HB3202 HD1

Report Title:

Affordable Housing; Counties; Inclusionary Zoning

Description:

Authorizes the counties to adopt inclusionary requirements in residential housing developments. (HB3202 HD1)

HOUSE OF REPRESENTATIVES	H.B. NO.	3202
TWENTY-THIRD LEGISLATURE, 2006		H.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

relating to affordable housing.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The joint legislative housing and homeless task force (task force) spent numerous hours conducting research and meeting with various stakeholders to discuss Hawaii's housing crisis. Bold and creative steps must be taken immediately to provide the thirty-six thousand housing units needed over the next five years for affordable housing for households earning one hundred forty per cent or less of the adjusted median family income.

The task force further found that the counties were inconsistent in their approaches to encouraging the development of affordable housing and ensuring that families of all income groups have access to housing. The task force recommended that a model inclusionary zoning law be adopted to facilitate the counties' efforts to develop affordable housing through public-private partnerships.

The purpose of this Act is to authorize the counties to adopt inclusionary requirements in residential housing developments.

SECTION 2. Chapter 46, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part . INCLUSIONARY ZONING

§46-A Purpose. The purpose of this part is to:

(1) Mitigate the impact of market-rate housing construction on the limited supply of land suitable for housing, by preventing county residential zoning ordinances from having the effect of excluding housing that meets the needs of all economic groups within the county and state;

(2) Encourage smart growth to reduce urban sprawl and long commutes between residential centers and places of work;

(3) Meet the needs of low- and moderate-income families who are unable to rent or purchase affordable homes; and

(4) Prevent overcrowding and deterioration of the limited supply of affordable housing, and thereby promote the public health, safety, and general welfare.

§46-B Definitions. For the purposes of this part:

"Applicant" means an applicant for a building permit for a covered project.

"Covered project" means a project or development for which a building permit is requested and to which the ordinance applies.

"Ordinance" means an inclusionary zoning ordinance adopted by a county that includes all the provisions of this part.

§46-C Applicability. (a) Each county is authorized to adopt an inclusionary zoning ordinance that includes all provisions of this part.

(b) The ordinance shall apply to any building permit requests for a project that will create:

(1) Ten or more single-family dwelling units through new construction or substantial rehabilitation of existing residential structures;

(2) Twenty or more multi-family dwelling units through new construction, existing condominium conversion, or substantial rehabilitation of existing residential structures; and

(3) Ten or more dwelling units through adaptive reuse or conversion of a nonresidential use to residential use.

(c) Multiple projects by the same applicant or responsible party within any consecutive twelve-month period that, in the aggregate, equal or exceed the criteria in subsection (b) shall be subject to the ordinance.

(d) Any project meeting the criteria under this section shall be deemed a covered project except:

(1) Projects that are the subject of development agreements currently in effect with a county and approved prior to the effective date of this Act;

(2) Projects that are within the jurisdiction of a development authority, including the department of Hawaiian home lands, which has adopted requirements for affordable housing for any residential development within its jurisdiction;

(3) Projects authorized by the Hawaii housing finance and development administration that meet its affordable housing requirements for the development; and

(4) Building permit applications for which a use permit and any extension was approved prior to the effective date of this Act.

§46-D Inclusionary requirements. (a) For a covered project where units are offered for rent, at least fifteen per cent of all dwelling units in the project shall be affordable rental units. These affordable rental units shall be constructed or completed no later than the market rate units in the project. Of the affordable rental units:

(1) Fifty per cent shall be available at rents affordable to households earning fifty per cent or less of the adjusted median family income; and

(2) Fifty per cent shall be available at rents affordable to households earning between fifty and eighty per cent of the adjusted median family income.

(b) The county may waive all or part of the requirements of subsection (a) upon a showing by the applicant that:

(1) Imposition of the requirement will cause undue hardship;

(2) Government subsidies or incentives are not sufficient to mitigate the undue hardship; and

(3) The project will contribute significantly to affordable housing opportunities within the county.

(1) If the average sales price of the project units is affordable to households earning eighty per cent or less of the adjusted median family income, ten per cent of the units shall be affordable to households earning fifty per cent or less of the adjusted median family income;

(2) If the average sales price of the project units is affordable to households earning one hundred per cent or less of the adjusted median family income, fifteen per cent of the units shall be affordable to households earning eighty per cent or less of the adjusted median family income;

(3) If the average sales price of the project units is affordable to households earning one hundred forty per cent or less of the adjusted median family income, twenty per cent of the units shall be affordable to households earning one hundred per cent or less of the adjusted median family income; and

(4) If the average sales price of the project units is affordable to households earning above one hundred forty per cent of the adjusted median family income, twenty per cent of the units shall be affordable to households earning one hundred and forty per cent or less of the adjusted median family income;

provided that if the applicant designates twenty-five per cent or more of the units for households earning one hundred and forty per cent or less of the adjusted median family income, or twenty per cent or more of the units for households earning one hundred per cent or less of the adjusted median family income, the applicant shall be entitled to an additional density bonus of five per cent for the proposed development, or the county may substitute an incentive of financial value equal to the density bonus that the county determines will further affordable housing opportunities.

