HB 1741

HOUSE OF REPRESENTATIVES
H.B. NO.
1741
THIRTY-THIRD LEGISLATURE, 2026
H.D. 2
STATE OF HAWAII
S.D. 1
C.D. 1
A BILL FOR AN ACT
RELATING TO HOUSING.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
���� SECTION 1.� The legislature finds that building homes
that local families can afford is essential to keeping Hawaii's communities
intact and perpetuating our way of life. �Inclusionary requirements, which ask
market-rate developments to contribute to the production of income-restricted
housing, have been an important county tool for decades and should be
strengthened by a clear evidentiary foundation.
���� Since
1992, Hawaii law has required counties to conduct a needs assessment study
before imposing development impact fees. �No comparable study has been required for
affordable housing requirements based on a percentage of units. �Yet just as fees for sewers and roads are
reflected in the cost of homes purchased by local working professionals,
including firefighters, teachers, and nurses, the cost of inclusionary
requirements is reflected in those prices. �Buyers and renters of market-rate homes are
entitled to know how much of their home cost is contributing to the county's
affordability policy.
���� In Sheetz
v. County of El Dorado, 144 S. Ct. 893 (2024), the United States Supreme
Court held that legislatively imposed land-use permit conditions, including
impact fees, must satisfy a two-part test of essential nexus and rough
proportionality. �Because inclusionary
mandates operate as permit-linked exactions, they are subject to the same
constitutional standards. A clear evidentiary record protects county
affordability policies from legal challenge.
���� The
legislature further finds that inclusionary mandates can, depending on their
design, reduce overall housing production, shift it away from the multi-family
and attached formats that most efficiently add units in already-urbanized
areas, and increase the share of luxury units by making lower-priced and
mid-market projects financially infeasible. �The required percentage, income targeting, and
available compliance options materially affect whether projects are financially
feasible and whether the policy delivers income-restricted units at scale. �Adequate production also reduces pressure on
the existing housing stock and expands options across income levels. �A financial feasibility analysis allows
counties to set inclusionary requirements at levels that produce affordable
units without suppressing the production needed to expand housing access for
local residents and families.
���� The
legislature additionally finds that an inclusionary requirement of ten per cent
or less is consistent with widely adopted practice, including in high-cost
housing markets. �This Act establishes
that benchmark as a threshold below which no additional study is required and
asks counties seeking to impose a higher requirement to support that decision
with a data-based assessment of housing needs and project feasibility.
���� This Act
is intended to support, not displace, county housing policy. �Counties retain full authority to design and
implement inclusionary requirements. �This
Act also ensures only that requirements above the threshold rest on a
foundation of disclosed data, financial feasibility analysis, and
constitutional findings.
���� Accordingly, the purpose of this Act
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)� Provide parameters
for a county's adoption or amendment of an inclusionary mandate for residential
or mixed-use development;
���� (3)� Establish
additional components for a needs assessment study for a county-imposed
inclusionary mandate; and
���� (4)� Condition the adoption or
amendment of a county inclusionary mandate above a specified threshold on
written findings of essential nexus and rough proportionality and a
determination of financial feasibility.
���� SECTION 2.� Chapter 46, Hawaii Revised Statutes, is
amended by adding a new section to part VIII to be appropriately designated and
to read as follows:
���� "�46-   � Inclusionary mandates; housing
affordability impact fee; needs assessment study.� (a)� Any county inclusionary mandate shall be
deemed a form of development exaction and shall be treated as a housing
affordability impact fee pursuant to this part.�
Beginning July 1, 2029, no county shall adopt or amend an inclusionary
mandate applicable to residential or mixed-use development unless the county
council has first approved, by ordinance or resolution, a needs assessment
study that:
���� (1)� Complies with this section and
section 46-143; and
���� (2)� Includes the analyses described in
subsection (b).
���� (b)� In addition to the requirements of section
46-143, the needs assessment study required by this section shall evaluate
the financial feasibility and general economic impacts of the proposed
inclusionary mandate to ensure it supports, and does not suppress, overall
housing production.� The needs assessment
study may also:
���� (1)� Disclose data sources and methodology;
���� (2)� Analyze various representative market-rate prototypes commonly
produced in the county, which may include single‑family, duplex,
townhome, condominium, and apartment formats;
���� (3)� Evaluate various compliance options, which may include on-site units,
off-site units, in-lieu fees, or land dedication; and
���� (4)� Publish a residential nexus and
affordability-gap analysis and summary tables of results.
���� (c)
�Beginning July 1, 2029, a county may
adopt or amend an inclusionary mandate on a residential or mixed-use
residential project only if:
���� (1)� The county makes written findings
demonstrating compliance with essential nexus and rough proportionality; and
���� (2)� A needs assessment study approved by
the county pursuant to this section finds that the applicable prototypes are
financially feasible under the inclusionary mandate.
���� (d)� Notwithstanding any other law to the
contrary, any inclusionary mandate enacted before July 1, 2029, shall be
unenforceable with respect to applications deemed complete on or after July 1,
2029, until a needs assessment study is conducted pursuant to this section and
section 46-143.� Once a needs assessment
study demonstrates compliance with subsection (c), enforcement of an
inclusionary mandate may resume prospectively for applications deemed complete
thereafter.
���� (e)� Each county shall provide a clear process by
which an applicant may contest the application of an inclusionary mandate or
any findings made under this section, including findings made under subsection
(c)(2).
���� (f)� This section shall not apply to:
���� (1)� Projects located on lands classified within the agricultural district or
conservation district pursuant to chapter 205;
���� (2)� Resort or vacation-rental construction, including any dwelling unit or
building that is used, intended, designed, or marketed, or that may be used for
transient accommodation purposes, including hotels, time shares, resort
condominiums, transient vacation units, or other transient accommodations as
defined by county ordinance or chapter 237D;
���� (3)� Conditions required by federal or state funding or financing programs;
voluntary commitments not required by county law, including codified voluntary
opt-in incentives programs established by county ordinance; or generally
applicable impact fees unrelated to inclusionary obligations;
���� (4)� Projects undertaken by, or subject to approvals, permits, exemptions,
rules, or actions of, the Hawaii housing finance and development corporation
under chapter 201H or Hawaii community development authority under chapter
206E;
���� (5)� Minor amendments to county ordinances, including amendments that repeal
ordinances, reduce regulatory burdens, or make changes solely for
administrative purposes; or
���� (6)� Any county inclusionary mandate that
requires ten per cent or less of the total dwelling units in a residential or
mixed-use development to be provided or funded as below-market-rate dwelling
units.
���� (g)� For purposes of this section:
���� "Inclusionary
mandate" means any county requirement that a development provide or fund
below-market-rate dwelling units on site or off site, pay an in-lieu fee,
dedicate land, or comply with equivalent exactions tied to permits, approvals,
or development agreements.
���� "Transient
accommodations" has the same meaning as in section 237D-1."
���� SECTION 3.� New statutory material is underscored.
���� SECTION 4.� This Act shall take effect upon its approval.
Report Title:
Inclusionary
Mandate; Housing Affordability Impact Fee; Needs Assessment Study; Essential
Nexus; Rough Proportionality; Financial Feasibility
Description:
Deems a
county inclusionary mandate as a form of development exaction and treats the
mandate as a housing affordability impact fee.�
Provides parameters for a county's adoption or amendment of an
inclusionary mandate for residential or mixed-use development.�
Establishes additional components for a needs assessment study for a
county-imposed inclusionary mandate.� Conditions
the adoption or amendment of a county inclusionary mandate for residential or
mixed-use development on written findings of essential nexus and rough
proportionality and a determination of financial feasibility.� (CD1)
The summary description
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not legislation or evidence of legislative intent.