Act 210 / HB 1740
What this bill means for Hawai‘i homes to stay in Hawai‘i hands
It’s no secret that Hawai‘i has accessibility issues when it comes to housing. State-government departments like the Hawai‘i Housing Finance and Development Corporation (HHFDC) have constantly been working to create incentives for affordable housing builders to increase the housing stock—most recently with the Alternative Housing Pathways program (Act 38) that was established in 2024. Over the years, Hawai‘i has seen numerous programs with specific limitations and rules and amendments that all attempt to perfect the process of keeping affordable Hawai‘i homes in the hands of kama‘aina who need it. With the different bills, statutes, and resulting programs, understanding how this process works can be difficult to navigate.
House Bill 1740, now Act 210, was recently signed into law by Governor Josh Green and seeks to address the frustrating pattern of state-supported homes—meant to help working kama‘aina—ending up in the hands of those who capitalize on the below-market price and take away opportunities for housing from those who need it most.
In order to understand why Act 210 is designed the way it is, we need to take a look at the history of Workforce and Affordable Housing programs and what we’ve learned.
Chapter 201H of the HRS
To get an idea of the different laws and programs that factor into the development of affordable housing, let’s start with Chapter 201H of the Hawai‘i Revised Statutes (HRS). HRS are the codified, statutory laws of the State.
In the simplest terms, 201H is the state law that allows developers to produce workforce and affordable housing units more efficiently than the standard processes. Chapter 201H allows HHFDC to help developers process requests to expedite their review process and seek exemptions from certain planning, zoning and construction standards. In addition, the HHFDC may offer financial incentives, such as low-income housing tax credits, tax-exempt revenue bond allocations, and low-interest loans for developers to build this housing.
While the responsibility to initiate this process falls on the developers (and project approvals are not guaranteed), 201H opens the door to opportunities to create more affordable housing.
Think of this like the fast pass at a theme park: if the builders were standing in line for the Housing in Hawai‘i waterslide, they could have the option to use the fast pass, which in this case allows them to streamline the process as long as they meet requirements, to get to the front of the line and go down the slide (and build affordable housing) faster.
Act 38
Act 38 was passed in 2024 as Senate Bill 2066 and amended Section 201H-38 (also known as the “Nuclear Option”) of the HRS to establish an “alternative pathway” for affordable housing developments. Under this pathway, all units in a development must be set aside for Hawai‘i residents who do not own other residential properties, live in the State as their primary residence, and are owner-occupants. The Act also states that the builder cannot impose stricter income requirements than those of the State.
The amendments established HHFDC’s streamlined review process for exemptions that we have today—given that the project does not violate any health and safety standards or rules set by the public utilities commission and board of water supply.
Let’s say the original fast pass requirements were too lax, and now people who shouldn’t be using the fast pass lane were crowding the slide and making it difficult for everyone to ride the waterslide. Act 38 added some rules—now you can only get fast pass access if you are wearing an orange swimsuit.
HB1740 / Act 210
If so few people owned orange swimsuits, then the fast pass lane would be unused, which defeats the purpose of it in the first place. That is where Act 210 comes in. It creates rules that account for those who might not be able to wear an orange swimsuit but still need fast pass access—essentially creating a more equitable system for fast pass access.
Act 210 amends Act 38, which was still too restrictive to incentivize construction of workforce housing. For builders, the zoning limits impose major financial obstacles to affordable housing. The rule requiring all units be set aside for Hawai‘i residents who do not own other properties may sound like a one-size-fits-all solution for those looking to create more available housing, but it eliminates a large pool of prospective buyers—namely homeowners who may be looking to move—which drives up the cost to build without proving profitability for potential financial backers. Under this pathway, builders would need to put more money than they might have available into a project that could end up being more costly than it’s worth.
For residents, this Act poses an obstacle to “moving up the ladder.” For example, a young couple—Makoa and Mika—buys their first one-bed, one-bath apartment right after getting married. Five years later, their careers are starting to take off, and they may want to start a family and need more room. Makoa and Mika both make around $60,000 a year working in accounting, totaling their two-person household AMI at around 100%—well within the workforce range. Despite making enough money that they don’t qualify for programs like LIHTC, they still cannot afford market priced two-bedroom apartments.
