SB 1235: RELATING TO HOUSING.

A BILL FOR AN ACT

RELATING TO HOUSING.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that it is becoming increasingly difficult to recruit and retain state employees.  Having affordable rental and homeownership opportunities for state employees will reduce the resignation and outmigration of state employees and fill critical labor needs throughout state government.

     The legislature further finds that with Honolulu's construction of an elevated rail transit system, the State has an opportunity to enhance Oahu's urban environment and increase the quality of life for residents by increasing the affordable housing inventory and eliminating the need for personal automobiles, among other public benefits.  As the largest landowner of transit-oriented development sites along the transit line in Honolulu, as well as being the landowner of other transit-oriented development sites in each of the other counties, the State and its various departments and attached agencies must be proactive in establishing a unified vision and approach toward redevelopment of its transit-oriented development sites statewide to maximize the benefits of state lands available for redevelopment.

     The purpose of this Act is to establish within the Hawaii housing finance and development corporation:

     (1)  An affordable housing program to facilitate the creation of low-cost rental, leasehold residential, and for-sale units to government employees on state‑owned land; and

     (2)  A government employee housing revolving fund to provide interim and permanent financing for the infrastructure, pre-development, development, and construction costs of projects developed under the affordable housing program.

     SECTION 2.  Chapter 201H, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART     .  GOVERNMENT EMPLOYEE HOUSING

A.  General Provisions

     §201H-    Definitions.  As used in this part:

     "Mixed-use project" means a mixed-use development as defined in section 201H-12(a).

     "Mixed-use transit-oriented development project" means a mixed-use project on a transit-oriented development site.

     "Owner-occupied residential use" means any use currently permitted in existing residential zones consistent with owner occupancy.  "Owner-occupied residential use" does not include renting or subleasing by the owner of a residential condominium unit to any tenant or sublessee.

     "Project" means a specific work or improvement, including real and personal properties, or any interest therein, acquired, owned, constructed, reconstructed, rehabilitated, or improved by the corporation, including a commercial project, redevelopment project, residential project, or mixed-use project.

     "Transit-oriented development site" means non-ceded state‑owned lands within a one-mile radius of a planned or existing station connected to a locally preferred alternative for a mass transit project.

     §201H-    Annual reports.  The corporation shall submit an annual report to the legislature no later than twenty days prior to the convening of each regular session describing the projects funded, a description of proposals submitted under this part and action taken on the proposals, and any barriers to developing housing units under this part.  The annual report shall include the feasibility of expanding the program and the demand for rental and leasehold projects developed under this part.

     §201H-    Additional powers.  The powers conferred upon the corporation by this part shall be in addition and supplemental to the powers conferred by any other law, and nothing in this part shall be construed as limiting any powers, rights, privileges, or immunities so conferred.

     §201H-    Rules.  The corporation may adopt rules pursuant to chapter 91 as may be necessary to carry out the purposes of this part.

B.  Government Employee Housing Revolving Fund Program

     §201H-    Government employee housing revolving fund.  (a)  There is created a government employee housing revolving fund.  The funds appropriated for the purpose of the government employee housing revolving fund and all moneys received or collected by the corporation for the purpose of the revolving fund shall be deposited into the revolving fund.  The proceeds in the revolving fund shall be used for the necessary expenses in administering government employee housing development programs and infrastructure programs on state lands and for carrying out the purposes of government employee housing development and infrastructure programs, including but not limited to the expansion of community facilities and infrastructure constructed in conjunction with government employee housing and mixed-use transit-oriented development projects on state lands; interim and permanent primary or secondary financing and supplementing building costs; and federal guarantees required for operational losses, and all things required by any federal agency in the construction and receipt of federal funds or low‑income housing tax credits for state employee housing projects.

     (b)  The following may be deposited into the fund:

     (1)  Appropriations made by the legislature; and

     (2)  Private contributions, repayment of loans, interest, other returns, and moneys from other sources.

     (c)  The fund shall be used to provide loans or grants for the development, pre-development, construction, acquisition, preservation, and substantial rehabilitation of rental housing units, residential leasehold units, and for-sale units developed under the government employee housing program pursuant to subpart C.  Permitted uses of the fund may include but are not limited to planning, design, land acquisition, costs of options, agreements of sale, downpayments, equity financing, or other housing development services or activities as provided in rules adopted by the corporation pursuant to chapter 91.  The rules may provide for a means of recapturing loans or grants made from the fund if a rental housing project or a unit developed under the government employee housing program financed under the fund is refinanced or sold at a later date.  The rules may also provide that moneys from the fund shall be leveraged with other financial resources to the extent possible.

     (d)  Moneys available in the fund shall be used for the purpose of providing, in whole or in part, loans or grants for government employee housing projects, rental housing projects, and rental units in mixed‑use projects for tenants in the following order of priority:

     (1)  Newly hired permanent full-time state employees;

     (2)  Other permanent full-time state employees;

     (3)  Permanent full-time county employees;

     (4)  Permanent part-time state and county employees;

     (5)  Temporary state and county employees;

     (6)  Retired state and county employees; and

     (7)  The general public.

     (e)  Should a state or county employee occupying a unit leave employment by the State or a county, the tenant may continue to occupy the unit for up to twelve months.

     (f)  The corporation may provide loans and grants under this section; provided that the corporation shall establish loan-to-value ratios to protect the fund from inordinate risk and that under no circumstances shall the rules permit the loan‑to-value ratio to exceed one hundred per cent; provided further that the underwriting guidelines shall include a debt‑coverage ratio of not less than 1.0 to 1.

     §201H-    Eligible applicants for funds.  Eligible applicants for funds shall include nonprofit and for-profit organizations, limited liability companies, partnerships, and government agencies that are qualified in accordance with rules adopted by the corporation pursuant to chapter 91.

     §201H-    Eligible projects.  (a)  Activities eligible for assistance from the fund shall include but not be limited to:

     (1)  New construction, rehabilitation, or preservation of low-income rental housing units that meet the criteria for eligibility described in subsection (c);

     (2)  The leveraging of moneys with the use of fund assets;

     (3)  Pre-development activity grants or loans to nonprofit organizations; and

     (4)  For-sale projects.

     (b)  Preference shall be given to projects producing units in at least one of the following categories:

     (1)  Multifamily units;

     (2)  Attached single-family units;

     (3)  Apartments;

     (4)  Townhouses;

     (5)  Housing units above commercial or industrial space; and

     (6)  United States Department of Housing and Urban Development mixed-finance development of public housing units.

     (c)  The corporation shall establish an application process for fund allocation that gives preference to projects meeting the following criteria that are listed in descending order of priority:

     (1)  Serve the original target group;

     (2)  Are committed to serving the target group over a longer period of time;

     (3)  Increase the integration of income levels of the immediate community area;

     (4)  Meet the geographic needs of the target group of the proposed government employee housing project, such as proximity to employment centers and services; and

     (5)  Have favorable past performance in developing, owning, managing, or maintaining affordable rental and rent‑to-own housing.

     (d)  The corporation may include other criteria as it deems necessary to carry out the purposes of this subpart.

C.  Government Employee Housing Program

     §201H-    Government employee housing program.  (a)  There is established the government employee housing program for the purpose of providing low-cost, leasehold residential condominium units for rent and subsequent sale to government employees, including for-sale units to government employees, on state‑owned lands within a transit-oriented development site.  Under the program, dwelling units may be rented to program participants, and the corporation shall credit a portion of the rent received toward the purchase of the unit.

     (b)  For rent-to-own units, the sales price shall be established at the beginning of the rental term and shall remain fixed for the first ten years after the rental agreement is executed.  During this period, the participant shall have the option of purchasing the unit at the designated sales price.  If the participant does not elect to purchase the unit within the ten-year period, the participant shall forfeit the right to continue living in the unit and the unit shall be made available to another purchaser or renter.

     (c)  The corporation shall have the right to reestablish the sales price upon expiration of the option period or upon resale of the unit.

     §201H-    Leasehold and for-sale condominiums on state lands.  (a)  The corporation may sell leasehold units in condominiums organized pursuant to chapter 514B and developed under this part on state land to a qualified resident as defined in section 201H‑32.

     (b)  The term of the lease may be for ninety-nine years, and the corporation may extend or modify the fixed rental period of the lease or extend the term of the lease.

     (c)  Any for-sale projects developed under this part shall be eligible for the government employee housing program and funding from the government employee housing revolving fund established pursuant to subpart B of this part.

     §201H-    Rules; guidelines.  (a)  Government employee residential condominium units within transit-oriented development sites shall not be advertised for rent, rented, or used for any purpose other than owner-occupied residential use.  The corporation, by rule, shall establish penalties for violations of this subsection up to and including forced sale of a residential condominium unit within a transit-oriented development site.

     (b)  The design and development contracts for residential condominium units within a transit-oriented development site shall be subject to chapter 103D.

     (c)  Development shall be revenue-neutral to the greatest extent possible.

     (d)  Transit-oriented development sites shall maximize walkability.

     §201H-    Sale of the leasehold interest of residential condominium units; rules; guidelines.  (a)  The corporation shall adopt rules pursuant to chapter 91 for the sale of the leasehold interest of residential condominium units under its control within transit-oriented development sites; provided that each lease shall be for a term of ninety‑nine years.  The rules shall include the following requirements for an eligible buyer or owner of a residential condominium unit within a transit‑oriented development site:

     (1)  The person shall be a qualified resident of the State, as defined in section 201H-32;

     (2)  The person shall not use a government employee residential condominium unit within a transit-oriented development site for any purpose other than owner‑occupied residential use; and

     (3)  The person, the person's spouse, or any other person intending to live with the eligible buyer or owner, shall not own any other real property, including any residential or non-residential property, beneficial ownership of trusts, and co-ownership or fractional ownership, while owning a residential condominium unit within a transit-oriented development site; provided that an eligible buyer may own real property up to six months after closing on the purchase of a residential condominium unit within a transit-oriented development site; provided further that an owner of a residential condominium unit within a transit-oriented development site in the process of selling the residential condominium unit may own other real property up to six months before closing on the sale of the residential condominium unit to an eligible buyer.

The rules adopted pursuant to this subsection shall include strict enforcement of owner-occupancy, including a prohibition on renting or subleasing a residential condominium unit within a transit-oriented development site to any tenant or sublessee.  The corporation may also establish rules for a minimum number of days residents shall be physically present on the premises and a maximum number of days non-residents may have access to the premises.

     (b)  The median price of residential condominium units within a transit-oriented development site shall be priced at the minimum levels necessary to ensure that the development is revenue-neutral for the State.

     (c)  An owner of a residential condominium unit within a transit-oriented development site may sell the owner's residential condominium unit; provided that the corporation shall have the right of first refusal to purchase the residential condominium unit for certain period of time and for a buyback price to be determined by the corporation.  If the corporation does not exercise its right to purchase the residential condominium unit, the residential condominium unit may be sold by the owner to an eligible buyer.  Upon the death of the owner of a residential condominium unit within a transit‑oriented development site, the residential condominium unit may be transferred to the deceased's heir by devise or as any other real property under existing law; provided that the deceased's heir shall meet the requirements listed in subsection (a); provided further that if the deceased's heir does not meet the requirements to accept transfer of the residential condominium unit, the deceased's heir shall sell the residential condominium unit to an eligible buyer.

     (d)  The corporation may adopt rules pursuant to chapter 91 that authorize the executive director to waive the requirements set forth in subsection (a), where the inability of an owner to reside in the residential condominium unit is due to unforeseen circumstances, military transfer, serious illness, or other hardship circumstances as determined by the executive director.

     §201H-    Use of public lands; acquisition of state lands.  (a)  If state lands under the control and management of other public agencies are required by the corporation for the purposes of this part, the agency having the control and management of those required lands, upon request by the corporation and with the approval of the governor, may convey or lease those lands to the corporation upon terms and conditions as may be agreed to by the parties.

     (b)  Notwithstanding subsection (a), no public lands shall be conveyed or leased to the corporation pursuant to this section if the conveyance or lease would impair any covenant between the State or any county or any department or board thereof and the holders of bonds issued by the State or that county, department, or board.

     §201H-    Acquisition of real property from a county.  Notwithstanding the provision of any law or charter, any county, by resolution of its county council, without public auction, sealed bids, or public notice, may sell, lease, grant, or convey to the corporation any real property owned by the county that the corporation certifies to be necessary for the purposes of this part.  The sale, lease, grant, or conveyance shall be made with or without consideration and upon terms and conditions as may be agreed upon by the county and the corporation.  Certification shall be evidenced by a formal request from the corporation.  Before the sale, lease, grant, or conveyance may be made to the corporation, a public hearing shall be held by the county council to consider the same.  Notice of the hearing shall be published at least six days before the date set for the hearing in the publication and in the manner as may be designated by the county council.

     §201H-    Condemnation of real property.  The corporation, upon making a finding that it is necessary to acquire any real property for its immediate or future use for the purposes of this part, may acquire the property, including property already devoted to a public use, by condemnation pursuant to chapter 101.  The property shall not thereafter be taken for any other public use without the consent of the corporation.  No award of compensation shall be increased by reason of any increase in the value of real property caused by the designation of the urban redevelopment site or plan adopted pursuant to a designation, or the actual or proposed acquisition, use, or disposition of any other real property by the corporation.

     §201H-    Construction contracts.  Construction contracts for residential condominium units within a transient-oriented development site shall be subject to chapter 103D.

     §201H-    Lease of projects.  Notwithstanding any law to the contrary, the corporation, without recourse to chapter 103D, may lease for a term not exceeding sixty-five years all or any portion of the real or personal property constituting a commercial project to any person, upon terms and conditions as may be approved by the corporation; provided that all revenues generated from the lease shall be used to support the purpose of this part.

     §201H-    Assistance by state and county agencies.  Any state or county agency, upon request of the corporation, may render services for the purposes of this part.

     §201H-    Lands no longer needed.  Lands acquired by the corporation from another government agency that are no longer needed by the corporation for the program shall be returned to the previous owner of those lands.  Lands acquired by the corporation from a private party that are owned by the corporation and designated for the program but are subsequently no longer needed for the program shall be retained by the corporation."

     SECTION 3.  Section 201H-211, Hawaii Revised Statutes, is amended to read as follows:

     "§201H-211  Expenditures of revolving funds under the corporation exempt from appropriation and allotment.  Except as to administrative expenditures, and except as otherwise provided by law, expenditures from the revolving funds administered by the corporation under subparts I and J of part III, relating to financing programs, subpart B of part    , relating to government employee housing, or section 201H‑80 or 201H-123 may be made by the corporation without appropriation or allotment by the legislature; provided that no expenditure shall be made from and no obligation shall be incurred against any revolving fund in excess of the amount standing to the credit of the fund or for any purpose for which the fund may not lawfully be expended.  Nothing in sections 37-31 to 37-41 shall require the proceeds of the revolving funds identified in subparts I and J of part III, subpart B of part    , or section 201H-80 or 201H-123 to be reappropriated annually."

     SECTION 4.  Section 302A-1603, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  The following shall be exempt from this section:

     (1)  Any form of housing permanently excluding school-aged children, with the necessary covenants or declarations of restrictions recorded on the property;

     (2)  Any form of housing that is or will be paying the transient accommodations tax under chapter 237D;

     (3)  All nonresidential development;

     (4)  Any development with an executed education contribution agreement or other like document with the agency for the contribution of school sites or payment of fees for school land or school construction; [and

 [](5)[]] Any form of development by the Hawaii community development authority pursuant to part XII of chapter 206E[.]; and

     (6)  Any form of development by the Hawaii housing finance and development corporation pursuant to part      of chapter 201H."

     SECTION 5.  There is appropriated out of the dwelling unit revolving fund the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the Hawaii housing finance and development corporation to:

     (1)  Adopt rules;

     (2)  Engage the community; and

     (3)  Conduct site and pre-development planning for at least one government employee housing project in each county.

     The sums appropriated shall be expended by the Hawaii housing finance and development corporation for the purposes of this Act.

     SECTION 6.  There is appropriated out of the dwelling unit revolving fund the sum of $450,000 or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the establishment of two full-time equivalent (2.0 FTE) positions within the Hawaii housing finance and development corporation.

     The sums appropriated shall be expended by the Hawaii housing finance and development corporation for the purposes of this Act.

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect on July 1, 2025.

Report Title:

HHFDC; Government Employee Housing; Government Employee Housing Revolving Fund; Affordable Rental Housing; Leasehold; Rent‑to‑Own; For-Sale Units; Appropriations

Description:

Establishes within the Hawaii Housing Finance and Development Corporation the Government Employee Housing Program.  Establishes the Government Employee Housing Revolving Fund.  Clarifies eligibility for the Government Housing Revolving Fund and Government Employee Housing Program.  Appropriates funds.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to housing.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that it is becoming increasingly difficult to recruit and retain state employees.  Having affordable rental and homeownership opportunities for state employees will reduce the resignation and outmigration of state employees and fill critical labor needs throughout state government.

     The legislature further finds that with Honolulu's construction of an elevated rail transit system, the State has an opportunity to enhance Oahu's urban environment and increase the quality of life for residents by increasing the affordable housing inventory and eliminating the need for personal automobiles, among other public benefits.  As the largest landowner of transit-oriented development sites along the transit line in Honolulu, as well as being the landowner of other transit-oriented development sites in each of the other counties, the State and its various departments and attached agencies must be proactive in establishing a unified vision and approach toward redevelopment of its transit-oriented development sites statewide to maximize the benefits of state lands available for redevelopment.

     The purpose of this Act is to establish within the Hawaii housing finance and development corporation:

     (1)  An affordable rental housing program and an affordable ninety-nine year leasehold rent-to-own program to facilitate the creation of low-cost rental and leasehold residential condominium units for rent and sale to government employees on state-owned land; and

     (2)  A government employee housing revolving fund to provide interim and permanent financing for the infrastructure, pre-development, development, and construction costs of projects developed under the affordable rental housing and affordable ninety-nine year leasehold rent-to-own programs.

     SECTION 2.  Chapter 201H, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART    .  GOVERNMENT EMPLOYEE HOUSING

A.  General Provisions

     §201H-     Definitions.  As used in this part, unless the context otherwise requires:

     "Mixed-use project" means a mixed-use development as defined in section 201H-12(a).

     "Mixed-use transit-oriented development project" means a mixed-use project on a transit-oriented development site.

     "Owner-occupied residential use" means any use currently permitted in existing residential zones consistent with owner occupancy.  "Owner-occupied residential use" does not include renting or subleasing by the owner of a residential condominium unit to any tenant or sublessee.

     "Project" means a specific work or improvement, including real and personal properties, or any interest therein, acquired, owned, constructed, reconstructed, rehabilitated, or improved by the corporation, including a commercial project, redevelopment project, residential project, or mixed-use project.

     "Transit-oriented development site" means non-ceded state-owned lands within a one-mile radius of a planned or existing station connected to a locally preferred alternative for a mass transit project.

     §201H-     Annual reports.  The corporation shall submit an annual report to the legislature no later than twenty days prior to the convening of each regular session describing the projects funded, a description of proposals submitted under this part and action taken on the proposals, and any barriers to developing housing units under this part.  The annual report shall include the feasibility of expanding the program and the demand for rental and leasehold projects developed under this part.

     §201H-     Additional powers.  The powers conferred upon the corporation by this part shall be in addition and supplemental to the powers conferred by any other law, and nothing in this part shall be construed as limiting any powers, rights, privileges, or immunities so conferred.

     §201H-     Rules.  The corporation may adopt rules pursuant to chapter 91 as may be necessary to carry out the purposes of this part.

B.  Government Employee Housing Revolving Fund Program

     §201H-     Government employee housing revolving fund.  (a)  There is created a government employee housing revolving fund.  The funds appropriated for the purpose of the government employee housing revolving fund and all moneys received or collected by the corporation for the purpose of the revolving fund shall be deposited into the revolving fund.  The proceeds in the revolving fund shall be used for the necessary expenses in administering government employee housing development programs and infrastructure programs on state lands and for carrying out the purposes of government employee housing development and infrastructure programs, including but not limited to the expansion of community facilities and infrastructure constructed in conjunction with government employee housing and mixed-use transit-oriented development projects on state lands; interim and permanent primary or secondary financing and supplementing building costs; and federal guarantees required for operational losses, and all things required by any federal agency in the construction and receipt of federal funds or low‑income housing tax credits for state employee housing projects.

     (b)  The following may be deposited into the fund:

     (1)  Appropriations made by the legislature; and

     (2)  Private contributions, repayment of loans, interest, other returns, and moneys from other sources.

     (c)  The fund shall be used to provide loans or grants for the development, pre-development, construction, acquisition, preservation, and substantial rehabilitation of rental housing units and units developed under the government employee ninety-nine year leasehold rent-to-own program pursuant to subpart C.  Permitted uses of the fund may include but are not limited to planning, design, land acquisition, costs of options, agreements of sale, downpayments, equity financing, or other housing development services or activities as provided in rules adopted by the corporation pursuant to chapter 91.  The rules may provide for a means of recapturing loans or grants made from the fund if a rental housing project or a unit developed under the government employee ninety-nine year leasehold rent-to-own program financed under the fund is refinanced or sold at a later date.  The rules may also provide that moneys from the fund shall be leveraged with other financial resources to the extent possible.

     (d)  Moneys available in the fund shall be used for the purpose of providing, in whole or in part, loans or grants for government employee ninety-nine year leasehold rent-to-own projects and rental housing projects and rental units in mixed-use projects for tenants in the following order of priority:

     (1)  Newly hired permanent full-time state employees;

     (2)  Other permanent full-time state employees;

     (3)  Permanent full-time county employees;

     (4)  Permanent part-time state and county employees;

     (5)  Temporary state and county employees;

     (6)  Retired state and county employees; and

     (7)  The general public.

All available units shall be for persons and families with incomes at or below one hundred forty per cent of the median family income.  For the purposes of this subpart, the applicable median family income shall be the median family income for the county or standard metropolitan statistical area in which the project is located as determined by the United States Department of Housing and Urban Development, as adjusted from time to time.

     (e)  Should a state or county employee occupying a rental unit leave employment by the State or a county, the tenant may continue to occupy the unit for up to twelve months.

     (f)  The corporation may provide loans and grants under this section; provided that the corporation shall establish loan-to-value ratios to protect the fund from inordinate risk and that under no circumstances shall the rules permit the loan-to-value ratio to exceed one hundred per cent; provided further that the underwriting guidelines include a debt-coverage ratio of not less than 1.0 to 1.

     §201H-     Eligible applicants for funds.  Eligible applicants for funds shall include nonprofit and for-profit organizations, limited liability companies, partnerships, and government agencies that are qualified in accordance with rules adopted by the corporation pursuant to chapter 91.

     §201H-     Eligible projects.  (a)  Activities eligible for assistance from the fund shall include but not be limited to:

     (1)  New construction, rehabilitation, or preservation of low-income rental housing units that meet the criteria for eligibility described in subsection (c);

     (2)  The leveraging of moneys with the use of fund assets; and

     (3)  Pre-development activity grants or loans to nonprofit organizations.

     (b)  Preference shall be given to projects producing units in at least one of the following categories:

     (1)  Multifamily units;

     (2)  Attached single-family units;

     (3)  Apartments;

     (4)  Townhouses; or

     (5)  Housing units above commercial or industrial space; and

     (6)  United States Department of Housing and Urban Development mixed-finance development of public housing units.

     (c)  The corporation shall establish an application process for fund allocation that gives preference to projects meeting the following criteria that are listed in descending order of priority:

     (1)  Serve the original target group;

     (2)  Are committed to serving the target group over a longer period of time;

     (3)  Increase the integration of income levels of the immediate community area;

     (4)  Meet the geographic needs of the target group of the proposed government employee housing project, such as proximity to employment centers and services; and

     (5)  Have favorable past performance in developing, owning, managing, or maintaining affordable rental and rent-to-own housing.

     (d)  The corporation may include other criteria as it deems necessary to carry out the purposes of this subpart.

C.  Government Employee Ninety-Nine Year Leasehold Rent-to-Own Program

     §201H-     Government employee ninety-nine year leasehold rent-to-own program.  (a)  There is established the government employee ninety-nine year leasehold rent-to-own program for the purpose of providing low-cost, leasehold residential condominium units for rent and subsequent sale to government employees on state‑owned lands within a transit-oriented development site.  Under the program, dwelling units that are for sale may be rented to program participants, and the corporation shall credit a portion of the rent received toward the purchase of the unit.

     (b)  The sales price shall be established at the beginning of the rental term and shall remain fixed for the first ten years after the rental agreement is executed.  During this period, the participant shall have the option of purchasing the unit at the designated sales price.  If the participant does not elect to purchase the unit within the ten-year period, the participant shall forfeit the right to continue living in the unit and the unit shall be made available to another purchaser or renter.

     (c)  The corporation shall have the right to reestablish the sales price upon expiration of the option period or upon resale of the unit.

     §201H-     Leasehold condominiums on state lands.  (a)  The corporation may sell leasehold units in condominiums organized pursuant to chapter 514B and developed under this part on state land to a qualified resident as defined in section 201H‑32.

     (b)  The term of the lease may be for ninety-nine years, and the corporation may extend or modify the fixed rental period of the lease or extend the term of the lease.

     §201H-     Rules; guidelines.  (a)  Government employee residential condominium units within transit-oriented development sites shall not be advertised for rent, rented, or used for any purpose other than owner-occupied residential use.  The corporation, by rule, shall establish penalties for violations of this subsection up to and including forced sale of a residential condominium unit within a transit-oriented development site.

     (b)  The design and development contracts for residential condominium units within a transit-oriented development site shall be subject to chapter 103D.

     (c)  Development shall be revenue-neutral to the greatest extent possible.

     (d)  Transit-oriented development sites shall maximize walkability.

     §201H-     Sale of the leasehold interest of residential condominium units; rules; guidelines.  (a)  The corporation shall adopt rules pursuant to chapter 91 for the sale of the leasehold interest of residential condominium units under its control within transit-oriented development sites; provided that each lease shall be for a term of ninety‑nine years.  The rules shall include the following requirements for an eligible buyer or owner of a residential condominium unit within a transit-oriented development site:

     (1)  The person shall be a qualified resident of the State, as defined in section 201H-32;

     (2)  The person shall not use a government employee residential condominium unit within a transit-oriented development site for any purpose other than owner-occupied residential use; and

     (3)  The person, the person's spouse, or any other person intending to live with the eligible buyer or owner, shall not own any other real property, including any residential or non-residential property, beneficial ownership of trusts, and co-ownership or fractional ownership, while owning a residential condominium unit within a transit-oriented development site; provided that an eligible buyer may own real property up to six months after closing on the purchase of a residential condominium unit within a transit-oriented development site; provided further that an owner of a residential condominium unit within a transit-oriented development site in the process of selling the residential condominium unit may own other real property up to six months prior to closing on the sale of the residential condominium unit to an eligible buyer;

provided further that the rules adopted pursuant to this subsection may require at least fifty per cent of the residential condominium units be sold to an individual or household with an income of up to one hundred forty per cent of the area median income.  The rules shall include strict enforcement of owner-occupancy, including a prohibition on renting or subleasing a residential condominium unit within a transit-oriented development site to any tenant or sublessee.  The corporation may also establish rules for a minimum number of days residents shall be physically present on the premises and a maximum number of days non-residents may have access to the premises.

     (b)  The median price of residential condominium units within a transit-oriented development site shall be priced at the minimum levels necessary to ensure that the development is revenue-neutral for the State.

     (c)  An owner of a residential condominium unit within a transit-oriented development site may sell the owner's residential condominium unit; provided that the corporation shall have the right of first refusal to purchase the residential condominium unit for certain period of time and for a buyback price to be determined by the corporation.  If the corporation does not exercise its right to purchase the residential condominium unit, the residential condominium unit may be sold by the owner to an eligible buyer.  Upon the death of the owner of a residential condominium unit within a transit-oriented development site, the residential condominium unit may be transferred to the deceased's heir by devise or as any other real property under existing law; provided that the deceased's heir shall meet the requirements listed in subsection (a); provided further that if the deceased's heir does not meet requirements to accept transfer of the residential condominium unit, the deceased's heir shall sell the residential condominium unit to an eligible buyer.

     (e)  The corporation may adopt rules pursuant to chapter 91 that authorize the executive director to waive the requirements set forth in subsection (a), where the inability of an owner to reside in the residential condominium unit is due to unforeseen circumstances, military transfer, serious illness, or other hardship circumstances as determined by the executive director.

     §201H-     Use of public lands; acquisition of state lands.  (a)  If state lands under the control and management of other public agencies are required by the corporation for the purposes of this part, the agency having the control and management of those required lands, upon request by the corporation and with the approval of the governor, may convey or lease those lands to the corporation upon terms and conditions as may be agreed to by the parties.

     (b)  Notwithstanding subsection (a), no public lands shall be conveyed or leased to the corporation pursuant to this section if the conveyance or lease would impair any covenant between the State or any county or any department or board thereof and the holders of bonds issued by the State or that county, department, or board.

     §201H-     Acquisition of real property from a county.  Notwithstanding the provision of any law or charter, any county, by resolution of its county council, without public auction, sealed bids, or public notice, may sell, lease, grant, or convey to the authority any real property owned by the county that the corporation certifies to be necessary for the purposes of this part.  The sale, lease, grant, or conveyance shall be made with or without consideration and upon terms and conditions as may be agreed upon by the county and the corporation.  Certification shall be evidenced by a formal request from the corporation.  Before the sale, lease, grant, or conveyance may be made to the corporation, a public hearing shall be held by the county council to consider the same.  Notice of the hearing shall be published at least six days before the date set for the hearing in the publication and in the manner as may be designated by the county council.

     §201H-     Condemnation of real property.  The corporation, upon making a finding that it is necessary to acquire any real property for its immediate or future use for the purposes of this part, may acquire the property, including property already devoted to a public use, by condemnation pursuant to chapter 101.  The property shall not thereafter be taken for any other public use without the consent of the corporation.  No award of compensation shall be increased by reason of any increase in the value of real property caused by the designation of the urban redevelopment site or plan adopted pursuant to a designation, or the actual or proposed acquisition, use, or disposition of any other real property by the corporation.

     §201H-     Construction contracts.  Construction contracts for residential condominium units within a transient-oriented development site shall be subject to chapter 103D.

     §201H-     Lease of projects.  Notwithstanding any law to the contrary, the corporation, without recourse to chapter 103D, may lease for a term not exceeding sixty-five years all or any portion of the real or personal property constituting a commercial project to any person, upon terms and conditions as may be approved by the corporation; provided that all revenues generated from the lease shall be used to support the purpose of this part.

     §201H-     Assistance by state and county agencies.  Any state or county agency, upon request of the corporation, may render services for the purposes of this part.

     §201H-     Lands no longer needed.  Lands acquired by the corporation from another government agency that are no longer needed by the corporation for the program shall be returned to the previous owner of those lands.  Lands acquired by the corporation from a private party that are owned by the corporation and designated for the program but are subsequently no longer needed for the program shall be retained by the corporation."

     SECTION 3.  Section 201H-211, Hawaii Revised Statutes, is amended to read as follows:

     "§201H-211  Expenditures of revolving funds under the corporation exempt from appropriation and allotment.  Except as to administrative expenditures, and except as otherwise provided by law, expenditures from the revolving funds administered by the corporation under subparts I and J of part III, relating to financing programs, subpart B of part    , relating to government employee housing, or section 201H‑80 or 201H-123 may be made by the corporation without appropriation or allotment by the legislature; provided that no expenditure shall be made from and no obligation shall be incurred against any revolving fund in excess of the amount standing to the credit of the fund or for any purpose for which the fund may not lawfully be expended.  Nothing in sections 37-31 to 37-41 shall require the proceeds of the revolving funds identified in subparts I and J of part III, subpart B of part    , or section 201H-80 or 201H-123 to be reappropriated annually."

     SECTION 4.  Section 302A-1603, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  The following shall be exempt from this section:

     (1)  Any form of housing permanently excluding school-aged children, with the necessary covenants or declarations of restrictions recorded on the property;

     (2)  Any form of housing that is or will be paying the transient accommodations tax under chapter 237D;

     (3)  All nonresidential development;

     (4)  Any development with an executed education contribution agreement or other like document with the agency for the contribution of school sites or payment of fees for school land or school construction; [and

   [](5)[]]  Any form of development by the Hawaii community development authority pursuant to part XII of chapter 206E[.]; and

     (6)  Any form of development by the Hawaii housing finance and development corporation pursuant to part     of chapter 201H."

