HB948

SECTION 1. The purpose of this Act is to encourage the development of affordable rental housing units by streamlining the review and approval of affordable housing projects and providing financing incentives.

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Affordable housing development exemption. (a) There shall be an exemption from the taxes imposed by this chapter for the development of affordable housing. The Hawaii housing finance and development corporation may certify for exemption any qualified person involved with the planning, design, financing, construction, or marketing of affordable housing units developed by a private developer upon receipt of an application; provided that in the case of projects involving the development of market-price as well as affordable housing units, the exemption under this section shall apply exclusively to the units developed as affordable housing units as defined in subsection (e).

(b) All claims for exemption shall be filed with and certified by the Hawaii housing finance and development corporation and forwarded to the department of taxation. The Hawaii housing finance and development corporation shall not be considered a governmental contracting party when it approves any claim for exemption for the purposes of section 104-2.

(c) The exemption under this section shall apply to all amounts received by any certified person for the planning, design, financing, construction, or marketing in the State of affordable housing units as described in subsection (a), and on which actual construction has started between July 1, 2007, and December 31, 2008, and which is completed by June 30, 2010, as verified by the Hawaii housing finance and development corporation; provided that the exemption shall not be applied until verification by the Hawaii housing finance and development corporation has been completed; provided further that in the event that the developer is delayed or hindered from completing the project by reason of floods, earthquakes (or other acts of nature), strikes, lockouts, inability to procure materials, electrical power failures, riots, insurrection, war, civil or criminal proceedings, injunctions, writs, appeals, stays, or other reason of a like nature, that is not the fault of, or capable of being prevented by the developer, then the June 30, 2010 completion deadline may be extended for a period equivalent to the period of the delay. In the event of a delay, the developer shall submit verification of the date of commencement as well as the date of cessation of any of the delaying events, to the Hawaii housing finance and development corporation for verification.

(d) The exemption shall apply only to projects containing the first two thousand five hundred affordable housing units that are certified and completed by June 30, 2010. The amount of the exemption shall not exceed $4,000 in taxes exempted per affordable housing unit.

(e) For the purposes of this section:

"Actual construction" means the date that the first permit is issued for the development of the project, including permits for off-site improvements that may be required by the county zoning or land use agency.

"Affordable housing units" means housing units that are sold or rented at rates affordable to households earning up to one hundred forty per cent of the area median income as determined by the United States Department of Housing and Urban Development.

"Completion" means the date of the notice of completion for the affordable housing unit or the building or buildings that the affordable housing unit is located within.

(f) The provisions of this section shall apply to property subject to chapter 238."

SECTION 3. Section 201H-3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There is created a board of directors of the Hawaii housing finance and development corporation consisting of nine members, of whom six shall be public members appointed by the governor as provided in section 26-34. At least four of the public members shall have knowledge and expertise in public or private financing and development of affordable housing. Public members shall be appointed from each of the counties of Honolulu, Hawaii, Maui, and Kauai[.]; provided that each member from the counties shall be a person appointed from a list of nominees submitted by the continuum of care system of each county. Each county continuum of care system shall submit three nominees. For purposes of this section, "continuum of care system" shall have the same meaning that it does in Title 24, Code of Federal Regulations, section 586.5. At least one public member shall represent community advocates for low-income housing, affiliated with private nonprofit organizations that serve the residents of low-income housing. The public members of the board shall serve four-year staggered terms; provided that the initial appointments shall be as follows:

(1) Two members to be appointed for four years;

(2) Two members to be appointed for three years; and

(3) Two members to be appointed for two years.

The director of business, economic development, and tourism and the director of finance, or their designated representatives, and a representative of the governor's office, shall be ex officio voting members. The corporation shall be headed by the board."

SECTION 4. Section 201H-36, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) In accordance with section 237-29, the corporation may approve and certify for exemption from general excise taxes any qualified person or firm involved with [a] the planning, design, financing, construction, or marketing of a proposed newly constructed, or moderately or substantially rehabilitated project:

(1) Developed under this part;

(2) Developed under a government assistance program approved by the corporation, including but not limited to the United States Department of Agriculture 502 program and Federal Housing Administration 235 program;

(3) Developed under the sponsorship of a private nonprofit organization providing home rehabilitation or new homes for qualified families in need of decent, low-cost housing; or

(4) Developed by a qualified person or firm to provide affordable rental housing where at least fifty per cent of the available units are for households with incomes at or below eighty per cent of the area median family income as determined by the United States Department of Housing and Urban Development, of which at least twenty per cent of the available units are for households with incomes at or below sixty per cent of the area median family income as determined by the United States Department of Housing and Urban Development.

(b) All claims for exemption under this section shall be filed with and certified by the corporation and forwarded to the department of taxation. Any claim for exemption that is filed and approved, shall not be considered a subsidy for the purpose of this part. The corporation shall not be considered a contracting party when it approves any claim for exemption for the purposes of section 104-2."

SECTION 5. Section 201H-41, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) In any county, the corporation may develop or may enter into agreements to develop housing projects with an eligible developer if in the corporation's reasonable judgment a project [~~is primarily designed for lower income housing.~~] provides a reasonable number of lower income housing units. The agreement may provide for the housing to be placed under the control of the corporation, or to be sold by the corporation, or to be sold to the corporation [~~as soon as the units are completed~~] or to be sold to an eligible purchaser, or rented to an eligible renter, when the units are available for occupancy and shall contain terms, conditions, and covenants as the corporation, by rules, deems appropriate. Every agreement shall provide for the developer or the general contractor to furnish a performance bond in favor of the corporation, assuring the timely and complete performance of the housing project[.]; provided that this requirement may be subordinated for purposes of financing. Sureties on the bond shall be satisfactory to the corporation."