Additionally, now that they own the one-bedroom apartment, they would not qualify for HHFDC’s affordable housing projects because of the restriction on owning residential property.
Section one of Act 210 introduces the law and explains major current issues with housing projects created with affordability intended for a specific income bracket of people in Hawai‘i:
When there are time restrictions on affordable housing that require the owner to live in the space for a certain number of years, units may later be sold or rented out by the owner without considering whether the new occupant is a local resident actually living in Hawai‘i. If Makoa and Mika’s one-bedroom apartment was built under Section 201H-38, they would not be able to get out of the contract a year later, and their family would not have the space to grow.
The current restrictions placed on owners of these properties may be so restrictive that they limit mobility for local households. Makoa and Mika may feel pressured to wait until they are in a better position to move to a bigger house before deciding to have a baby.
This bill aims to address these issues by:
Removing some financial screenings and ownership qualifications for prospective buyers
Allowing Hawai‘i residents to own one other residential property and still qualify for these affordable properties, but they must sell it within two years of buying and qualifying for the affordable one
Amending certain exemptions for these projects if they satisfy requirements related to employment, owner-occupancy, and deed restrictions.
Section two of HB1740 amends the definition of a “qualified resident” to mean a citizen or legal resident of the U.S. that is over 18 years old and physically resides in the unit purchased under Chapter 201H. It includes the amendment mentioned above that allows the qualified resident to own at most one other residential property, given that they sell it within two years of buying the affordable unit.
So Makoa and Mika now have the opportunity to sell their one-bedroom apartment while moving into the two-bedroom apartment in a new development—they have more options available to them, which creates a healthier housing ecosystem.
Section three amends some of the requirements for these affordable projects, namely the owner-occupancy requirement. It basically revises the original 10-year occupancy requirement, saying that 80% of units in an affordable housing development must be sold to qualified residents that will occupy it for five years.
Now, the builder is able to offset the costs of the affordable development by selling 20% of the total units at market-price, and Makoa and Mika can sell their one-bedroom in that affordable development after qualifying for an affordable two-bedroom apartment in a new building.
Additionally, once the unit is sold, there are perpetual deed restrictions that apply to qualified residents of the state. In effect, it provides for the creation of a residents-only housing market that will be insulated from outside investments. This means there are rules attached to the property forever:
The unit must always be occupied by someone physically living in Hawai‘i, except in any hardship conditions—specifically medical related
If the owner chooses to rent out the unit, the minimum lease term has to be for one year—meaning short-term rentals or Airbnbs are not allowed
If the owner chooses to sell the unit, the same resident “qualifications” apply
Basically, these new rules aim to ensure that the affordable units serve the same local residents that need it forever, and not just for the first buyer.
So when James wants to purchase Makoa and Mika’s apartment after moving back to Hawai‘i after graduating college, the same rules apply: he must be a resident physically living in the State and occupy the space for at least five years.
Perpetual Deed Restrictions
Some may think that imposing these perpetual deed restrictions are too limiting for affordable properties. But we have seen many past cases with projects that were intended to serve the workforce community (individuals with annual income under 140% AMI) ending up occupied by residents whose income falls outside of the AMI requirements or by visitors to the state who don’t actually live in the units year round.
801 South is one example in which several owners re-sold their properties to turn a profit on housing that was specifically created for below-market buyers. 801 South was the first affordable housing development of its kind, so there weren’t as many restrictions on buyer qualifications, owner-occupancy, and reselling as there are now. The new rules imposed by HB1740 aim to prevent these cases of inaccessibility happening again.
How will this help?
There is no one-size-fits-all solution to the housing crisis—it’s clear that some of the past attempts at creating housing that is attainable for the locals who need it have not been perfect, and we’ve overlooked some holes that end up introducing issues further down the line. This bill integrates some of the lessons learned from past attempts at streamlining the process of affordable housing, from development to occupancy and beyond.