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THE SENATE |
S.B. NO. |
3335 |
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THIRTY-THIRD LEGISLATURE, 2026 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to creating a local housing market.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
To solve the problem of unaffordable market rate housing, the State can create a separate local housing market. To do this, for all housing built with government funds or assistance the State should place deed restrictions to keep the housing in the same area median income range pricing that it was initially offered at. This will build an inventory of housing that will always be affordable to the local wage earner.
The Hawaii State Planning Act
(HRS §226-19) lays out the State's socio-cultural advancement with regard to
housing. Its purpose is to achieve
greater opportunities for Hawaii's people to secure reasonably priced, safe,
sanitary, and livable homes, located in suitable environments that
satisfactorily accommodate the needs and desires of families and individuals,
through collaboration and cooperation between government and nonprofit and
for-profit developers to ensure that more rental and for sale affordable
housing is made available to extremely low‑, very
low-, lower-, moderate-, and above moderate-income segments of Hawaii's
population.
Two of the policies of our
State are to:
(1) Stimulate and promote feasible approaches that increase affordable rental and for sale housing choices for extremely low-, very low-, lower-, moderate-, and above moderate-income households; and
(2) Increase homeownership and rental opportunities and choices in terms of quality, location, cost, densities, style, and size of housing.
In 2019, this Legislature
requested a study of policies and practices around achieving these housing
objectives. One of the findings of the
ALOHA Homes Implementation Study was a recommendation "that the sales
price of affordable units be restricted so that subsequent buyers can purchase
a home at the same area median income level as their predecessors." And that in their focus groups, "most
participants felt it would be unfair for people to sell affordable units at
market-rate value at any time after the initial purchase."
The purpose of this Act is to
make changes to §201H-47, §201H-49, and §201H-023 to keep affordable housing
units affordable to the initial targeted area median income level in
perpetuity.
SECTION 2. Section 201H-47, Hawaii Revised Statutes, is amended to read as follows:
"§201H-47 Real property; restrictions on transfer; waiver of restrictions. (a) The following restrictions shall apply to the transfer of real property developed and sold under this chapter, whether in fee simple or leasehold:
(1) [For a period of ten years] In
perpetuity after the purchase, whether by lease, assignment of lease, deed,
or agreement of sale, if the purchaser wishes to transfer title to the real
property, the corporation shall have the first option to purchase the real
property at a price that shall not exceed the same regulations it was
purchased under and remain affordable to the same area median income as it was
originally purchased at. If applicable
the sales price shall be adjusted to include the sum of:
(A) [The original cost to the purchaser,
as defined in rules adopted by the corporation;
(B)] The cost of any improvements added by
the purchaser, as defined in rules adopted by the corporation; and
[(C) Simple interest on the original cost
and capital improvements to the purchaser at the rate of one per cent per year;
and
(D)](B) The amount, if any, previously paid by
the purchaser to the corporation [as the corporation's share of net
appreciation in the real property;].
(2) The corporation may purchase the real property either:
(A) By conveyance free and clear of all mortgages and liens; or
(B) By conveyance subject to existing mortgages and liens.
If the real property is conveyed in the manner provided in subparagraph (A), it shall be conveyed to the corporation only after all mortgages and liens are released. If the real property is conveyed in the manner provided in subparagraph (B), the corporation shall acquire the real property subject to any first mortgage created for the purpose of securing the payment of a loan of funds expended solely for the purchase of the real property by the seller; and any mortgage or lien created for any other purpose; provided that the corporation has previously consented to it in writing.
The corporation's interest created by this section shall constitute a statutory lien on the real property and shall be superior to any other mortgage or lien, except for any first mortgage created for the purpose of securing the payment of a loan of funds expended solely for the purchase of the real property by the seller; any mortgage insured or held by a federal housing agency; and any mortgage or lien created for any other purpose; provided that the corporation has previously consented to it in writing. The amount paid by the corporation to the seller shall be the difference, if any, between the purchase price determined by paragraph (1)(A) to (D), and the total of the outstanding principal balances of the mortgages and liens assumed by the corporation;
(3) A purchaser may refinance real property
developed and sold under this chapter; provided that the purchaser shall not
refinance the real property [within ten years from the date of purchase]
for an amount in excess of the purchase price as determined by paragraph (1)(A)
to [(C)](B); provided further that the purchaser shall obtain the
corporation's written consent [if any restriction on the transfer of the
real property remains applicable] to refinance;
[(4) After the end of the tenth year from
the date of initial purchase or execution of an agreement of sale, the
purchaser may sell the real property and sell or assign the property free from
any price restrictions; provided that the purchaser shall be required to pay to
the corporation the sum of:
(A)](4) The balance of any mortgage note,
agreement of sale, or other amount owing to the corporation[;] may be
paid, in part or in full, at any time after recordation of the sale.