SECTION 6. Section 201H-202, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201H-202[]] Rental housing trust fund. (a) There is established the rental housing trust fund to be administered by the corporation.

(b) An amount from the fund, to be set by the corporation and authorized by the legislature, may be used for administrative expenses incurred by the corporation in administering the fund; provided that fund moneys may not be used to finance day-to-day administrative expenses of projects allotted fund moneys.

(c) The following may be deposited into the fund: appropriations made by the legislature, private contributions, repayment of loans, interest, other returns, and moneys from other sources.

(d) The fund shall be used to provide loans or grants for the development, pre-development, construction, acquisition, preservation, and substantial rehabilitation of rental housing units. Permitted uses of the fund may include but are not limited to planning, design, land acquisition, costs of options, agreements of sale, downpayments, equity financing, capacity building of nonprofit housing developers, or other housing development services or activities as provided in rules adopted by the corporation pursuant to chapter 91. The rules may provide for a means of recapturing loans or grants made from the fund if a rental housing project financed under the fund is refinanced or sold at a later date. The rules may also provide that moneys from the fund shall be leveraged with other financial resources to the extent possible.

[~~(e) Moneys available in the fund shall be used for the purpose of providing, in whole or in part, loans or grants for rental housing projects in the following order of priority:~~

~~(1)~~ Projects or units in projects that are allocated low‑income housing credits pursuant to the state housing credit ceiling under section 42(h) of the Internal Revenue Code of 1986, as amended, or projects or units in projects that are funded by programs of the United States Department of Housing and Urban Development and United States Department of Agriculture Rural Development wherein:

~~(A)~~ At least fifty per cent of the available units are for persons and families with incomes at or below eighty per cent of the median family income of which at least five per cent of the available units are for persons and families with incomes at or below thirty per cent of the median family income; and

~~(B)~~ ~~The remaining units are for persons and families with incomes at or below one hundred per cent of the median family income;~~

~~provided that the corporation may establish rules to ensure full occupancy of fund projects; and~~

~~(2)~~ Mixed-income rental projects or units in a mixed‑income rental project wherein all of the available units are for persons and families with incomes at or below one hundred forty per cent of the median family income.]

(e) To the extent possible, at least five per cent of the units developed from the fund allocated to construction shall be reserved for persons or households with incomes at or below thirty per cent of the median income.

(f) The corporation shall submit an annual report to the legislature no later than twenty days prior to the convening of each regular session describing the projects funded and, with respect to rental housing projects targeted for persons and families with incomes at or below thirty per cent of the median family income, its efforts to develop those rental housing projects, a description of proposals submitted for this target group and action taken on the proposals, and any barriers to developing housing units for this target group.

(g) For the purposes of this subpart, the applicable median family income shall be the median family income for the county or standard metropolitan statistical area in which the project is located as determined by the United States Department of Housing and Urban Development, as adjusted from time to time.

(h) The corporation may provide loans and grants under this section; provided that the corporation shall establish loan-to-value ratios to protect the fund from inordinate risk and that under no circumstances shall the rules permit the loan‑to-value ratio to exceed one hundred per cent; and provided further that the underwriting guidelines include a debt-coverage ratio of not less than 1.0 to 1.

(i) For the period commencing July 1, 2005, through June 30, 2007, the fund may be used to provide grants for rental units set aside for persons and families with incomes at or below thirty per cent of the median family income in any project financed in whole or in part by the fund in proportion of those units to the total number of units in the project. At the conclusion of the period described in this subsection, the corporation shall report to the legislature on the number and use of grants provided and whether the grants were an effective use of the funds for purposes of developing rental housing for families at or below thirty per cent of the median family income."

SECTION 7. Section 201H-203, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201H-203[]] Eligible applicants for funds. Eligible applicants for funds shall include nonprofit and for-profit organizations, limited liability companies and partnerships, partnerships, and government agencies, who are qualified in accordance with rules adopted by the corporation pursuant to chapter 91."

SECTION 8. Section 201H-204, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) Activities eligible for assistance from the fund shall include but not be limited to:

(1) New construction, rehabilitation, or preservation of [~~low-income~~] rental housing units for persons and families with incomes at or below one hundred forty per cent of the median family income that meet the criteria for eligibility described in subsection (c);

(2) The leveraging of moneys with the use of fund assets;

(3) Pre-development activity grants or loans to nonprofit organizations; and

(4) Acquisition of rental housing units for the purpose of preservation as [~~low-income or very low-income housing.~~] rental housing for persons and families with incomes at or below one hundred forty per cent of the median family income.

(b) [~~Preference shall be given to projects producing~~] An eligible project shall produce units in at least one of the following categories:

(1) Multifamily units;

(2) Attached single-family units;

(3) Apartments;

(4) Townhouses;

(5) Housing units above commercial or industrial space;

(6) Single room occupancy units;

(7) Accessory apartment units;

(8) Employee housing;

(9) United States Department of Housing and Urban Development mixed finance development of public housing units; and

(10) Other types of units meeting the criteria for eligibility set forth in subsection (c)."

SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 10. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	948
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII