House Standing Committee on Housing

Good morning. I'd like to call to order our house housing committee hearing for Friday, February 13. We are on our 9am agenda, and it's 09:02AM right now. And before we dive into the, the agenda, just a couple of housekeeping notes. We'll be limiting testimony to two minutes per testifier.

Please, if you're on Zoom, keep yourself muted and your video off while waiting to testify. The Zoom chat function will allow you to chat with the technical staff only. And please avoid using any trademarked or copyrighted images, and please refrain from profanity or unsimilar behavior. Such behavior may be grounds removed from the hearing without the ability to rejoin. That's nothing on our agenda is super controversial, so I think hopefully we'll have a

for for housing committee terms, nothing is all that controversial. So so I think we should be good today. But but just urge members of the committee and the public to remain respectful. That said, first item on the agenda is, oh, we amended it. It should be 16 o four related to agricultural workforce housing.

Establishes an agricultural workforce housing group within the Department of Agriculture and Biosecurity to address the shortage and challenges of agricultural workforce housing in the state. Vice chair of the testimony.

Department of Agriculture and Biosecurity with comments.

Department of very welcome.

Cool. Yeah. Thanks.

Aloha, vice chair, vice chair, a member of the committee. Cedric Gates here on behalf of Deb. Deb stands on its written testimony offering comments and supporting the intent. Here for any questions. Thank

you. City and county of Honolulu, office of economic revitalization in support. Hawaii Farmers Union in support. Hawaii Farm Bureau in support. Housing Hawaii's Future in support.

Hey, chair vice chair. Rich Mazar testifying on behalf of Housing Hawaii's future. Sorry. I think our testimony was addressed to agricultural committee, but, we stand on the written testimony in support. We just add that, you know, we think, Lisa, an organization, the written testimony in support. We just add that, you know,

a charter organization dedicated housing advocacy should be added to the to the working group to just balance it out a little bit. Thank you.

Thank you. Maui Chamber of Commerce and support anyone online or in person wishing to testify on HB 16. Oh, four.

Not sure members any questions. I actually have a question for Department of Ag and Biosecurity. Hi. Thanks for being here. So in your testimony, you recommended that an early task of the task force, is to gather data and information and survey farm operators to assess the realistic demand for farm workers.

Are you asking for to amend the bill to clarify that that's an early task, or would that just be within the scope of the task force already and the bill is okay as is?

Yeah. Raul Yamamoto, Department of Agriculture and biosecurity. We just wanted to make sure that point of emphasis so that we don't get, you know, too much mission creep

thereafter. You know, I we looked at earlier bills introduced in prior sessions, and a lot of the testifiers imagined this measure, this bill, the same bill pretty much, solving other housing issues and the stream that kind of well as much as possible. Okay.

Thank you. Members further questions?

Seeing none. Next item on the agenda is HB 1713 relating to school impact these. This bill clarifies the application of exemptions for certain affordable housing projects, including exempting new residential developments of fewer than 100 dwelling units from schools impact your requirements.

Vice chair for the testimony.

Attorney General's Office with comments.

Good morning, Chair. Good morning, Vice chair Miyake, members of the committee. Randall Watt, Deputy Attorney General,[inaudible] department. As described further in our written testimony, department has comments regarding paragraph six of the amendment.

Amendment to paragraph six of HRS 302A- 1603B. Makes reference to low and moderate income households. The department notes that there is no definition of owed to moderate income households in pictures Chapter 302A. And so the department recommends that the definition be incorporated to the, Thank you.

Thank you. HHFDC in support.

[inaudible]

Thank you.

School Facilities Authority in support.

Thank you, committee. It's comes down to cost benefit. It's too much work for almost no money. We wanna remove barriers for housing, so we strongly support this building. Thank you.

Tax Foundation of Hawaii with comments.

Not present.

Not present. Grassroot Institute of Hawaii in support.

Richmond Lazar, individual in support.

Sorry. That should have been housing voice, we stand in our written testimony.

Thank you.

Anyone else, anyone online or in person wishing to testify in on HB 1713?

Seeing none, Chair.

Members, any questions? Rep. Grandinetti.

For school district?

Sure. This is mostly just for my own education and context, but can you explain how this bill would interact or build upon HB 422 from last year?

Right. So that bill improved and cleaned up the impact fee process. But due to drafting, it didn't clearly state that developments under a 100 are exempt in the exemption section. So this cleans it up. It clearly states any project less than a 100 units is exempt from the impact fee process.

Okay. Thank you.

I have a follow-up question.

Sure.

Yeah. And I appreciate that clarification. The intention of the bill last year was one of the intentions was to ensure that developments under a 100 weren't assessed the impact fee.

So I think I see this as cleaning up, but may have been a drafting error from last year. And I appreciate that. But so last year, you know, the introduced version of that bill would have repealed this contract fee entirely. If that's not a cleaner solution here, like, what it seems like now is we have a very messy and potentially confusing statute.

And if all of us are still having trouble determining, you know, like, what it means and when it gets applied, isn't it easier just to eliminate the school effect fee entirely?

Yes. We agree. We just feel it's a bridge too far, you know, so we're doing this in stages. Right? This will help immensely from an administrative standpoint

Okay.

In reducing the workload. The fee process, though, really has to be approved with something different. And given in light of recent US Supreme Court cases on administrative leave imposed impact fees, it clearly we need to breach that eventually. Yeah.

And, so just to clarify, though, you when you say a bridge too far, is that a bridge too far politically? I mean, are you supporting this because you think it's the most feasible route to passage or would you support a full repeal?

We support a full repeal like we did last session also. Right?

Okay. Appreciate that. Thank you.

Chair, question?

Yes, Rep. Kila.

So can you comment what federal pieces are you citing?

[inaudible] City of El Dorado. So what it did was it the City Of El Dorado had a similar kind of administrative fee reverted back to the traditional Nolan Dolan test for Nexus. So that actually applies to us spending the impact fees now. For example, what happens is if you collect fees for lever at Oahu, right? You cannot use that money for an elementary school and another part of Lira or what?

It has to be actual nexus to where the where the money was

exactly the school district.

From that exact neighborhood. So right, it hand ties you on how you can even spend the fees now.

So wait. With that court ruling, are you focusing on technically school impact fees that cannot be expended then?

No. So then there are another bill that allows us to spend these fees, we need approval from the ledge to increase the ceiling. We could use it for pre k because pre k has no geographic nexus. You're taking kids

Or you can apply area

or a high school.

Right? Because then enrollment is available to the entire district of that high school. So there's a way to spend it.

We have a bill to spend it finally. It requires approval from the ledge in terms of sealing of spending it. It's a very complicated process just to spend, and we wanna spend it this session.

So I believe this will address. So but I this is good content, so thank you.

Thank you, chair.

Yes.

And one more quick question. I'm not sure if it was in your test when you're not. But how much, how much again has been collected and remains unspent in the fund? In Approximately.

Yeah. In total, about $28,000,000, but it's in four districts. So each district, Kalee, Ala Moana, Leeward, Central Oahu, West Maui, Central Maui. So those are where the fees so it's split up all over the state.

Right? And has any money from this fund fund ever been spent?

Never.

Never. Not a not a dollar.

Yes. Our hope is to finally spend it this year.

Thank you.

I have a question.

Rep. Vice chair Miyake.

Thank you, SFA. Would we be able to use it for the new Central Maui school then?

No. Because it's a middle school, and it doesn't meet the nexus test of Nolan Dolan. Unfortunately, if it were a pre k for Central Maui, yes. If it were a high school for Central Maui, yes.

Okay. Thank you.

It's very prescriptive.

And before I get to Rep. and his question, just so I understand the Sheets versus El Dorado application. So the nexus, the money has to be tied to the impact of the development where it was collected.

The exact action. Right.

And then so the issue elementary versus high school is just that the geographic area or attendance at the elementary is smaller. Maybe it wasn't associated with the direct housing impact in the high school area and preschools.

Absolutely. Your district can to which elementary school you can go to. Another possible use is a charter school because the charter doesn't have that same language.

Yeah. Okay. Thank you. Representative Grandinetti.

Thank you. You said you're hoping to spend it this year. Is it on pre k or how?

So, actually, there's a separate bill. Sorry. I don't know exactly in it. It was introduced by, Representative Woodson that specifically gives authority for use in one area. In addition to the budget process, we've asked for expenditure ceiling limits for that money this session through the budget bill.

So there's two avenues to honest and that. Yeah.

Representative Muroaka, you have a question?

No.

Members, any further questions? Seeing none.

Thank you.

Thank you.

Next item agenda is HB 1722 relating to residential condominiums.

This bill clarifies that the ninety nine year leasehold program to require at least 60% of the residential condominium units within urban redevelopment sites to be set aside for owner occupied residential use for not less than ten years from the date of initial purchase of the unit, amends eligibility requirements, amends the term owner occupied use to include renting or subleasing, and allows the sale of up to 40% of residential condominium units to qualified residents if there are units available after being advised for sale for more than sixty days. Vice chair for the testimony. HCDA

HCDA in support.

Good morning, chair, vice chair, and members of the committee. Craig Nakamoto, executive director of the board. Before I start, chair, vice chair, you know, with the limited time I have, I was wondering what you think I should cover. Should I kind of give background of Act 97 because that led us to where we are?

Yeah. You know what? If actually, we could suspend our two minute testimony rule for you. If you could give us just because there's a lot going on here. Yeah.

So it would it would be appreciated if you could give us the overview of the legislation that was passed three years ago, which authorized this pilot project, and then the barriers you hit in the pilot project, and then what the intention of this bill is and how it will be of those barriers. So we'll totally suspend the two minute rule for you to clarify that because there's a lot going on.

Perfect. So I can do that. And I can also, I saw some testimony from AARP that I prepared to address at the same time if time permits.

Yeah, please do. Thank you.

So again, Craig Nakamoto, Executive Director of the Hawaii Community Development Authority. So just some background on this and how we got here. So Act 97 became law in 2023. This bill was championed by Senator Chang, and it was intended to require HCDA to develop one ninety nine year residential for sale leasehold condominium project. It was meant to be kind of a test project.

If this project, turned out to work, with the intent of HCDA to approach Senator Chang in the future to try to replicate this with other areas. The way we looked at this bill and this project is if work, it could potentially be another tool in the toolbox to address the housing shortage, which is top priority for this administration. When this bill was enacted, Act 97, it was very, very owner occupant centric. It was very strict on owner occupancy.

It required owner occupancy in perpetuity for a 100% of the units. And it had some other restrictions as well. We because of Act 97, we received one million, 500 dollars to do predevelopment work. So we procured a consultant, Kola Ila. I believe they have also submitted testimony in support, but we've worked with them for about a year or so to do some due diligence work. All throughout that time, I think we, like, the developer, were very bullish on, you know, whether that we could do this project at a site that was selected by the HCDA. That's the site at Kapiolani and Ward, the Jack In A Box, and then the old Gallaher Law Building where the Obama mural is. So we're very bullish about that. I think towards the end of 2025, market conditions sort of changed.

You know, interest rates were a little bit uncertain. I think construction costs had increased by about 25% over the last year. There was some other factors. There were there were, projects that were on set to go online in Kaka'ako, namely two projects off Cook Street. I think it's Stanford cars project plus Castle and Cook's project.

So we're kinda concerned about the competition and and how that would affect presales. And we wanted, at that point, the next step was to go out for presales. But because of all those factors, the macroeconomic factors and the restrictions in the original bill, we decided not to go to presales because, especially these conditions into the bill, it was thought to be too restrictive and it would affect sales of and the marketability of these.

And we didn't wanna go and presales, fail, and then try to come back out again. So we said, let's put this project on hold. We met with Senator Chang and discussed possible amendments to the program and we arrived at changes to the program to address both his desire that this be addressed owner occupants, but also address our concerns about the marketability and the attractiveness of this kind of product.

At the same time, still wanting to make this project work and make this kind of product work as a new tool. So we came up with the provisions for our bill, which is reflected here, and there's a Senate companion as well. But we came up with these to kind of remove some of these restrictions. We think these restrictions, if removed, will, help our sales.

And if the bill is passed, we're gonna be engaged with the developer and try to, move forward with the presales. Thank you. Does that help?

Yeah that helps. Okay. I think we we'll get to more in the questions, but that helps.

Okay. And do you want me to also address the AARP testimony?

Okay. Thank you.

No, I think we can address that in the questions.

Thank you, Craig, appreciate it.

AARP Hawaii with comments. Ko Laila LLC in support. William Yuan.

Good morning. My name is William Yuan. I'm testifying in support of HB 1722, Act 97 of the 2023 session established The ninety nine year leasehold program to stimulate development of affordable leasehold residential condominium projects for away residents on non seated state owned land near public transit stations HCDA has designated a site in Kakaako for a demonstration project and has engaged an experienced affordable housing developer to plan and develop a high rise project on the site.

HCDA believes these proposed amendments to HRS Chapter 206E are necessary to keep a demonstration project such as this affordable and attractive for Hawaii residents while assuring its financial feasibility. As an attorney working with HCA's development partner, I support these amendments to hopefully make this project a reality. Thank you.

Thank you.

Henry Chang, Ko Laila LLC in support.

Excuse me. I'm gonna be reading approximately what Bill read. But, I'm Henry Chang, product manager at Ko Laila and testifying in support of HB 1722, Act 97 of the 2023 session established 99 year leasehold program to simulate development of affordable leasehold residential condominium projects for Hawaii residential residents on non-ceded land estate plan, sealed land, near the public transit stations.

The Hawaii Community Development HCDA has designated a 1.18 site acre, Akako, for demonstration project and is engaged experienced portable housing developer to plan a high rise on the site. The HCDA believes the proposed amendments to HRS chapter 206E are necessary to keep the demonstration project affordable, tract for Hawaii residents while assuring its feasibility.

HCDA and our team have assessed the feasibility of demonstration project and believe that amendment development criteria will support to discuss the project. That's our statement. As the project manager working for ACA's development partner, I support these amendments to the HRS chapter to succeed.

Thank you.

Anyone online or in person wishing to testify on HB 1722? Seeing none, chair.

I have alright. Members, questions? I have a question for Craig.

Yes.

So a couple of related questions. If the changes to the definition, it's on page three and four of the bill, we're deleting what looks like owner occupancy requirements that you, deleting their prohibition on, let me just hold on one second. We're deleting the prohibition on owning any other property.

And so what it looks like that's opening it up to is the possibility of somebody owning a unit and renting that unit out. But then later on, there's clarification that the rule shall include strict enforcement of owner occupancy, including a prohibition on a renting or subleasing. So I guess, like, what's the purpose of deleting that language around the ability to own other parcels if you still can't rent it out?

So when act 97 became law, the pilot demonstration project made that owner occupancy requirement applicable to 100% of the units. And what we've done with or what we've suggested with this amendment is to limit those owner occupancy requirements to just 60% of the units. And the 60% coincides with the 201H requirements because we need 201H, the exemptions to make this project pencil out, so we've limited that owner occupancy requirements, even the rental requirements just to the 60% units.

And so what's the reason for deleting the language around ability to own other units?

That was also, I think, seen as a impossible impediment to the sale of these new units. So we decided to remove that as well.

But the intention, if somebody owns two units, they wouldn't be able to or how would you own two units if you start being owner occupant?

Well, they would have to live, to the extent there's the owner occupant required units, they would have to live in the owner-occupied required unit.

So I guess I'm still at, like, why do we need to delete this language on this paragraph for me? And then the person shall not own any other real property. Yeah. And which gave them some flexibility to own property within six months of the closing of another one. So that was all getting struck, which I thought my first read about the intention of striking that seemed to be like, oh, maybe there's more flexibility over long-term renting these units.

But then it's pretty clear later on in the bill that you still can't long term rent it.

Yeah. I think it was and where where did you see the other part that was conflicting with that? I'm sorry.

So this paragraph three is on bottom page three and top page four. The deleted portion is on owning other property. But then existing statute includes a clause that says the rules shall include strict enforcement of owner occupancy, including a prohibition on renting or subleasing a residential condominium unit within an urban redevelopment site.

Yeah. So maybe I could clarify that. So I I think that still applies just to the owner occupant required units, which is the 60%. Maybe we have to clarify that to say it's only for the owner, the prohibition on renting is only for the owner-occupied units restricted.

Yeah. And that's that is what it applies to, but I, so my understanding of the rules that were imposed on the owner occupant units, you had to be a qualified resident. You should not use the residential development for any purpose other than owner occupied residential use. And then that paragraph three said you couldn't own more than two units and gave some flexibility for overlap if you're selling one.

So I'm just still sort of confused why we're deleting that paragraph three if we're not actually opening it up to long term rentals in those units.

And and I think, Chair, if this bill passes, we're also gonna have to do some rule amendments to reflect these so we can address that in the movement.

Okay. Okay. So one of the things I was considering was possibly deleting the language around the rule shall include strict enforcement of owner occupancy. So the intention for the owner occupied units is still that they remain owner occupied. That there's not possibility around occupant. That's right.

Yeah. They'd be owner occupied. I guess, I don't wanna take out the prohibition on rental for the owner-occupied required units. But if we say that it's just for owner occupant units, that's fine.

That is. Okay. So I think what would be helpful maybe over the next committee is just a better understanding then of why that paragraph, the intention of the meeting that paragraph of the three and what that does for the bill.

Appreciate that, Chair.

And then another couple of questions. How much was appropriated last year to the project?

Fifteen million dollars. So the financing and capital stack for this project represents is as follows. There's a gonna be a senior construction loan, kind of a mezzanine loan, which is a DURF loan, each CDAs equity, which is the fifteen million and then developer equity. We did not wanna use private equity just because of the cost of money for private equity. You know, every dollar of cost affects the feasibility of a project like this. So the fifteen million is sort of the state's equity contribution into the project.

And we haven't drawn down on that money yet.

Okay.

And sorry, just remind me, I know you said in your testimony, but the state already owned the the parcel or you guys purchased the parcel?

We purchased that parcel. We already own that parcel.

Yes. No restrictions. Yes. And and the reason if I can add to that, I mean, where these market units were on the market or will be on the market competing with other market units that have no restrictions. And so to be competitive, you know, with that, we we have to be able to remove those restrictions.

Yep.

You own it?

So the fifteen million dollars wasn't going to the purchase. You already owned it. And then just so I'm clear then, so then the 40% of units will be sold at market with no owner occupancy restrictions?

Okay. And what's the estimated cost per unit? Do you have that?

Yes. I think the estimated cost per unit was about $700,000, around.

That's including land acquisition costs?

So the land piece of this, what we're intending is to have, you know, ninety nine year leases with each unit owner, and the rent will be a nominal rent just so that it tries to maintain its affordability.

Okay. And then I'm just trying to sort of wrap my head around the value. I appreciate the amendments you're making to make sure that this thing can work. But having a hard time wrapping my head around the value, like, when a typical tool on each project without a $15,000,000 essentially state subsidy, you know, when we're getting essentially the same number of market rate versus income restricted units. Here, it looks like we're giving a $15,000,000 subsidy to end up with half the rates, half the units market rate, and half units 140% AMI.

I'm sorry. And then even the 40 unrestricted market units will still be ninety nine year leases.

Correct.

It just seems, and I understand that the finances are, what they are. So this isn't on you. I know you guys are doing your best to make this thing pencil out given what was mandated to you years ago. But, like, just help me walk through like.

Maybe I can provide this cost to share. When we got this project, we knew that it had been a long time since a for sale, this whole ninety nine year project had been done in Honolulu. Most of the others are for sale fee units. So we knew that we were gonna have to compete against a a comparable for sale fee unit which most people prefer buying.

So, we needed to do everything we could to make the differential between a, for a leasehold unit and a comparable fee unit as a bigger delta as we could. Because I think everybody's mindset would be if the delta between a leasehold ninety nine year unit at a at a comparable fee unit is small, you're gonna say, I'm gonna go with, you know, the fee unit because, you know, it's it's fee. It's not leasehold.

So, I think that's why we're trying to kind of keep the cost as low as possible and that's why it reflects putting in this state equity. Now, for that state equity, so I hope that answered your question that it may not look like we're getting as much, but the reason why is we're trying to keep the cost, you know, very low so we can sell it at a greater, at a bigger, at a lower price.

That was the whole purpose of this. The $15,000,000 of state equity into this project was intended to sort of be like a sort of like a asset purchase in a way. It was gonna be to have HCDA own the parking garage and the commercial units at the bottom, which is something typically, you know, to retain ownership of that.

The revenues from the commercial and the revenues from the parking garage were, in our mind, would be put into a a special fund and then would be used to fund or is commence other similar projects. Because as I've mentioned, it was always our intent to try to replicate this project in other areas.

And so that that revenue for the fifteen years is gonna be to kinda start up other similar projects.

Okay. Thanks. That helps. And final question is, so what is you know, you're saying you wanna make that delta as much as possible. What is your anticipated sales price for...

I think I don't sorry, I don't have that information with me, but I can provide it to you. I I think we're once we kinda resume the project again, if we resume the project, we'll have to kinda take a look at that.

You have a ballpark AMI range?

So for the 60% units, it's gonna be one forty and below.

So do you think you're gonna be you say you wanna make that delta as much. I mean, one forty is pretty close to market.

Yeah.

the anticipation?

Yeah. One it's gonna be I said one forty and below. So I think it's it'll be lower than one forty.

Okay. Alright. Thank you.

It's all gonna yeah.

I really do appreciate your work in trying to do your best to make this thing pencil given what was handed to you.

We're doing everything we can. That's why we went to Senator Chang to see if we can.

Yeah. Thank you. Thank you.

Did you also want me to address some of the AARP comments?

I think it's Chris, a welcome outcome might be if his question is addressing everything, then you can then you can address those.

So, and first of all, let me just apologize before I start. If "Dean" hits his head down because I come at, he may have commented so much about this already. So I'm getting nightmares hearing this whole thing. I'm gonna explain to you why. It sounds like the revamp, rebirth, and re-try of Ulu Wehi in Waianae.

We're trying to make affordable housing. We're trying to do it with leasehold lands. We're trying to do long term leases. But in here, we're using words like competitive. And then we're using words like ten years or time frames like ten years.

So let me just explain to you what's happened in Ulu Wehi, and maybe you can read between the lines of what I'm trying to say. Ulu Wehi was originally built on the same premise to create affordable homeownership. Now after a certain amount of time, the people were allowed to sell, which is the same thing here after ten years. Here's the problem. That does not promote long term homeownership in an affordable rate.

Ulu Wehi is an investor's dream. 60% of Ulu Wehi now is owned by investors. It's a 100% rented, but it's owned by investors. I think we all in this room agree that as an investor, we're making money. So everybody who's currently renting could be a homeowner.

And for me, what bothers me about that is the amount of units we wanna bring down from a 100%, now we wanna come down to 60%. And then that word competitive pops back up. If we're using subsidies with the tool aid act and stuff like that, we need to not try and be competitive if we are indeed trying to create affordable homeownership. And I get it. I get it.

It's business. I'm a business owner. I get it. But if we're gonna do business, we gotta do business. If we're gonna try and do homeownership affordable, we gotta do it that way as well.

There are ways. There are ways. That's why the government has these programs. I'm just quite honest, bothered. I'd like to use other words, but I won't out of respect that we continue using these words, like trying to create homeownership affordable, trying to help people get in, but then we put these limits in here that really, after 10 years, it's forgotten about.

Representative Morocco just I...

I'll end with that. I'll end.

Oh, but is is there a question there? Or?

Yeah. Why are we still trying to bring the residential units down, The number of residential units down, number one. Why are we limited to ten years?

So we're not bringing the residential affordable residential units down. So what we what we are doing is with the ten year regulated term, we reduce the occupant requirements, which were in perpetuity in perpetuity. That was originally 97, which we believe would hamper the sales of these units. It would be an impediment to the sales, would be a restriction.

So we worked with Senator Chang, and we we reduced the occupancy or we changed the owner occupancy requirements only to the 60% units.

And, and we limited that to ten years to be kind of consistent with other, you know, workforce housing groups. Representative Muraoka, I totally understand where you're coming from. I think we're trying to create a balance here between trying to determine whether this product, this housing product is really gonna be successful or not.

And even though I said we're gonna proceed after this if this bill is enacted, it's still up in the air whether we can sell any of these units and whether we can be successful in the program, but I understand where you're coming from.

I just, thank you. I'm sorry. I apologize.

Thank you, Representative Muraoka. Representative Cohen.

Yeah. And just not to but I concur with Rep Muraoka on this whole thing. I've said it again and again for at least fifteen years. The state needs to have two types of inventory of housing. One is affordable in perpetuity and the other is investment properties.

We have a ton of investment properties. This is actually this is what I mean, if you wanna do investment and gain a big profit and stay afloat, then get into that business. But for me, I think the 201H's of the world were meant to be affordability in perpetuity for our people, our local people. And now you're trying to like, you know, split it up and morph this thing into something that personally I think it should not be.

And so for a question, the 40% pretty much will flip into market rate for qualified residents, meaning that can be a transplant from anywhere.

Comes to town, wants to buy a unit. Right? So, I mean, there goes the whole thing again, that inventory of affordability for our local people. We'll never get ahead of that ball because we keep getting rid of our affordables after ten years, after sixty years. So is that what's gonna happen? Forty Percent too qualified?

You know, with, thank you, Representative Cochran, for your question. I think, you know, as these restrictions that put into place for owner occupancy in perpetuity, I I think it's a little bit of a balance too because what we're trying to do is balance that against getting these leasehold units on to the market and sold, you know, in people's hands. And if these restrictions are too onerous as they were in Act 97, it would prevent that from happening.

Now could hamper those sales from happening. I think if this legislative body as a policy matter does not agree with it, then that, so be it.

But I'm just trying to state sort of the market realities of this and how how these restrictions work on saleability. And I, and to your point, Representative Muroaka, I don't wanna mess, you put it in the competitive terms, but where we are, you know, dealing with other projects in the market, and we do have to kind of take that into consideration as we go up to sales. So.

Sure. Sorry. all that, but the success is for who?

You know, I mean, it's not for affordable families who need some place. And it's the success is I think he explained with that one project. It's an investment's dream, and that's what I foresee happening here. Again, I think we gotta stick with build our our inventory of affordable, and that's the charge I feel for entities here in the state. And the outside investment people, that's what they do.

You know we're supposed to be here for our people.

Representative Cochran, so, you know, when people use the term what if use the term affordability in your mind, what does affordability mean? What AMI are you looking at?

Definitely not $700,000. You know? 400,000 is pushing it too. And, you know, Chair, I've been researching to figure out what solutions are to keep costs down, and there are there's answers out there. So I don't wanna get into that here now, but anyways.

I appreciate the questions and the conversation. And I just maybe wanna try and wrap this up with what I think is a clear summary or a quick summary. What they're concerned about is wanting deeper levels of affordability or longer periods of affordability. And I think what I'm hearing here is that when it costs $700,000 to build a unit, the only way to make this thing pencil is to either reduce some of the restrictions or have a higher level of state subsidy, right?

If the goal is $400,000 sales price, but if costing $700,000 to do it, the only way to make this thing pencil is giving more money to the project or to reduce some of the restrictions to ensure that it can pencil. So I think our role here today is to try and figure out what that balance is. We are not a money committee. And we can have this discussion when it comes time to pass the bill.

But am I sort of clear in trying to frame what the trade off that we have in front of us is?

I think it's a fair trade off, Chair. And, yeah, we're trying to balance a lot of things in getting this to the to the market.

Can I ask one more question? The ballpark right now is at 700,000, per cost unit.

That that's a cost, not the sales price.

Right. Right.

We know it's gonna be more than that.

More or less in some cases.

Just wanna be clear. That's the average cost of building the unit. The sales cost. The sales price would be could be lower depending on the type we see.

My question is, if we remove the competitive edge and we built a 100% of these units with being affordable, the only driver. There are things in the unit. Maybe instead of marble tabletop marble countertops, we can do Formica. Instead of certain faucets, we can use lesser brands. If we focused on affordability on a 100% of the units, would you agree that that per unit cost can come down significantly?

No. I I don't know if I would agree with that because so, yeah, when you when you No. No. No. No. No. No. No. No. No. No need to explain. I mean,

I don't know if I agree with that. You know, construction costs for, you know, high rise building like this, I mean, this is always gonna be construction cost. And I don't know if it will differ that much from it. And then when you talk about affordability, affordability for whom? Is it affordability for people in the 80% EMI, 60% EMI?

What EMI range are you talking about? Well, for me, affordability is the 60%. 60 to 80. Because if we're at one forty, like Cher said, we're almost at market.

So at at so I'm not I'm not arguing with you. And neither am Aye. I and this is not I'm no way towards you, sir. It's just that we wanna get ahead of it before this becomes a bigger problem. And and

and my role here is to try to educate. So the deeper I think, generally, the deeper the affordability, deeper the affordability. I think, generally, it's gonna require more state subsidies and and other things to make that affordability work. That's why in this project, we have a combination of market units and and, workforce housing units below a certain level because that's what makes it work.

If we're gonna do a project at 60%, 80%, affordable at that level, I think we're gonna the state's gonna have to come in with a lot of money to subsidize that kind of project.

And it's and if even if you have that kind of project with a hunt you know, perpetuity, you know, out owner occupant in perpetuity, some kind of other restrictions, it could hamper the sales of those kind of units. And if we do, then what's the point of that? Because then we haven't gotten those units into the market as which is the purpose, right? So respectfully, I'm not I'm not arguing with you, representative. Oh, no worries.

No worries. Just wanna you know, we can argue another time. But but I I I just I just wanna, you know, make sure.

Alright. Thank you. Thank you, Members for that question. I don't Yeah.

So the the bid process is over and you've procured Khalilah Khalilah LLC to be the developer. Yes. So there's no way for someone else to come in with a another bid and, you know, present a whole different plan at this point.

Representative Cockrell, I think, I'm not sure what efficiencies would be gained by having another developer come in, go through the whole due diligence process again, go through the whole predevelopment work, and then start from scratch at that point. I think, you know, the Pola Ile has done a lot of work to date, and they have a lot of information. We've worked with them extensively or my staff has. So I I don't know what efficiencies would be gained by having another developer.

Is there a way to see the plan? Can I see a plan?

I can I can send you a rendering that we have, and I can send you a little bit more information on the, sort of the range, the price ranges of the units?

No. I don't no. Just the plan. I just wanna see the actual structure.

Oh, yeah. Yeah.

What it looks like and everything. I can send you a rendering.

Okay. That'd be great. Yeah. That's good. That'd be great for me to see. And and, mister Cochrane, I mean, in the time we have, I know it's not always conducive to diving deep into something like that, but I'd be happy to meet with you Sure. And, Stum and bring my staff who's working on this. Again, I can work with you. Okay.

Thank you so much. I'll make sure I'm thank you.

Sure. I'm responsive to your question.

Yes. Thank you so much.

Alright. Thank you, Harry. Thanks for being here. Thanks for your work on trying to get this project built. Thank you, chair.

Members, any final questions? Thank you. Seeing none, next item on the agenda is HB 2270 relating to the down payment is loan assistance program. Amends a down payment loan program administered by the Hawaii Health and Finance Development Corporation to align with federal requirements and enhance assistance for low and moderate income first time buyers. Thanks, everyone.

Department of Business, Economic Development and Tourism in support. OPSD in support. Send on our written testimony in support. Thank you. HHFDC in support.

Mister vice chair members, we're in charge of part of this measure. We're trying to align our I'll come on and also let's see what federal response. Right now, we offer a dolphin assistance program. And why statue to participate in that program must put down 5% before they can even participate in the program. The full value is now exceeding the half million dollars.

That means if that one is $500,000, you have to put in $25,000 in own funds, plus cover closing costs to participate in the in the down payment assistance program. That's a real barrier for first time buyers.

So we'd like to reduce that amount.

Also, the loan to value amount under federal guidelines can actually exceed a 100% because they allow closing costs to be covered by the loan. So we'd like to have that option also just to be consistent with federal program guidelines. Thank you for your consideration.

Thank you. Hawaii Realtor is in support. AARP Hawaii in support. Anyone online or in person wishing to testify on HB 2270? I see not sure.

Members, any questions? Representative, let you go.

Dean, please. I'll check. I see. Just go over the the current Halekama Aina current program and then what are the changes that you're hoping to make.

Sure. The Holland Common Line of program is the mortgage program component and the down payment program. So the mortgage program component is the low rate, financing. So right now, we're it's at 5.4 for government backed loans such as USDA, VA, or FHA loans, and 5.7% for conventional loans. And the great thing about this loan is that whether or not you have a large down payment or just a minimum, you still get that rate.

If you go to a bank or other lenders, that rate fluctuates depending on your credit score, on how much you're putting down. Our rate is fixed. So as long as you meet the minimum requirements, you get that rate. And so for the down payment assistance, we're asking it to be lowered, because to 3% inclusive of the down payment assistance provided by our program, which is up to 4% of the loan amount.

So this would open the doors for many homeowners who can support the monthly payments, but don't have, you know, the equity for the down payment for to purchase a home.

And, yeah, when we had met about this, I thought this was so wonderful. Deal, what would be the eligibility requirements to be able to participate?

Main requirements are that you have to be a Hawaii resident 18 years or older, has to be your primary you have to be a first time home buyer. In most cases, there are some exceptions. You have to limit the minimum score of six sixty, which is still reasonable, but, you know, as well that many other loan programs, I believe those are the major requirements.

And final question, on the can you talk about the forgiving the accrued interest, like, question?

Yeah. So we're seeking approval to forgive the interest of the down payment assistance only. Not not the first markets, but only the down payment assistance. Right now, the down payment assistance loan is at 1% simple interest per year. So let's say the loan is 20 down payment was $20,000.

Interest rate is $100 per year. What I'm trying to do is to forgive that amount after ten years.

And this is currently online or is it going to it's not yet.

We haven't started. The the program is it it launched in in December. So it is

We have applicants already?

We do not have applicants for doing our marketing right now. We do not outreach to banks, auto realtors. It takes some time for managers to cooperate on new products such as this into their business model. It is it is complicated on the lender side to incorporate this on their side. This this is not a typical mortgage offering.

Do we know how much much how much is available?

Right now, there we issued bonds, $30,000,000 issuance in December. So our strategy is is that's a relatively small amount. We want to test the waters first and also didn't wanna be stuck holding this product if rates dropped. So with the $30,000,000 are are fully reserved or close to that amount, we're gonna issue another tranche of bonds. And at that point, the rate will be reset.

So if rates come down from whether we're in December, the rates will be reset both for the first mortgage and adopting business.

Thank you so much, doctor, for your work on this.

Thank you. Members, further questions? Seeing none, next item on agenda is HB 2401 relating to the Rental Housing Revolving Fund. This bill authorizes the Rental Housing Revolving Fund to be used to provide loans or grants to eligible individuals to purchase rental units. Vice Chair for the testimony.

Attorney general's office with comments.

Good morning, Chair, Vice Chair, members of the committee. Deputy Attorney General Chase Suzumoto. We provided written comments on House Bill 2401. In our comments, we first recommend placing this authority in a separate new section, within HRS Chapter 20H, Part III, Subpart J. Second, clarifying the phrase "purchase or rental unit" as used in the bill.

And third, inserting appropriate standards for the award of grants by HHFDC to the eligible individuals. And I'm available if you have any questions. Thank you.

HHFDC with comments. HHFDC stands as a testimony of free congress.

Thank you. DHHL in support.

Yes. Good morning.

Oh, we have our Chair online. I'm available for questions.

Chair Watson, go ahead.

Yeah. So just to add that this is a very, very important bill for us. We're very active in addressing the lower income individuals on our wait list. And so we've been active on the LIHTC, or low income housing tax credit, to address maybe about half of the people that they can give awards to. But on the back end, when they do the conversion to actually buy the unit or home, the challenge is how big is that loan that they have to take out.

Obviously, if we can continue the use of the Rental Housing Revolving Fund loan, extend it out and incorporate it in the balance loan amount, that makes it a lot easier for our beneficiaries to finance the back end loan that they have to take out. So we're very supportive of this. I would suggest that, though, to reduce it to below 60% AMI, but it's possibly about 40 to include that group as being accessible to this loan product. Thank you.

[Roll Call]

No. Are there any questions? Oh, perfect.

I'm sorry. I brought my wrong binder. Sorry. I had to step out. So I missed who came to testify.

Just Chair Watson.

But do we have a representative here?

From DHHL?

Yeah. I'm just trying to think. Did HHFDC? Did Mr. Minakami, did you testify? I'm sorry if I missed you.

Yes, sir. But can I, I have a question?

Yeah. Dean, if you could come up, please. Thank you.

Thanks. Sorry. I missed your testimony coming here, and the Rental Housing Revolving Fund, is this saying that you want to utilize it to purchase land and homes?

This isn't our proposal, just to clarify.

Okay. Sorry. But you do manage the housing fund, the revolving fund itself, though?

Yes.

And so is this entity looking to utilize it in this manner?

I believe what the Department of Hawaiian Home Lands would like to do is to use the Rental Housing Revolving Fund and rent to own programs to allow tenants to use those remaining balances to finance purchase of the homes. I believe that's what the intent is.

Okay. And is that the intent of the revolving fund?

That is not how it has been used historically.

Can I ask if you're supportive of it being utilized this way?

We'd have to look at that. I mean, this, I'm not sure how we would structure the loan to convert to, say, thirty year mortgages. Yeah. I mean, it's not a simple conversion, I would say.

Okay. Alright. Well, thank you for your time, Mr. Minakami.

I have a follow-up.

In your testimony, you mentioned the Halakama Hina program, and I know HHFDC has a number of financing programs. I am also concerned about the issue brought up in your testimony regarding our RHRF, you know, is intended to finance the development of rental housing. And this as it looks would be financing the purchase of homes. And as the AG brought up in their testimony, essentially the unrestricted purchase of homes.

So could you talk through other programs that might be better fits to try and amend to allow for this type of financing for DHHL beneficiaries?

Well, for example, we just spoke about the Halakama Hina mortgage program. That is a mortgage product where it is structured to originate mortgages and, I guess, service mortgages.

And that's a whole other company servicing the mortgage, which RHRF is not structured to do. You know? There are many parties involved in a mortgage program. So we would have to look at how that would be administered if it was through RHRF.

And how about the AHRF? Could that be tweaked to try and allow this type of financing? I mean, I I'm just I it seems like from the testimony, I think DHL's primary hope here is to help finance the conversion of rent to own parcels to, you know, a traditional mortgage. Right.

Probably would be better to create a new fund because, for example, the Public Ownership Revolving Fund is to support for-sale developments and is really targeted toward the construction of the units. So perhaps it could be a sub account within our RHRF or within an existing fund. The purpose of the fund should be to originate mortgages for home buyers. These home buyers, the funds targeted for them should be specified.

I just found out that if if you were trying to develop a state financing tool to enable this and sort of starting from scratch, like, would you just create an entirely new section and a new financing tool, or would you try and amend an existing revolving fund to enable it to use for this?

Probably would be better to create a new fund because, for example, a revolving fund is to support for sale developments and is really targeted toward the construction of the units. So perhaps could be a subaccount within RHRF or within an existing fund. The purpose of the fund should be to bridge and originate mortgages for homebuyers. These homebuyers that these funds are targeted for should be specified.

I guess, I haven't thought of until now. But what about, since DERF has much more raw applicability, could something like this be put into DERF instead?

Possibly. And it could be a account within DERF to fund mortgages.

Okay. Members, further questions? Thank you. Next item is HB 2515 relating to workforce housing. This bill establishes the workforce housing regulatory sandbox program within the Hawaii Housing Finance and Development Corporation.

Establishes an advisory council within the workforce housing regulatory sandbox program to advise on environmental and cultural practices within specific developments. Establishes a position and requires annual reports to legislation. Vice chair for the testimony.

OPSD in support?

OPSD stands on its testimony.

Thank you. HHFDC in support.

Standover testimonial in support.

Thank you.

HPHA in support.

HPHA stands on its testimony.

Thank you. HCDA in support.

Stand on our testimony. Thank you.

Chamber of Commerce Hawaii in support. Thank you. Housing Hawaii's future in support. Maui Chamber of Commerce in support. And one individual in support.

Anyone online or in person wishing to testify on HB 2515? Same then, chair.

Members, any questions?

Sure.

Representative Culkin.

This is something new that's being established. This is not in this Who

The workforce Quick answer is yes. But do you wanna

Oh, yeah.

Direct your question to HHFDC maybe?

This is in your wheelhouse, mister Minikami? This is proposed to be established within HHFDC.

Again, this is not our proposal.

We're gonna

be also planning.

You are okay. And this is gonna and these are voluntary people who will be

Yeah. These are folks who are seeking relief from county processes where they could bring a proposal to seek to modify process, regulatory process.

Isn't that what two zero one HSR? Fast track Meter County processes?

Similar, but 200 is not modifying approval process. So but for example, what processes, applicants might want to see if, like, 200 modifies development standards or height, setbacks, middle uses, does not always change the process that an agency uses to review a project.

Right. I think, some of the comments, in the cons for this is, you know, there's already regulations and things existing that help to protect things that we would like protected. And is this going to wanna waive those protections? I think are are the concerns, but I guess no telling what they're gonna focus on and and decide at the end of the day, you know, but that's, I think, some of the concerns I'm hearing.

