HB2333

SECTION 1. The legislature finds that in 2023, affordable housing was declared an emergency in the state, citing Hawaii's housing supply as the most expensive in the nation. It has been estimated that 50,000 homes are needed in the next five years to address our housing crisis.

The legislature further finds that there is an inexpensive remedy for our extensive housing supply shortage. Incentivizing the construction of low-cost accessory dwelling units, commonly known as ADUs, is a greatly underutilized solution to spur affordable housing development. An accessory dwelling unit is a separate additional living unit either attached or detached from the primary residential unit. Accessory dwelling units provide a legal alternative to illegal rental units and are similar to ohana dwelling units, but with fewer restrictions, particularly the absence of the requirement the unit be rented to a family member only.

The legislature finds accessory dwelling units cost substantially less than traditional housing units because there is no need to purchase additional land for the structure and construction costs are considerably lower. For example, a public housing unit costs between $300,000 and $400,000 whereas an eight hundred square foot accessory dwelling unit costs less than half as much.

The legislature additionally finds that the August 2023 Maui wildfires, which either destroyed or made uninhabitable over 3,700 residential structures, further exacerbated the state's housing crisis, making it more important than ever to adopt out-of-the-box solutions.

The purpose of this Act is to establish a program to encourage the construction of accessory dwelling units by providing a subsidy for the construction costs plus a general excise tax exemption for the first three years of renting the unit.

SECTION 2. Chapter 206E, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . accessory dwelling unit Housing development program

206E-A Accessory dwelling unit housing development program. (a) There is established the accessory dwelling unit housing development program to provide matching funds to promote the construction of accessory dwelling units throughout the State.

(b) Notwithstanding any other law to the contrary, the authority shall promote and administer the accessory dwelling unit housing development program.

(c) The authority shall adopt rules without regard to chapter 91 to implement the accessory dwelling unit housing development program; provided that pursuant to the rules, the program shall award:

(1) Matching funds for homeowners who construct or contract to construct an accessory dwelling unit in conformity with applicable county accessory dwelling unit requirements; and

(2) Matching funds on a one-to-one basis, up to a maximum of $ per accessory dwelling unit.

§206E-B Accessory dwelling unit housing development program special fund. (a) There shall be established the accessory dwelling unit housing development special fund into which shall be deposited:

(1) Appropriations made by the legislature to the fund;

(2) All contributions from public or private partners;

(3) All interest earned on or accrued to moneys deposited in the special fund; and

(4) Any other moneys made available to the special fund from other sources.

(b) Moneys in the fund shall be expended by the authority to award matching funds for the accessory dwelling unit housing development program."

SECTION 3. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Accessory dwelling unit exemption. (a) Notwithstanding any law to the contrary, taxes under this chapter shall not be due on income generated by rental sales of any accessory dwelling unit funded pursuant to section 206E-A for the first three years that the accessory dwelling unit is rented by the owner of the accessory dwelling unit; provided that:

(1) This section shall not apply more than four years after the construction of the accessory dwelling unit; and

(2) The tax liability savings generated by this section shall be passed on by the owner of the accessory dwelling unit to the renter without any increase in rent price.

(b) The owner of the accessory dwelling unit shall not be required to obtain a special license, a permit, or other documentation of sales during the exemption period; provided that the owner's records shall clearly identify the address of the accessory dwelling unit, the date the construction is completed, the dates of rents owed and paid, and the amount of taxes exempted by this section."

SECTION 4. In accordance with section 9 of article VII, of the Constitution of the State of Hawaii and sections 37-91 and 37-93, Hawaii Revised Statutes, the legislature has determined that the appropriations contained in this Act will cause the state general fund expenditure ceiling for fiscal year 2024-2025 to be exceeded by $ , or per cent. The reasons for exceeding the general fund expenditure ceiling are that the appropriations made in this Act are necessary to serve the public interest and to meet the need provided for by this Act.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2024-2025 for deposit into the accessory dwelling unit special fund.

SECTION 6. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2024-2025 to provide matching funds for the accessory dwelling unit housing development program.

The sums appropriated shall be expended by the Hawaii community development authority for the purposes of this Act.

SECTION 7. In codifying the new sections added by sections 2 and 3 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 8. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2024.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2333
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII