The Hawaii state legislature has taken a major step to expand rental housing options for low and moderate income households by passing a package of $570 million in new investments to state housing development programs. The new funding, much of which will be made available to developers through an excise tax exemption, will produce an estimated 25,000 rental homes. House Bill 2748 (HB2748) passed both chambers on April 24 and now heads to Governor David Ige (D) for his signature.
Much of the new housing production will be achieved through a $200 million appropriation to the state’s Rental Housing Revolving Fund, which provides equity gap financing through grants and loans to developers who will build housing affordable at or below 80% of the area median income (AMI). The Rental Housing Revolving Fund had a balance of $156 million at the end of 2017, so this action amounts to a doubling of the funds available for housing production. An additional $10 million is provided to the Dwelling Unit Revolving Fund, which provides interim construction financing for rental housing development.
HB2748’s largest allocation comes from $360 million of excise tax exemptions for developers of rental housing. The bill authorizes a budget of $30 million for these tax breaks each year for the next twelve years. Developers using this tax credit must provide rents affordable to households at 140% of AMI, with 20% of all overall program funding set aside for housing with rents affordable at or below 80% of AMI. Legislators who advocated for this tax exemption speak to the importance of supporting middle income households who do not have enough wealth for Hawaii’s expensive housing market but are not eligible for subsidized housing programs. This argument ignores the fact that Hawaii’s extremely low income households—those living at or below 30% of AMI—have the highest rates of housing cost burdens and the most severe shortage of housing among all income groups on the islands.
To address the crisis for Hawaiians with the lowest incomes, HB2748 also includes $50,000 appropriated to the Hawaii Housing Finance and Development Corporation to study the housing needs of very and extremely low income households. The needs assessment will specifically focus on Hawaiians with disabilities, those who are functionally challenged, and those who have no income at all. Additionally, funding to support people who are homeless are expected to be announced prior to the legislature’s adjournment in early May.