SB3285

SECTION 1. The legislature finds that the current executive administration in Hawaii has made significant efforts to increase the State's housing supply, including prioritizing affordable housing development and addressing zoning and permitting inefficiencies. These efforts have included advocating for faster processing of housing permits and increasing land availability for residential development. Despite these initiatives, housing production continues to lag due to bureaucratic challenges, lengthy regulatory processes, and limited coordination among state and county agencies.

The legislature further finds that workforce housing is critical to the State's economic stability and long-term growth. Housing located in reasonable proximity to employment centers and emerging industries provides affordable living options for essential workers who are vital to the State's economy. Expanding the supply of workforce housing can help stabilize communities, reduce commute times, and improve quality of life for residents.

Additionally, the legislature further finds that innovative regulatory approaches are necessary to address the State's housing crisis. Regulatory sandbox programs have been used in other policy areas to test time-limited, data-driven regulatory flexibility without permanently altering existing regulatory frameworks. A workforce housing regulatory sandbox can provide a pathway for developers to test innovative housing solutions while maintaining appropriate environmental, cultural, and public safeguards. Through structured collaboration among state agencies and participating counties, such a program can accelerate the development of workforce housing while respecting county land use authority.

The legislature further finds, however, that a 2024 Hawaii housing planning study projected that the State would need approximately 64,490 new housing units by 2027 to meet existing demand, a significant portion of that demand consisting of workforce housing. Targeted efforts to improve the supply of workforce housing through innovative regulatory approaches, including a regulatory sandbox, could meaningfully contribute toward meeting this demand and help alleviate the housing shortage over the coming decade.

Furthermore, the legislature finds that the Hawaii housing finance and development corporation is well positioned to administer a workforce housing regulatory sandbox program due to its experience financing, facilitating, and coordinating housing development statewide. The legislature also finds that the inclusion of environmental, cultural, infrastructure, and sustainability expertise through an advisory council can help ensure that innovative housing solutions respect the State's natural resources, cultural heritage, and community needs.

The legislature further finds that similar measures proposing a workforce housing regulatory sandbox program were introduced during the regular session of 2025, including Senate Bill No. 1200 and its companion House Bill No. 1317, on which the department of the attorney general provided comments and recommendations. The attorney general's comments and recommendations have been considered and incorporated into the design of this Act to further the intent and purpose of those measures.

Accordingly, the purpose of this Act is to:

(1) Establish a voluntary, time-limited workforce housing regulatory sandbox program administered by the Hawaii housing finance and development corporation in coordination with participating counties; and

(2) Establish an advisory council to provide nonbinding guidance and recommendations to support the workforce housing regulatory sandbox program.

SECTION 2. As used in this Act:

"Corporation" means the Hawaii housing finance and development corporation.

"Participating county" means a county that has formally agreed, through resolution, memorandum, or agreement, or other official action, to participate in the workforce housing regulatory sandbox program.

"Regulatory sandbox" means a time-limited, project-specific framework that allows for temporary regulatory flexibility for approved workforce housing projects, subject to defined conditions and expiration.

"Workforce housing" means housing primarily targeted for households earning between sixty per cent and one hundred forty per cent of the area median income, adjusted for family size and high-cost areas, as defined by the United States Department of Housing and Urban Development.

SECTION 3. (a) There is established the workforce housing regulatory sandbox program, to be administered by the corporation in coordination with participating counties.

(b) Notwithstanding any other law, rule, ordinance, or code to the contrary, the workforce housing regulatory sandbox program shall be vested with the authority to waive or temporarily modify permitting processes and other regulatory requirements for eligible workforce housing projects, subject to the conditions and limitations established by this Act and with the consent of the participating county.

(c) Participation by a county in the workforce housing regulatory sandbox program shall be voluntary and shall not be construed to limit or supersede any authority granted to counties under chapter 46, Hawaii Revised Statutes.

SECTION 4. (a) There is established a workforce housing regulatory sandbox advisory council to provide nonbinding guidance and recommendations to the corporation.

(b) The advisory council shall consist of the following members:

(1) The director of the office of planning and sustainable development, who shall serve as chairperson;

(2) One member representing the Hawaii housing finance and development corporation;

(3) One member representing the board of land and natural resources;

(4) One member representing the state historic preservation division of the department of land and natural resources;

(5) One member representing the Hawaii public housing authority;

(6) One member representing the Hawaii community development authority;

(7) The director of the department of planning or department of planning and permitting, as applicable, of each county;

(8) The director of the department of public works or department of facility maintenance, as applicable, of each county; and

(9) Four members to be invited by the chair, comprising:

(A) One member with demonstrated knowledge of sustainable development practices;

(B) One member with expertise in Native Hawaiian traditional and customary practices;

(D) One member representing a nonprofit housing organization.

(1) Provide advisory recommendations regarding environmental, cultural, infrastructure, and sustainability considerations; and

(2) Assist in identifying best practices and lessons learned from sandbox projects.

(d) The advisory council shall not have approval, veto, or decision-making authority over regulatory waivers or project approvals.

(e) The advisory council shall be subject to chapter 92, Hawaii Revised Statutes.

(f) A majority of the appointed members shall constitute a quorum for the transaction of business.

SECTION 5. (a) Developers seeking participation in the regulatory sandbox program shall submit an application to the corporation that includes:

(1) A description of the proposed workforce housing project and innovative elements;

(2) An explanation of how the project addresses affordability, sustainability, and construction timelines;

(3) Identification of the county or counties in which the project is located; and

(4) Documentation demonstrating the county's participation or consent, if applicable.

(b) The corporation may consult with the advisory council before approving an application.

SECTION 6. (a) With the written consent of the participating county, the corporation may approve temporary waivers or modifications of county-administered permitting, zoning, or infrastructure requirements for an approved project under the program.

(b) Any waiver or modification granted pursuant to this section shall:

(1) Be project-specific;

(2) Be limited in duration and expire on the earliest of:

(A) Issuance of a certificate of occupancy;

(B) Ten years from the date of the project approval; or

(3) Not be construed as establishing precedent or permanently altering any county or state regulatory requirement.

(c) Upon expiration, all applicable laws, ordinances, rules, and codes shall apply as if no waiver or modification had been granted.

SECTION 7. (a) Developers participating in the program shall ensure that:

(1) Sale prices or rents remain affordable to workforce households earning between sixty per cent and one hundred forty per cent of the area median income under rules adopted by the corporation;

(2) Units are not used as short-term rentals during the affordability period; and

(3) Units are occupied on a full-time basis by the resident household.

(b) The requirements of this section shall be enforced through deed restrictions or equivalent legal mechanisms.

SECTION 8. (a) The corporation shall administer and oversee the workforce housing regulatory sandbox program.

(b) The corporation shall establish one full-time equivalent (1.0 FTE) position to administer and support the workforce housing regulatory sandbox program, including coordination with participating counties, developers, and the advisory council.

(c) The corporation shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of each regular session. The report shall include:

(1) The number and type of projects approved;

(2) The nature and duration of any regulatory waivers granted;

(3) Measurable outcomes related to affordability and project timelines; and

(4) Recommendations regarding continuation, modification, or termination of the program.

SECTION 9. There is appropriated out of the general revenues of the State of Hawaii the sum of $5,000,000 or so much thereof as may be necessary for fiscal year 2026-2027 for the establishment and operation, including administrative costs and support for approved projects, of the workforce housing regulatory sandbox program established by this Act, and for the establishment of one full-time equivalent (1.0 FTE) position.

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

SECTION 10. This Act shall take effect on July 1, 2026 and shall be repealed on June 30, 2031.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	3285
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII