STAND. COM. REP. NO. 3199

Honolulu, Hawaii

RE: H.B. No. 1741

H.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

Your Committees on Energy and Intergovernmental Affairs and Housing, to which was referred H.B. No. 1741, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO HOUSING,"

beg leave to report as follows:

The purpose and intent of this measure is to:

(1) Deem a county inclusionary mandate as a form of development exaction and treat the mandate as a housing affordability impact fee, with certain exemptions;

(2) Prohibit a county from adopting, amending, or enforcing an inclusionary mandate or inclusionary mandates for residential or mixed-use development, under certain circumstances;

(3) Establish additional requirements for a needs assessment study for a county-imposed inclusionary mandate; and

(4) Establish a criterion that allows luxury residential projects or projects that receive certain discretionary value increases to be subject to inclusionary mandates.

Your Committees received testimony in support of this measure from the Housing Hawaiʻi's Future, Hawaii Appleseed Center for Law and Economic Justice, Hawaiʻi YIMBY, Grassroot Institute of Hawaii, Avalon Development Company, and one individual.

Your Committees received testimony in opposition to this measure from Locals In My Backyard Hawaiʻi and UNITE HERE! Local 5.

Your Committees received comments on this measure from the Office of Hawaiian Affairs and Aloha Independent Living Hawaii.

Your Committees find that research shows that inclusionary zoning can help produce income-restricted units, but only when requirements and incentives are balanced correctly. When mandates are set without clear data on feasibility or market impacts, they can suppress new construction, raise prices, or shift development toward fewer and more expensive homes and ultimately make affordability worse, not better. This measure responds to this challenge by requiring counties to rely on studies before imposing or enforcing inclusionary mandates, thereby ensuring that affordable housing policies do not result in a net loss of housing stock.

As affirmed by the records of votes of the members of your Committees on Energy and Intergovernmental Affairs and Housing that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 1741, H.D. 2, and recommend that it pass Second Reading and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Energy and Intergovernmental Affairs and Housing,

________________________________ STANLEY CHANG, Chair

________________________________ GLENN WAKAI, Chair