§46-E Alternative equivalent proposal. (a) An applicant may submit a proposal to meet the inclusionary requirements under section 46-D by an alternative equivalent action that may include but is not limited to dedication of vacant land, the construction of affordable units on another site, or acquisition and enforcement of required rental or sales price restrictions consistent with section 46-D on existing standard dwelling units.

(b) The proposal shall show how the alternative action will further affordable housing opportunities in the county to an extent equal to or greater than compliance with the inclusionary requirement of section 46-D or payment of the appropriate in-lieu housing fee.

(c) Proposals shall be considered on a case-by-case basis by the county council and may be approved by the county council if the county council determines that the proposed alternative will further affordable housing opportunities in the county to an extent equal to or greater than compliance with the inclusionary requirements under section 46-D.

§46-F Housing fee in-lieu of inclusionary requirements.

(a) An applicant for a single-family residential project may meet the inclusionary requirements of section 46-D by payment of an in-lieu fee.

(b) An applicant for a multi-family residential project may propose to pay the in-lieu fee instead of meeting the inclusionary requirements of section 46-D by submitting at the time of application:

(1) A request to pay the in-lieu fee;

(2) A report identifying all conditions affecting the project that prevent the applicant from constructing the affordable units;

(3) Sufficient independent data, including appropriate financial information, to support the applicant’s claim that certain conditions prevent the applicant from constructing the required affordable units; and

(4) A detailed analysis of why government zoning and other development waivers or concessions cannot mitigate the conditions that the applicant identifies as preventing the applicant from constructing the affordable units.

The county planning director and housing director shall review the requests and prepare a recommendation for the county council. The county council shall consider requests on a case-by-case basis and may approve a request if the council determines that there are conditions affecting the project that prevent the applicant of a multi-family residential development from meeting the requirements of section 46-D and that payment of the in-lieu fee will further affordable housing opportunities.

§46-G In-lieu fee; calculation; form; time of payment.

(a) The housing in-lieu fee shall be based on a percentage of the projected construction costs of market rate dwelling units. The calculation and amounts of the fee shall be established by resolution of the county council. For attached single-family residential and rental residential development projects, construction costs of market rate dwelling units shall be separately calculated for each dwelling unit and the appropriate fee paid for each unit within the residential project.

(b) The housing in-lieu fee may be satisfied either by cash payment or, upon approval of the county council, by an alternative that will provide the county with a value equal to or greater than the amount of the required in-lieu fee.

(c) The housing in-lieu fee shall be paid prior to the issuance of a building permit, or upon execution by the applicant and owner, if different, of the county’s secured building agreement recorded against the property at the time of final inspection or issuance of the certificate of occupancy.

(d) For purposes of this section, "construction costs" means the estimated cost per foot of construction, as established by the building department of the county for use in the setting of regulatory fees and building permits, multiplied by the total square footage to be constructed for each dwelling unit, minus square footage for garage area.

§46-H Affordable housing concessions or incentives. (a) For covered projects that meet the inclusionary requirement through the actual construction of affordable units, the county shall provide the following concessions or incentives through the process set forth below:

(1) Prior to the submittal by an applicant of any formal application for a general plan amendment, rezoning, use permit, tentative subdivision or parcel map, or other permit or entitlement, and within ninety days of submittal by an applicant of a written preliminary conceptual development proposal describing and specifying the number, type, location, and size of the housing development, and identifying any density bonus, additional incentives, or concessions, waivers, or modifications of development or zoning standards necessary to make construction feasible for the proposed development, including the affordable units, the county council shall review the preliminary development proposal at a public hearing noticed in accordance with county ordinance, and indicate preliminary approval or disapproval of the proposed development and any requests for additional affordable housing incentives, concessions, waivers, or modification of development or zoning standards. Preliminary approval or disapproval shall not bind the county council and shall be subject to modification by the county council based upon a full review of all pertinent project information, including any environmental impact report presented at the public hearing of the application;

(2) Regardless of the original submittal date, county departments shall give priority to the processing of applications for covered projects over all other land use applications except those eligible for expedited processing under section 201G-118. Applications for covered projects that include affordable rental units shall be processed before applications for covered projects that include owner-occupied units;

(3) The payment of all county fees applicable to the affordable units in a covered project shall be deferred until the issuance of the certificate of occupancy;

(4) Using available funds, the county shall purchase and assume responsibility for marketing and selling an owner-occupied affordable unit that remains unsold upon the issuance of a certificate of occupancy. The developer shall be responsible for marketing and selling the affordable units until the issuance of a certificate of occupancy; and

(5) The county shall establish and provide a minimum density bonus for covered projects.

(b) The county council may, on a case-by-case basis, consider and provide a covered project with the following additional concessions or incentives:

(1) An additional density bonus or other incentives of equal financial value;

(2) Where not inconsistent with required building and safety code standards and necessary for the feasibility of the covered project, waiver or modification of county standards that have a direct impact on reducing total project costs, including but not limited to subdivision infrastructure requirements, set-asides for parks and public access, and impact fees. The developer shall be responsible for documenting that the waiver or modification is necessary for the feasibility of the project and is consistent with required building and safety code standards;

(3) Direct financial assistance in the form of a loan, revenue bonds or grants, as authorized by sections 46-15.1 and 46-15.2; and

(4) Deferral of payment of county fees on market rate units until the issuance of the certificate of occupancy for the unit.

(c) The county council may, on a case-by-case basis, consider providing additional concessions or incentives for covered projects that provide more affordable units than required by section 46-D.

§46-I Basic requirements for owner-occupied and affordable rental units. (a) Affordable units shall be comparable in the number of bedrooms, exterior appearance, and overall quality of construction to market rate units in the same covered project. Subject to the approval of the planning director and housing director, square footage of affordable units and interior features in affordable units may not be the same as or equivalent to those in market rate units in the same covered project; provided that the interior features are of good quality and are consistent with contemporary standards for new housing.

(b) Affordable units shall be dispersed throughout the covered project or, subject to the approval of the planning director and housing director, may be clustered within the covered project to further affordable housing opportunities.

§46-J Continued affordability. (a) Deeds of trust and other documents that are acceptable to the county and consistent with the requirements of this part shall be recorded against parcels with affordable units in covered projects, and shall be effective for a minimum of thirty years with respect to each owner-occupied affordable unit and in perpetuity for affordable rental units. The deeds of trust and other documents shall be recorded for these units prior to the issuance of certificates of occupancy, approval of the final inspection of the units, and finalization of regulatory agreements and, for owner-occupied units, prior to the issuance of resale restrictions.

(b) Notwithstanding any other provision in this part:

(1) The maximum sales price permitted on resale of an affordable unit intended for owner-occupancy shall not exceed the seller's purchase price, adjusted for the percentage increase in median income from the time the seller purchased the unit, plus the value of substantial structural or permanent fixed improvements to the property, plus the cost of a reasonable seller’s broker fee as determined by the housing director. For purposes of this paragraph, median income shall be calculated based upon the presumed occupancy levels used to determine affordable sales price; and

(2) The resale restrictions shall provide that in the event of the sale of an affordable unit intended for owner-occupancy, the county shall have the right to purchase or assign its right to purchase the affordable unit at the maximum price that could be charged to an eligible household.

(c) No household shall be permitted to occupy an affordable unit or purchase an affordable unit for owner-occupancy unless the purchaser has established residency within the county for not less than six months and has been approved by the county for income eligibility. The county may establish other criteria for eligibility for occupancy of affordable units.

§46-K Annual monitoring and transfer fees. (a) For each affordable rental unit provided under the ordinance, the current owner may be required to pay an annual monitoring fee for the term of required affordability. The fee shall be specified in the regulatory agreement required under the ordinance.

(b) For each owner-occupied affordable unit provided under the ordinance, the current owner may be required to pay a transfer fee for any change of ownership during the term of required affordability. The fee shall be specified in the resale restrictions required under this part.

§46-L Requirements for certificate of occupancy and final inspection. (a) An applicant shall satisfactorily complete the requirements under this part, including but not limited to onsite construction of affordable units, alternative equivalent action, or payment of the in-lieu fee, prior to the issuance of a temporary or permanent certificate of occupancy, approval of final inspection, or authorization for the release of utilities for any new dwelling unit in a covered project.

(b) An applicant shall make an acceptable showing to the county that an exemption is appropriate prior to the issuance of a temporary or permanent certificate of occupancy, approval of final inspection approved, or authorization for the release of utilities for a dwelling unit in a covered project. The county shall develop and implement regulations to ensure that initially exempt dwelling units remain in compliance with the terms of the exemption throughout the first two years of occupancy. An applicant of a dwelling unit found to be out of compliance at any time during a two-year period shall be required to pay one hundred twenty-five per cent of the current in-lieu fee for that dwelling unit, as specified by resolution of the county council. The payment shall not limit the county’s ability to proceed against any party pursuant the enforcement provisions under section 46-M or other applicable law.

§46-M Enforcement provisions. (a) It shall be unlawful, a public nuisance, and a misdemeanor for any person to sell or rent an affordable unit at a price or rent exceeding the maximum allowed under the ordinance or to a household not qualified under this part. Violation of this section shall be subject to a $500 fine per month from the date of original non-compliance until the affordable unit is in compliance with this section.

(b) The county prosecutor shall be authorized to:

(1) Abate violations of the ordinance;

(2) Enforce the provisions of the ordinance; and

(3) Enforce all implementing regulatory agreements and resale controls placed on affordable units,

by civil action, injunctive relief, and any other proceeding or method permitted by law.

(c) The remedies provided for under the ordinance shall be cumulative and not exclusive, and shall not preclude the county from any other remedy or relief to which it otherwise would be entitled under law or equity.

§46-N Appeal and adjustment process. (a) An applicant may appeal to the county council for a reduction, adjustment, or waiver of any requirement imposed under the ordinance based upon:

(1) The absence of any reasonable relationship or nexus between the impact of the development and either the amount of the fee charged or the inclusionary requirement; or

(2) Clear and convincing financial data or evidence relating to the character of the development or surroundings that the imposition of the fee charged or inclusionary requirement causes an undue hardship so as to render the project unfeasible and that government subsidies or incentives are not sufficient to mitigate the undue hardship.

(b) An applicant subject to the requirements of the ordinance who has received an approved tentative subdivision or parcel map, use permit, or similar discretionary approval and who submits a new or revised tentative subdivision or parcel map, use permit, or similar discretionary approval for the same property may appeal for a reduction, adjustment, or waiver of the requirements with respect to the number of lots or square footage of construction previously approved.

(c) Any appeal shall be made in writing and filed with the county clerk no later than ten days prior to the first public hearing on any discretionary approval or permit for the development. If discretionary approval or permit is not required, or if the action complained of occurs after the first public hearing on such permit or approval, then the appeal shall be filed within ten days after the action to which objection is raised. The appeal shall set forth in detail the factual and legal basis for the claim of waiver, reduction, or adjustment. The council shall consider the appeal at the public hearing on the permit application or at a separate hearing within sixty days after the filing of the appeal, whichever is later. The appellant shall bear the burden of presenting substantial evidence to support the appeal, including comparable technical information to support the appellant’s position. No waiver shall be approved by the county council for a new tentative subdivision or parcel map, use permit, or similar discretionary approval on property with an approved tentative subdivision or parcel map, use permit, or similar discretionary permit unless the county council finds that the new tentative subdivision or parcel map, use permit, or similar discretionary approval is superior to the approved project both in its design and its mitigation of environmental impacts. The decision of the county council shall be final. If a reduction, adjustment, or waiver is granted, any change in use within the project shall invalidate the waiver, adjustment, or reduction of the fee or inclusionary requirement."

SECTION 3. Section 46-123, Hawaii Revised Statutes, is amended to read as follows:

"[[]§46-123[]] General authorization. Any county by ordinance may authorize the executive branch of the county to enter into a development agreement with any person having a legal or equitable interest in real property, for the development of such property in accordance with this part; provided that such an ordinance shall:

(1) Establish procedures and requirements for the consideration of development agreements upon application by or on behalf of persons having a legal or equitable interest in the property, in accordance with this part;

(2) Designate a county executive agency to administer the agreements after such agreements become effective;

(3) Include provisions to require the designated agency to conduct a review of compliance with the terms and conditions of the development agreement, on a periodic basis, as established by the development agreement; [~~and~~]

(4) Include provisions establishing reasonable time periods for the review and appeal of modifications of the development agreement[.]; and

(5) For residential developments covered under part , describe the inclusionary requirements or alternative equivalents."

SECTION 4. Section 46-126, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) A development agreement shall:

(1) Describe the land subject to the development agreement;

(2) Specify the permitted uses of the property, the density or intensity of use, and the maximum height and size of proposed buildings;

(3) Provide, where appropriate, for reservation or dedication of land for public purposes as may be required or permitted pursuant to laws, ordinances, resolutions, rules, or policies in effect at the time of entering into the agreement; [~~and~~]

(4) Provide a termination date; provided that the parties shall not be precluded from extending the termination date by mutual agreement or from entering subsequent development agreements[.]; and

(5) Describe compliance with part for any residential development covered under part ."

SECTION 5. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act, which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 6. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2020.