     SECTION 5.  There is appropriated out of the dwelling unit revolving fund the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the Hawaii housing finance and development corporation to:

     (1)  Adopt rules;

     (2)  Engage the community; and

     (3)  Conduct site and pre-development planning for at least one government employee rental or ninety-nine year leasehold rent-to-own project in each county.

The sums appropriated shall be expended by the Hawaii housing finance and development corporation for the purposes of this Act.

     SECTION 6.  There is appropriated out of the dwelling unit revolving fund the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the establishment of two full-time equivalent (2.0 FTE) positions within the Hawaii housing finance and development corporation.

     The sums appropriated shall be expended by the Hawaii housing finance and development corporation for the purposes of this Act.

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect on July 1, 2025.

Report Title:

Government Employee Housing; Hawaii Housing Finance and Development Corporation; Affordable Rental Housing; Leasehold; Rent-to-own; Appropriation

Description:

Requires the Hawaii Housing Finance and Development Corporation to establish a Government Employee Housing Revolving Fund Program and Government Employee Ninety-Nine Year Leasehold Rent-to-Own Program.  Establishes the Government Employee Housing Revolving Fund.  Appropriates funds.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 563

Honolulu, Hawaii

RE:    S.B. No. 1235

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committees on Housing and Labor and Technology, to which was referred S.B. No. 1235 entitled:

"A BILL FOR AN ACT RELATING TO HOUSING,"

beg leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Require the Hawaii Housing Finance and Development Corporation (HHFDC) to establish a Government Employee Housing Revolving Fund Program and Government Employee Ninety-Nine Year Leasehold Rent-to-Own Program;

     (2)  Establish the Government Employee Housing Revolving Fund; and

     (3)  Appropriate funds.

     Your Committees received testimony in support of this measure from the Hawaii Housing Finance and Development Corporation; United Public Workers, AFSCME Local 646, AFL-CIO; Hawaii Government Employees Association, AFSCME Local 152, AFL-CIO; and one individual.

     Your Committees received testimony in opposition to this measure from one individual.

     Your Committees received comments on this measure from the Department of Budget and Finance.

     Your Committees find that homeownership ensures stability for residents who intend to live and work in the State.  However, factors such as the State's high cost of living have contributed to lower rates of homeownership among residents statewide.  While studies have shown that housing costs should not total more than thirty percent of an individual's or family's total income, the State's high cost of housing has remained prohibitive for many residents.  The establishment of a housing program that initially prioritizes government employees may stabilize the existing market, prevent greater relocation from the State, and incentivize the retaining and recruiting of State employees to address chronic vacancies.  Therefore, this measure establishes a creative approach to increase homeownership in the State.

     Your Committees note the concerns regarding the units produced under the Government Employee Housing Program being exclusive to government employees.  It is the Legislature's intent that this program be available to all residents, regardless of employment status as a state or county employee.  As proposed in this program, as more units are produced, more units will be available to the general public. 

     Your Committees additionally note the question raised by the United Public Workers regarding participants who choose not to purchase the unit they are offered under the Government Employee Housing Program.  According to HHFDC, the amount allocated for the unit would be kept by the owner, thereby providing an incentive for the renter to purchase the unit under the rent-to-own program.

     Your Committees further note that HHFDC has the statutory authority to provide loans out of the Rental Housing Revolving Fund (RHRF) for certain permitted uses relating to the development of rental housing.  However, while equity financing is a permitted use of funds from RHRF, equity financing, including equity investment, is not a loan.  Therefore, your Committees respectfully request that subsequent Committees consider inserting language to existing statutory provisions regarding RHRF to authorize HHFDC to utilize funds in RHRF for equity investments, in addition to providing loans for the development of rental housing units.

     Your Committees have amended this measure by:

     (1)  Deleting language that would have implemented income restrictions for participants of the Government Employee Housing Program to be at or below one hundred forty percent of the median family income;

     (2)  Expanding the Program by specifying that for-sale units shall be eligible for the Government Employee Housing Program and funding from the Government Employee Housing Revolving Fund;

     (3)  Inserting an appropriation amount of $450,000 out of the Dwelling Unit Revolving Fund for the establishment of two full-time equivalent (2.0 FTE) positions needed for HHFDC to administer the Government Employee Housing Program;

     (4)  Amending section 1 to reflect its amended purpose; and

     (5)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the records of votes of the members of your Committees on Housing and Labor and Technology that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 1235, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 1235, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Housing and Labor and Technology,