That, unknowing of what has happened is this built to do and to waive.

And the county would have to consent and participate in the correct views. Okay.

Doesn't give me that much more, confidence, but okay. Well, thank you.

Thank you, Robert. Members, further questions?

I just wanted to state there was no, opposition in the testimony.

No. But I talked to people too, so it's fine.

Seeing no further

comment comment on

At the end when they comment. It's more about it. HB 1979 h d one, no image environmental review. The shortness of period for certain judicial proceedings involving environmental assessments and environmental impact statements on actions that propose the use of land for or construction of affordable housing or clean energy projects, must be initiated.

It specifies that appeals from environmental courts that involve actions that oppose the use of land for or construction of a public housing or clean energy projects meet one of the grounds for transfer to the Supreme Court and prohibits any court from awarding attorneys fees in each judicial proceedings.

Vice chair for the testimony.

OTSD with comments.

Chair and members. Mary Alice Evans with the Office of Planning and Sustainable Development. We see this as a support for housing. The environmental review processes and disclosure process, but we noted that anyone who has a concern that disclosure was not properly conducted and disclosed has the right to file a judicial complaint with our state courts It helps to give an affordable housing developer some certainty within a reasonable period of time if we limit the, window when they find an opponent of a project, disclosure

process can file to thirty days. All of the information is available before that, so that they should have able to determine whether they that meets the technical requirements in the statute.

Thank you. HCA with comments.

Thank you, vice chair. Chair, Craig Nakamoto, executive director of Hawaii Community Development Authority. Just wanna refer to Mary Alice Evans' testimony for PST, but maybe suggest an amendment to the definition of affordable housing. And this is my recent Affordable housing, often includes maybe programmatic space at the Ground Floor that adds activity at the Ground Floor, but also adds things of convenience to for the residents of the building, like a convenience store or a secondary store. There's also, of course, on-site infrastructure that needs to be constructed.

It could be off-site infrastructure that needs to be constructed, to facilitate the development of affordable housing project. So, on page four, line 13, we're suggesting to delete that line and instead replace it with the following language, affordable housing project needs a housing project, including other ancillary on-site mixed uses and any necessary on and or off-site infrastructure. Just to clarify that that definition, chair and vice chair, members of the committee. Thank you very much.

Thank you. The outdoor circle in opposition. Three fifty Hawaii in opposition. Kauai Island Utility Cooperative in support on Zoom.

Aloha. Good morning, Chair, Vice Chair, and members of the committee. Beth Amaro from Kauai Island Utility Cooperative. We are in very strong support of this measure. First, I wanna thank, Chair Eppslin for championing this concept for the past two years.

We're very pleased to see this measure moving forward, and we feel it's important because it'll provide developers of affordable housing and clean energy projects, which we know are critical to meeting important state goals, more certainty on the process and the time frame for resolution of legal challenges. And this could prevent valuable projects from being abandoned because of the lack of certainty on the resolution of the legal challenges. So, thank you very much, and I'm happy to answer any questions you might have.

Thank you.

Earthjustice in opposition. Avalon Development company in support on Zoom.

Present.

Aloha. My name is McKinley, and I'm speaking on behalf of Avalon Development. We're in strong support of this bill. The issue this bill addresses is not whether environmental concerns can be raised. They should be.

The issue is that under the current structure, delay alone can determine outcomes regardless of merit. Even when agencies complete environmental review and make formal determinations, prolonged litigation timelines can delay projects long enough to make them financially infeasible. Affordable housing and clean energy projects are especially vulnerable to this reality. They depend on limited funding windows, escalating construction costs, and coordinated approvals. When challenges are not brought promptly, projects can fail not because of environmental harm, but because uncertainty and delay make them impossible to deliver.

This bill encourages concerns to be raised early where they can meaningful meaningfully addressed while preserving environmental safeguards and ensures that environmental review remains a tool for informed decision making, not a mechanism where delay itself become becomes the deciding factor. Thank

you. Thank you. In opposition, and one individual in support, and one in opposition. Anyone online or in person wishing to testify on HB 1979 h d one?

Do not check. Members, any questions?

Sure.

Representative Cochran?

This is your introduction. Right?

No. I was

Oh, I I heard I

I did

a similar bill in the past.

Okay.

I'm trying to think who would I just had a question if judiciary was con con consented on this. They did not submit testimony to everybody.

But I just I was wondering if you're familiar if they're I can see. Okay.

And the alright. The person I wanted to ask questions of isn't here, I guess.

Do you remember further questions? Representative Frandenetti.

Thank you. I maybe okay. I understand, I guess, shortening the time frame so that the projects aren't delayed regardless of merit. But the part that concerns me more that less of the testimony spoke to, was the part about, prohibiting the o the award of attorney's fees. And Earthjustice, in their testimony says, in cases where the court awards attorney's fees, it is because it has determined that the defendant has violated the law.

Prohibiting such awards will not only effectively dissuade challenges, but it will unduly penalize those who have legitimate and successful claims. That part to me kinda contradicts with the intent of avoiding prod like, meritless delays. So I'm wondering if you could speak to that.

I'm not an attorney on the planner. I have observed over the last few decades that, opponents of projects, especially clean energy and affordable housing projects

Can you speak up a little? I'm just sorry. Have sometimes wanted to stop projects at the environmental disclosure stage, left them waiting until the environmental documents are complete and accepted and go to the decision makers like yourselves, elected officials. And so, therefore, there's a in my view, this is a personal view, a perverse incentive to try to file a complaint, a judicial complaint, a challenge for the acceptance of an environmental document in order to create that delay, increase the cost, and kill the project. So I think that provision of this bill, takes away that perverse incident. That's just a that's a personal view, not a not speaking for the office of planning or policy.

Okay. Do you also I mean, are you not worried about it dissuading legitimate challenges?

Let's see. For all NAEA or an EIS, the anyone can find. It is it's something that it goes straight to the judiciary. So I don't think it'll take effect in order to discourage someone who, you know, believes that there is, you know, a flaw in the internal assessment or EIS.

Thank you. Thank you. I know it's members, further questions?

Sure. For mister Nakamoto, you're you're wanting can you elaborate a little bit more about your deletion that you wanted to have affordable definition include ancillary and off-site on or off-site infrastructure too in the term affordable housing?

Sure. So representative Cochran, it's both a deletion and add and addition. It's to delete the existing language on page four, line 13 to expand the definition of affordable housing project to include some of the sort of other ancillary parts of an affordable housing project, like a commercial space on the Ground Floor or a retail space on the Ground Floor.

And infrastructure of both on and off-site that typically goes with the development of a project like roadways or a sewer line or electrical because they're part and parcel of affordable housing development. Well, a part of any development, you gotta have off-site, on-site infrastructure.

And what we find in the workforce housing that we've developed in Kaka'ako that the residents really appreciate sometimes having a small sundry store on the Ground Floor that they could go down and, you know, get various things like food items. And that kind of use of the Ground Floor also activates the street so that it's not just a lobby entrance to a building, but it's actually some place where people can walk to go and get things.

So it's really just to kind of make sure the definition of affordable housing includes that kind of use.

Sure. Follow-up. So you're wanting to use affordable housing funds for commercial uses?

No. That's not that's not the way. Right? That convenience store on the Bottom Floor?

It's it's part it's usually part of it's usually part of a project that would we go ahead and develop or ask a developer to do it. It's part of the part of the project.

And and represent Cochrane, just to clarify, there's nothing in the bill that contemplates use of affordable housing funding. So I'm changing. Sorry. What I

think your question to him was that he was advocating using Affordable housing funding money for commercial development. So even changing the definition for this section to broaden it to include outside infrastructure doesn't impact the use of any funding for these projects. It would just brought up the definition for the applicability of a lawsuit.

To ensure that, for example, if somebody is building a mixed use project with commercial downstairs That by just narrowly targeting affordable housing component in this bill, theoretically, somebody could sue the project for the commercial component. If it's not brought into include commercial, so it doesn't Just clarifying to your question that this does not impact the use of state money.

Or direct the state use of state money towards commercial projects.

I just I think just overall and thank you, mister Nakamoto. That's yeah. Just the cutting I guess, restricting the the, community input is kinda what concern you but thank you.

You can have, make your comments when we're available. Thank you. Thank you. Thank you. Members further questions?

Seeing none. Next item on the agenda is HB 1593, related to affordable housing. This bill requires that for any affordable rental housing project that receives financing or any financial assistance from the Hawaii Housing Finance and Development Corporation, that the corporation require the housing development lease or occupancy agreement to allow residents to own or otherwise maintain one or more common household funds. Vice chair for the testimony.

HHFDC with comments.

Any comments on this measure? Just to be clear, we do not oppose the measure. We just wanted to raise comments for the committee's consideration.

Thank you.

Hawaiian Humane Society in support.

Chair and vice chair members of the committee. Stephanie Kendrick with the Hawaiian Humane Society. This is, our number one priority bill for this session. And I just wanna share some data with the committee. You know, the human animal bond and access to pet friendly housing is not some sort of a niche issue.

I know the committee has very weighty matters on its plate, but 59% of Oahu households in a survey in 2024 reported owning at least one pet. Those rates were highest in our rural areas, suggesting that the rates on the neighbor islands, the neighbor island counties were probably even higher than that. Another seventeen percent of households reported having had a pet in the last five years.

Meanwhile, our lack of access to pet welcoming housing, is the number one reason that animals are surrendered to our shelters across the state. Fully thirty percent of people who had to surrender an animal in the last five years cited housing access as the main issue.

So we are in strong support of this measure. We think that housing that's being built with taxpayer resources should represent our local families in their entirety, which includes our pets. I'd be happy to work with, HFDC on their concerns. For example, they cite a worry about damage to units.

The Pet Inclusive Housing Initiative, which is a national group that has the best data on this issue, reports that only nine percent of pets do any damage to a unit at all, and the damage is generally less than $210.

So I think there's a lot of fear around that, around renting to pet owners that is not borne out by the the data. This is modeled after a California law that was passed in 2021, so we know that we have resources available. We can talk to California's public housing officials about their experience there. If the committee and the department would like to do that, we'd be happy to facilitate those conversations.

But this is a really important bill for our community, and we hope the committee will move it forward. Thank you.

And thank you.

Available for any questions, you have for me.

Appreciate it. Thank you. Animal Interfaith Alliance in Britain, so in support. The American the American Kennel Club in support. Hawaiian Humane Society in support.

Jane Arnold, individual in support on Zoom.

Present.

Not present? Yeah.

Jane Arnold?

Yes. Hello?

Hi.

Hi. Sorry.

Yeah. Basically, I just want to make one point. I stand behind everything Stephanie said, and I'm very much in favor of this bill, and I just wanna make the point that it actually would also help to decrease the homeless population, which people all want to happen, because 29% of homeless people have at least one pet and many of them choose to live on the street, rather than giving up their pet.

So, it would help some of those people to get off the street and into affordable housing. Thank you.

Thank you. We also received 30 individuals in support and one in opposition. Anyone online or in person wishing to testify on HB 1593? Seeing none, chair.

Members, any questions? Representative La Chica.

Thank you so much for being here. Can you share with us, what are the current, like, existing challenges, especially, in, in terms of access to the units that aren't available, like, what's going on with both on what you see on the all of the prop, like, housing development, you know, subsidized, through us, and then as well as what have been the existing conversations with both on the landlord side and then the condo ports around this issue.

Right. So, one of the most important conversations we've been having with the property manager side of things is really sharing the data about what it really means to rent to pet owners and what the benefits and risks are in terms of data, not just you know, everybody's got their horror story. Right? But the reality is damage can be done by any tenant, and the damage done by pets, according to an analysis of data collected across the country, is, is actually very low.

So, kind of diffusing some of those fears and trying to encourage people to voluntarily open up more housing to pets.

It's also the case that pet friendly housing tends to fill much faster, and those tenants tend, tend to stay much longer because they know how hard it was to get that unit. So, there's really a lot in favor of property owners making these kinds of decisions on their own, but there's still a lot of misinformation out there that we're really having to battle. But as it stands now and, unfortunately, these statistics are primarily about Oahu, though they they're statewide. It's just Oahu has better data.

But as it stands now, fewer than 38% of our available rental units allow pets at all, which is the lowest rate in the nation.

And only about 15% of those do not have arbitrary breed and size restrictions. So, we're really behind the mainland in terms of opening up housing for pet owners, and we see that at our shelters every day.

So, that barrier exists at the landlord, like, you know, conversation, not at the Condo Board, like, bylaws? Or?

Oh, no. I mean, it, it exists at all levels. I mean, it's everything from the individual landlord and working with them. Actually, Partners in Care has done some amazing work on this through their landlord engagement program because, as Jane mentioned, fully 29% of our unsheltered homeless on, on Oahu have more than have at least one pet. We got a that question added to the point in time count a few years ago.

We don't have this year's numbers yet, but it's been pretty consistently at the 26 to 30% level. And so, PIC's done a lot of work through their landlord engagement program to try and get more people to open up housing to pet owners, but there's just a lot of fear and misinformation around this issue.

Yeah. I mean, I would have to agree. I mean, we're very—we have a lot of restrictions, not just in the housing side, but even where pets can gain access, like, the republic parks and beaches and then, establishments. As you were reviewing legislation, if you can speak to California model, like, how long that's been in existence and if there's—are there other types of incentives that you've seen us work have worked in other states to get, I guess, unit owners to be more receptive.

Sure. There is a bunch of things. Thank you for asking that. Yeah. This particular bill is modeled after a law firm has had in place.

It was adopted in '21 and for—and it went into effect in '22. So, there are, there are several years now of, as I—that this is going fine. The other bills that we were trying to get through this session would have prohibited re-discrimination in insurance. And the reason that that's a housing barrier is that, currently, why property liability insurers are allowed to exempt certain rates from coverage under their policies. Eight states have banned that.

We wanted to be the next one.

But I need to do a better job working with the insurance industry to move that one forward. But the reason that makes a difference to housing is landlords will say, well, we can't rent to pet owners because we might have this liability. And there's no evidence that excluding those breeds from coverage has fit—that outlawing, excluding those breeds from coverage has had any ill effects on the insurance industry. So, we're gonna try on that one again next year.

I know that there have been proposals to offer some sort of tax credit incentive to landlords that, that open their units to pet owners. We would certainly support that.

I didn't necessarily think that given our budget situation, this was the year to bring that up. But we would be highly in support of any incentives for landlords to open up their units to pet owners.

Well, thank you. Thank you so much, Stephanie.

Absolutely.

Members, any questions? Representative Cochran and then representative.

Oh, thank you, and hi. Thanks for being here and standing up for them.

Issue on mail. Yeah.

So, yes, thank you for knowing that. So, reasonable conditions, I think is that sort of a—I mean, agencies, you see is like the, what's that gonna mean? How are they going to enforce with that term? What's, what's that term mean to you?

Well, the most important thing in the bill was that we—it specifically prohibits arbitrary breed and size restrictions. So, but the reasonable conditions aspect is really supposed to allow a lot of discretion to the property owner in what other guardrails they wanna put in place to make sure that pets and their owners are gonna be good neighbors. For example, the bill already suggests that vaccinations be required. We often recommend that spay and neuter is required.

All of those things support both the human-animal bond and the health of the animals, and those are great.

Another thing that's becoming very common across the country is having a pet board at, at developments that allow pets. It's usually volunteers, pet owners who live in the building, and they help to screen incoming tenants. Kind of like you'd screen a tenant for anything, you know, but to see, see what their relationship is with their pet. Is the pet well cared for? Is the pet well behaved?

And help make that decision based on behavior of whether this is gonna be a good fit for the community. So, those are the sorts of things that we recommend because they deal with the specific health and behavior of the animal, and they let you have transparency on whether you're dealing with a responsible pet owner.

Alright, and a follow-up, Chair?

Yeah. Please.

And it, it mentions common household pets, primarily dogs and cats, which I, you know, I also have. So, what other, do you think, type of animals could be term "common or other?" I mean, I have a tenant who has chinchillas and turtles, so.

Yeah. I mean, chinchillas and turtles can make great apartment pets, particularly when they're quiet.

Because birds are probably another.

Yeah. Birds. So, Hawaii is actually pretty lucky in that we have fairly strict import bans on exotic animals. So, we're not talking about people having snakes in their unit or anything crazy like that. We've got dogs, cats, small mammals.

You mentioned the chinchillas. We have bunnies and, and guinea pigs. Like, hamsters are not legal in Hawaii, so nobody's gonna have hamsters. Some reptiles, which we would prefer that pet stores weren't selling red eared sliders, but they do, and they're illegal pets, so people can have those and caged birds.

Yeah. And lastly, chair, so, with the prohibition of specific breed and size, so CCNRs in h—HOAs—they can be more restrictive?

Well, private property owners can write any rules they want, but we've strongly discouraged them from having rate and size restrictions. I'll give you an example. I'm sorry. It's okay, chair. I know I'm taking a lot of time.

But I have an 85 pound dog. She is perfectly happy sleeping quietly on the couch for hours of the day. One of my best friends has a 15 pound miniature poodle who was surrendered to Hawaiian Maine and adopted there probably because the dog barks as soon as you leave the house and does not stop until you get back. She finally solved this problem by buying him a big—by adopting a big sister for him, which quieted him down.

But the size of a dog really has no relationship to whether they're gonna make a good companion in a, in a dense setting like a public housing development.

So, we really discourage rules that are arbitrary because they're honestly counterproductive. I mean, you don't want the Great Dane, but the Great Dane could be great, and you're gonna let the 15-pound terrier in. So, not tha 15-pound terriers are bad.

I'm not saying that. They can be wonderful companions if they get enough exercise, but it it just doesn't speak to how well the animals are.

I understand. Okay. Well, very good. And thank you, chair. Thank you for your time.

Thank you, Rep. Cochran. Yeah. We're okay. Thank you.

This covered a lot of what I do. I'm a doggy dad. I got six of them. And I hate to see when they designate dogs as danger. I'm from Waianae.

We're designated as pilau, right, by most people. So, I, I completely resent that motion. But can you expand on the insurance ban? You said that insurance, they, there's insurances that won't cover units. Can you?

Right. And they're usually—so they, they, they exclude certain breeds from being qualified for their coverage. So, say you're a property owner, you have homeowners insurance, and you have a German Shepherd. It's, under state law currently, perfectly legal for your insurance company—and most of them do—to say, "Hey, if anything happens with that Shepherd, we're not gonna cover you," because the assumption is that that's a more dangerous breed.

There is no evidence of this, which is why this fight has been successful in other states of getting that language out of insurance policies because there's absolutely no empirical evidence that any breed does more damage or is—poses more of a danger to the community than anything else. As you know, as a dog owner, it's about how they're raised and the behavior that they're trained with. So, that's the kind of thing that we're trying to get out of insurance.

I do not think that measure is gonna move this year.

And one more, hust playing devil's advocate. Should this thing proceed, it shouldn't get granted and it becomes a law. So, if you foresee down the line wanting more, I, I ask this only because of my fear of cost increases in housing, that maybe the next, the next ask is gonna be that now we gotta force them to build comfort stations in these apartment buildings for these animals.

Well, I mean, I think you would want the amenities to serve your tenants. S,o but I, I mean, I don't know that that would add enormously to cost. You're talking about having some sort of green space somewhere, which would also be, of course, a huge benefit to your human tenant population. So, I, I don't see that as being a barrier, but I would be happy to talk to anyone about those concerns.

Any further questions? Thank you, Stephanie. Seeing none, we'll have a brief recess.

Reconvening for decision making for our 9 am housing committee hearing, We, first item on the agenda is HB 1604 HD 1 related to agricultural workforce housing. I recommend that we move out at HD 2 for this bill with two amendments. One to clarify that the department of Agriculture and Biosecurity is authorized instead of requested, to provide administrative support to the working group.

I—reconvening for decision making for our 9:00 AM House—Housing Committee—hearing.

And then also to adopt the recommendation from Department of Agriculture and Biosecurity's testimony to clarify that the task force is intended to gather data and information and survey from operators to assess the realistic demand for farm workers. Members, any questions, comments, or concerns?

Yeah. No. The bill already contains a defective effective dates. We won't be further defending that. Members, questions, comments, or concerns?

Seeing none, vice chair for the vote.

Voting on HB 1604 HD1, the recommendation is to pass with amendments. Chair and vice chair vote aye. [Roll Call} The recommendation is adopted.

Thank you, vice chair. Next item on the agenda is HB 1713 relating to school impact fees. I wanna express my appreciation to the School Facilities Authority for being here and for passionately advocating for this for years now. I think I may have made abundantly clear, right, the process we have does not work. $28,000,000 is sitting in an account unused.

This is really just a tax on housing or essentially no purpose because the funds are so difficult to utilize. And that said, I think what we passed last year is a good start. I do appreciate the amendments, you know, this year as a as a second step, but I still believe that the house position should be to reveal the school impact fee entirely, in that the statute is, is confusing.

And if the concern is that, that large developments won't have an in lieu land component fee, then that concern should be addressed at the LUC process. And if the land use commission has the full authority to impose conditions on a developer when they're coming in for a rezoning to have some component of the development go towards for schools, and they they do do that process.

So right now, we essentially have, like, two bites of the apple here in a way that I do not think is necessary. So my recommendation is to replace section two of the bill with language that we repeal school impact fees, abolish is abolish and transfer unencumbered balances of the school impact fee sub accounts and certain pair share contribution accounts to school facility special fund, and eliminate the sunset in the bill and to affect the date.

And then note in the committee report that the LUC currently has the authority to impose these land conditions to ensure that there is land available for elementary schools. Members, questions, comments, or concerns? Other questions.

Okay, so last year's bill eliminated just the construction part of the fee? Yes. Okay, so now we're getting rid of. Yeah. So last year, Bill, eliminated the construction cost component fee and eliminated the fee for certain forms development, affordable housing, and building DHL properties. There was language altering the 100 unit, count, which I think at the time was taken to our standing at the time was that that would have eliminated the fee for units of under a 100. I think further analysis last year's bill was, no, it didn't actually serve that intent, but we did eliminate the construction cost. And now we're eliminating the land in

So now, this would essentially just repeal the entire section and give them, you know, authority to spend the money down. But again, because the land component, we already have the authority to do the rezoning process at the LUC for large developments. Members, questions, comments, or concerns?

Sure.

Representative Cochran.

Did you say the effective date is?

We would be defecting the effective date. So the 07/01/3000. And that's to ensure continued dialogue on the subject. And and ultimately, if this bill is passed, it's gonna go to conference. For me, I wanna do this in this committee so that we have the options in conference, and then, you know, we'll ensure for the conversation as we go.

Sure. Are you using last year's language or whatever?

Yes. Members, further questions, comments, concerns? Thank you. Vice chair for the vote.

Voting on HB 1713. The recommendation is to pass with amendments, noting all members present. Any reservations? Any no votes?

The recommendation is about. Thank you. Next item is HB 1722 related to condominiums. I appreciate the conversation that we have. I really appreciate the work of HCDA, what you folks are doing here.

I do think that conversation brought up some interesting things that are worth sort of highlighting, you know, $700,000 to build a unit. And the clear trade off we face as a state that if we want to ensure that we are selling units at below the cost of construction, then that's gonna require either state subsidies to do that or more flexibility on the state's part to sell essentially high end units, which can subsidize the below market units.

There's no other real way to, you know, just bite the apple there. So that's what we're faced with here is trying to determine the best way to ensure that this project can pencil. I do wanna note, again, while I appreciate HCDA's work, and that they are doing their best which would is given to them.

You know, I think the initial conception of this was that this would create a revenue neutral program that could be replicated and replicated and would essentially snowball. You know, and I think interest rates have gone up since then, construction costs have gone up since then. And I think, I'm skeptical, like, that that is going to prove this out, you know, given the barriers that you guys are facing now.

That said, I do wanna do everything that we can to ensure that, like, we're giving this the best shot it has. So, I appreciate the amendments you guys came to us with today.

I appreciate the bills. So, my recommendation is that we move this bill out simply with a defective date. But I would ask for HCDA in further committee hearings and further testimony to just clarify the intention of the changes to the definitions around the owner occupancy and to just further clarify that whether the intention is or not to allow any form of subletting of these of these units. Members, any - sorry, technical amendments for clarity, consistency, and style.

Members, any questions, comments, or concerns? Sure. Representative Cochran.

I mean, I shared my concerns during our discussion. And again, I just think we need to stick with the our inventory of affordable and market needs to be a whole separate deal. And I not in favor of mixing; so, yeah. And I believe there's other solutions into making this project affordable.

But if certain entities have already been chosen, then perhaps if it does move forward, I hope to bring alternate options and solutions to the table for future. So, that's we have to look at this. Okay. Thank you. But I'm not supporting.

Thank you. I'm looking forward to seeing what those alternatives are. Yes. Members, further questions, comments, or concerns? Alright.

Seeing none, Vice Chair for the vote.