SB1171

PART I

SECTION 1. The legislature finds that the State has a housing crisis. A 2019 study commissioned by the department of business, economic development, and tourism found that the State will require an additional 50,156 homes by the year 2025, with the city and county of Honolulu requiring 22,168 new units, Hawaii county requiring 13,303 new units, Maui county requiring 10,404 new units, and Kauai county requiring 4,281 new housing units.

The Federal Home Loan Corporation, more commonly known as Freddie Mac, has reported that the average 30-year fixed residential mortgage interest rate was 3.11 per cent in December 2021 and 6.42 per cent in December 2022. This 206 per cent increase reflects the dramatically increasing monthly cost of owning a home for residents and the decreasing maximum sale price of affordable housing units in the State. In addition, the Federal Reserve has reported that the one-month term of the secured overnight financing rate, a metric used by lenders to determine real estate construction loan interest rates, has increased from 0.05 per cent in December 2021 to 4.30 per cent in December 2022. The 86-times increase reflects the dramatically increasing cost of construction financing for residential units. These increases in home loan and construction loan interest rates pose a significant risk to the continued production of affordable rental or for-sale units.

The legislature further finds that zero interest home loans administered by the Hawaii housing finance and development corporation through the dwelling housing revolving fund made to eligible homebuyers will counteract the current higher interest rates and lower the effective borrowing interest rate. In turn, a loan will allow a buyer to obtain a portion of their home loan as interest free financing for the purchase of affordable for-sale housing units.

The legislature also finds that additional funds allocated to the dwelling unit revolving fund and rental housing revolving fund are necessary to stimulate the development of affordable for-sale and rental housing units. Additional funding would be allocated to aid more new affordable for-sale and rental housing projects and existing for-sale and rental housing projects that are currently in development by addressing impacts of rising interest rates and construction costs.

Accordingly, the purpose of this Act is to:

(1) Require the dwelling unit revolving fund to be used to provide zero interest loans or grants to certain buyers and to aid certain projects in development to address increased construction costs or interest rates;

(2) Appropriate funds to the rental housing revolving fund and the dwelling unit revolving fund; and

(3) Allocate funds out of the rental housing revolving fund and the dwelling unit revolving fund for certain purposes.

PART II

SECTION 2. Section 201H-191, Hawaii Revised Statutes, is amended to read as follows:

"§201H-191 Dwelling unit revolving fund. (a) There is created a dwelling unit revolving fund. The funds appropriated for the purpose of the dwelling unit revolving fund and all moneys received or collected by the corporation for the purpose of the revolving fund shall be deposited in the revolving fund. The proceeds in the revolving fund shall be used to reimburse the general fund to pay the interest on general obligation bonds issued for the purposes of the revolving fund, for the necessary expenses in administering housing development programs and regional state infrastructure programs, and for carrying out the purposes of housing development programs and regional state infrastructure programs, including but not limited to the expansion of community facilities and regional state infrastructure constructed in conjunction with housing and mixed-use transit-oriented development projects, permanent primary or secondary financing, and supplementing building costs, federal guarantees required for operational losses, and all things required by any federal agency in the construction and receipt of federal funds or low‑income housing tax credits for housing projects.

(b) The fund shall be used to provide zero interest loans or grants to buyers with incomes above sixty and at or below one hundred and forty per cent of the median family income for the State. Moneys allocated pursuant to this subsection shall prioritize projects utilizing the lowest average loan amount as a percentage of unit sale price. Moneys received upon repayment of zero interest loans or grants shall be redeposited into the fund for the issuance of new zero interest loans to or grants to buyers with incomes above sixty and at or below one hundred and forty per cent of the median family income for the State.

(c) The fund shall be used to provide aid to existing for-sale projects in development that have received entitlement or loans from the fund to address increased construction costs or interest rates since receiving the entitlement or loan.

[~~(b)~~] (d) Subject to the requirements of subsection (a), proceeds in the revolving fund may be used to establish and operate regional state infrastructure subaccounts pursuant to section 201H-191.5."

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $10,000,000 or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 to be deposited into the dwelling unit revolving fund established pursuant to section 201H-191, Hawaii Revised Statutes.

SECTION 4. There is appropriated out of the dwelling unit revolving fund the sum of $ or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 for providing aid to existing for-sale projects in development that have received entitlement or loans from the fund to address increased construction costs or interest rates since receiving the entitlement or loan; provided that $ shall be allocated to provide zero interest loans or grants to buyers with incomes above sixty and at or below one hundred and forty per cent of the median family income for the State.

PART III

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 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 into the rental housing revolving fund established pursuant to section 201H-202, Hawaii Revised Statutes.

SECTION 6. There is appropriated out of the rental housing revolving fund the sum of $ or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 for mixed—income rental projects or units in mixed—income rental projects targeted for individuals and families with incomes above sixty and at or below one hundred per cent of the median family income for the State, which shall be allocated as follows:

(1) $ for low-income housing tax credit projects; and

(2) $ for additional funding to existing affordable rental projects that were awarded low-income housing tax credits or bonds to address changes in interest rates or construction costs since receiving an award.

The sums appropriated shall be expended by the Hawaii housing finance and development corporation for the purposes of this Act; provided that the appropriation shall not lapse at the end of the fiscal year for which the appropriation is made; provided further that all moneys from the appropriation unencumbered as of June 30, 2024, may be used for other rental housing projects pursuant to paragraph 201H-202(e)(1), Hawaii Revised Statutes; provided further that all moneys from the appropriation unencumbered as of June 30, 2025, shall lapse as of that date.

PART IV

SECTION 7. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2023.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	1171
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII