infrastructure has been operating beyond its useful life, and some components of systems are over 100 years old. … due to lack of funding, it has been difficult to effectively maintain and improve the existing infrastructure systems.” These systems are a vital component of keeping housing production aligned with increasing demand. Without proper investment in infrastructure, Hawaiʻi will not be able to meet its housing needs across the state. 

Increasing conveyance tax rates, removing caps on the RHRF (and Land Conservation Fund, or LCF), and creating a dedicated DURF fund, can provide millions of dollars to addressing some of the most pressing barriers to providing affordable housing to residents today. Accordingly, Hawaiʻi should: 

• Increase the conveyance tax;

• Remove the caps on special funds; and

• Add an additional allocation for the Dwelling Unit Revolving Fund.