[(B) Any subsidy or deferred sales price
made by the corporation in the acquisition, development, construction, and sale
of the real property, and any other amount expended by the corporation not
counted as costs under section 201H-45 but charged to the real property by good
accounting practice as determined by the corporation whose books shall be prima
facie evidence of the correctness of the costs;
(C) [Repeal
and reenactment on June 30, 2028. L
2023, c 92, §5(1).] Interest on the subsidy or deferred sales
price, if applicable, and any other amount expended at a rate established by
the corporation computed as to the subsidy or deferred sales price, if
applicable, from the date of purchase or execution of the agreement of sale,
and as to any amount expended, from the date of expenditure; provided that the
computed interest shall not extend beyond thirty years from the date of
purchase or execution of the agreement of sale of the real property. If any proposed sale or transfer will not
generate an amount sufficient to pay the corporation the sum as computed under
this paragraph, the corporation shall have the first option to purchase the
real property at a price that shall not exceed the sum as computed under
paragraphs (1) and (2); and
(D) The corporation's share of
appreciation in the real property as determined under rules adopted pursuant to
chapter 91, when applicable;
(5) Notwithstanding any provision in
this section to the contrary, pursuant to rules adopted by the corporation, the
subsidy or deferred sales price described in paragraph (4)(B) and any interest
accrued pursuant to paragraph (4)(C) may be paid, in part or in full, at any
time; and
(6) Notwithstanding any provision in
this section to the contrary, the corporation's share of appreciation in the
real property described in paragraph (4)(D):
(A) Shall apply when the sales price of
the real property that is developed and sold under this chapter is less than
the then-current, unencumbered, fair market value of the real property, as
determined by a real property appraisal obtained prior to the closing of the
sale;
(B) Shall be a restriction that runs
with the land until it is paid in full and released by the corporation, or
extinguished pursuant to subsection (f); and
(C) May be paid, in part or in full, at
any time after recordation of the sale.]
[(b)](a) If the corporation waives its first option to
repurchase the real property provided in subsection (a), a qualified nonprofit
housing trust shall have the option to purchase the real property at [a]
the same area median income level as it was originally purchased at. [price
that shall not exceed the sum of:
(1) The original cost to the purchaser,
as defined in rules adopted by the corporation;
(2) The cost of any improvements added
by the purchaser, as defined in rules adopted by the corporation;
(3) Simple interest on the original cost
and capital improvements to the purchaser at the rate of one per cent per year;
and
(4) The corporation's share of net
appreciation in the real property to be paid as determined under rules adopted
pursuant to chapter 91, when applicable.
(c)]
(b) [For a period of ten years
after the purchase,] If, whether by lease, assignment of lease,
deed, or agreement of sale, if the purchaser wishes to transfer title to the
real property, and if the corporation or the qualified nonprofit housing trust
selected by the corporation does not exercise the option to purchase the real
property as provided in subsection (a) or (b), then the corporation shall
require the purchaser to sell the real property to a "qualified
resident" as defined in section 201H-32, and upon the terms that they
are qualified in the same area median income level that preserve the intent
of this section and sections 201H-49 and 201H-50, and in accordance with rules
adopted by the corporation.
[(d)](c)
The corporation
may waive the restrictions prescribed in subsections (a) through [(c)](b)
if:
(1) The purchaser wishes to transfer title to the
real property by devise or through the laws of descent to a family member who
would otherwise qualify under rules established by the corporation;
(2) The sale or transfer of the real property
would be at a price and upon terms that preserve the intent of this section
without the necessity of the State repurchasing the real property; provided
that, in this case, the purchaser shall sell the real property and sell or
assign the real property to a person who is a "qualified resident" as
defined in section 201H-32 in the same area median income level; [and
provided further that the purchaser shall pay to the corporation its share of
appreciation in the real property as determined in rules adopted pursuant to
chapter 91, when applicable; or
(3) The sale or transfer is of real
property subject to a sustainable affordable lease as defined in section 516-1.]
(e) The corporation may release the restrictions prescribed in subsections (a) through (c) if the real property is financed under a federally subsidized mortgage program and the restrictions would jeopardize the federal government's ability to recapture any interest credit subsidies provided to the homeowner.
(f) The restrictions prescribed in this section
and sections 201H-49 to 201H-51 shall be automatically [extinguished] retained
and shall [not] attach in subsequent transfers of title when a qualified
nonprofit housing trust becomes the owner of the real property pursuant to
subsection (b); or a mortgage holder or other party becomes the owner of the
real property pursuant to a mortgage foreclosure, foreclosure under power of
sale, or a conveyance in lieu of foreclosure after a foreclosure action is
commenced; provided that the mortgage is the initial purchase money mortgage,
or that the corporation consented to and agreed to subordinate the restrictions
to the mortgage when originated, if the mortgage is not the initial purchase
money mortgage; or when a mortgage is assigned to a federal housing
agency. Any law to the contrary
notwithstanding, a mortgagee under a mortgage covering real property or
leasehold interest encumbered by the first option to purchase in favor of the
corporation, prior to commencing mortgage foreclosure proceedings, shall notify
the corporation in writing of:
(1) Any default of the mortgagor under the
mortgage within ninety days after the occurrence of the default; and
(2) Any intention of the mortgagee to foreclose
the mortgage under chapter 667 forty-five days prior to commencing mortgage
foreclosure proceedings;
provided that the mortgagee's
failure to provide written notice to the corporation shall not affect the
mortgage holder's rights under the mortgage.
The corporation shall be a party to any foreclosure action, and shall be
entitled to its share of appreciation in the real property as determined under
this chapter in lien priority when the payment is applicable, and if
foreclosure occurs within the ten-year period after the purchase, the
corporation shall also be entitled to all proceeds remaining in excess of all
customary and actual costs and expenses of transfer pursuant to default,
including liens and encumbrances of record; provided that the person in default
shall be entitled to an amount that shall not exceed the sum of amounts
determined pursuant to subsection [(a)(1)(B) and (C)] (1)(A) and (B).
(g) The provisions of this section shall be
incorporated in any deed, lease, agreement of sale, or any other instrument of
conveyance issued by the corporation. [In
any sale by the corporation of real property for which a subsidy or deferred
sales price was made by the corporation, the amount of the subsidy or deferred
sales price described in subsection (a)(4)(B), a description of the cost items
that constitute the subsidy or deferred sales price, and the conditions of the
subsidy or deferred sales price shall be clearly stated at the beginning of the
contract document issued by the corporation.
In any sale in which the corporation's share of appreciation in real
property is a restriction, the terms of the shared appreciation equity program
shall be clearly stated and included as an exhibit in any deed, lease,
agreement of sale, or any other instrument of conveyance.]
(h) This section need not apply to market-priced units in an economically integrated housing project, except as otherwise determined by the developer of the units; provided that preference shall be given to qualified residents in the initial sale of market-priced units.
(i) The corporation is authorized to waive any of the restrictions set forth in this section in order to comply with or conform to requirements set forth in federal law or regulations governing mortgage insurance or guarantee programs or requirements set forth by federally chartered secondary mortgage market participants.
(j) Notwithstanding any law to the contrary, if
real property is purchased by a qualified nonprofit housing trust pursuant to
subsection (b), the housing trust shall establish new buyback restrictions for
the purpose of maintaining the unit as affordable for [as long as
practicable, or as otherwise required by the corporation] in perpetuity.
(k) A qualified nonprofit housing trust shall report the status and use of its housing units to the corporation by November 30 of each calendar year."
SECTION 3. Section 201H-49, Hawaii Revised Statutes, is amended to read as follows:
"[§201H-49]
Real property; restrictions on use.
(a) Real property purchased under
this chapter shall be occupied by the purchaser at all times [during the
ten-year restriction period] as set forth in section 201H-47, except
in hardship circumstances where the inability to reside on the property arises
out of unforeseeable job or military transfer, a temporary educational
sabbatical, serious illness of the person, or in other hardship circumstances
as determined by the corporation on a case-by-case basis.
The
corporation may waive the owner-occupancy requirement for a total of not more
than ten years after the purchase of the dwelling, during which time the
dwelling unit may be rented or leased.
Waivers may be granted only to qualified residents who have paid
resident state income taxes during all years in which they occupied the
dwelling, who continue to pay resident state income taxes during the waiver
period, and whose inability to reside on the property does not stem from a
natural disaster. [The ten-year
owner-occupancy requirement shall be extended by one month for every month or
fraction thereof that the owner-occupancy requirement is waived.]
The corporation shall adopt rules under chapter 91 to implement the letter and spirit of this subsection and to prescribe necessary terms and conditions. The rules shall include:
(1) Application and approval procedures for the waivers;
(2) Exceptions authorized by this subsection;
(3) The amounts of rents that may be charged by persons allowed to rent or lease a dwelling unit; and
(4) Schedules of fees needed to cover administrative expenses and attorneys' fees.
No qualified resident who fails to reoccupy a dwelling unit after any waiver period shall receive more than the maximum to which the person would be entitled under section 201H-47. Any person who disagrees with the corporation's determination under this section shall be entitled to a contested case proceeding under chapter 91.
(b) From time to time the corporation may submit
a verification of owner-occupancy form to the purchaser. Failure to respond to the verification in a
timely manner or violation of subsection (a) shall be sufficient reason for the
corporation, at its option, to purchase the unit as provided in section
201H-47(a)(1), (or) (2), [or (4),] as applicable.
(c) Any deed, lease, agreement of sale, or other instrument of conveyance issued by the corporation shall expressly contain the restrictions on use prescribed in this section.
(d) The restrictions prescribed in subsection (a) shall terminate and shall not attach in subsequent transfers of title if the corporation releases the restrictions when the real property is financed under a federally subsidized mortgage program.
(e) Subsections (a) to (c) need not apply to market-priced units in an economically integrated housing project, except as otherwise determined by the developer of the units; provided that preference shall be given to qualified residents in the initial sale of market-priced units.
(f) The corporation shall be authorized to waive any of the restrictions set forth in this section in order to comply with or conform to requirements set forth in federal law or regulations governing mortgage insurance or guarantee programs or requirements set forth by federally chartered secondary mortgage market participants."
SECTION 4. Section 201H-23, Hawaii Revised Statutes, is amended to read as follows:
"[§201H-23] For-sale developments. [[](a)[]] Any law to the contrary notwithstanding, new
multifamily for-sale housing condominium developments of seventy-five units or
more per acre on privately owned lands and privately financed without federal,
state, or county financing assistance or subsidies, including tax credits,
shall:
(1) Be exempt from the corporation's shared
appreciation equity program;
(2) Be subject to three-year occupancy
requirements and transfer restrictions; provided that the three-year occupancy
requirement shall begin upon the sale of each unit; and
(3) Not be subject to the [ten-year occupancy]
requirements and transfer restrictions in sections 201H-47 and 201H-49,
respectively;
provided that, in order for
paragraphs (1), (2), and (3) to apply, the primary purpose of constructing the
new multifamily for-sale housing condominium development of seventy-five units
or more per acre shall be to augment the existing affordable housing unit
inventory in the State and not for the purpose of satisfying any affordable
housing or reserved housing requirement under this chapter, section 206E-4(18),
or any other law or ordinance.
[[](b)[]] As used in this section:
"Affordable
housing" means the same as defined under section 201H-57.
"Reserved housing" means the same as defined under section 206E-101."
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act shall take effect on July 1, 2026.
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INTRODUCED BY: |
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Report Title:
Local Housing Market; Affordability; Wages; Income; Cost of Living
Description:
Establishing a Local Housing Market that is tied to Hawaii State resident's incomes and not the global economy. Thus providing housing options that are affordable relative to wages for residents of the State.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.