SB735 SD1.DOC

SECTION 1. The legislature finds that in August 2007, Hawaii accepted an invitation by the United State Department of Housing and Urban Development to join the National Call to Action for Affordable Housing through Regulatory Reform. The Call to Action presented an opportunity for Hawaii to receive technical assistance from the federal government and collaborate with other states, counties, municipalities, and organizations to knock down the barriers imposed by governments in hopes of building more affordable housing. Governor Lingle convened a statewide task force comprised of representatives from the counties, business, labor, developers, architects, non-profit providers of services, the State, and the legislature to carry out the mission of the Call to Action and recommend solutions to address barriers to affordable housing.

The legislature recognizes that the need for more affordable housing in Hawaii remains a significant problem affecting all segments of society. The development of residential housing is bridled by significant varying regulations placed on the industry at both the state and county levels. Recent analysis shows that regulations and conditions placed on developers can potentially delay a project for up to seven years. This delay in time leads to a level of uncertainty for the housing industry, adds cost to the total development project, jeopardizes funding streams for affordable housing projects, and ultimately results in a more expensive home for the homebuyer or renter.

The purpose of this Act is to implement the legislative recommendations of the task force by requiring the counties to identify and designate affordable housing receiving zones to facilitate the development of affordable housing, particularly in transit oriented developments.

SECTION 2. Chapter 201H, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part . AFFORDABLE HOUSING RECEIVING ZONES

§201H-A Purpose. The purpose of this part is to encourage the development of affordable housing in transit oriented developments in the State by providing for the establishment of affordable housing receiving zones. The counties are best equipped to determine where affordable housing developments should be located within geographic areas designated for population growth as determined in general plans adopted by the counties pursuant to section 226-58.

§201H-B Definitions. As used in this part:

"Affordable housing" means housing that is affordable to households with incomes at or below one hundred forty per cent of the median family income as determined by the United States Department of Housing and Urban Development, or such other figure as authorized by the appropriate approving local authority.

"Affordable housing receiving zone" means an area nominated by, and within the jurisdiction of, a county government, and subsequently declared by the corporation to be eligible for the benefits of this part.

"Commission on transit oriented development" means the commission established pursuant to section 6 of S.B. No. 442, whose purpose is to provide oversight and ensure collaboration among transportation, housing, the environment, economic development, and other stakeholders in transit oriented development.

"Corporation" means the Hawaii housing finance and development corporation.

"Transit oriented development" means compact, mixed-use development near new or existing public transit facilities that serves, housing, transportation and neighborhood goals.

§201H-C Administration. The corporation shall administer this part and shall have the following powers and duties, to:

(1) In consultation with the commission on transit oriented development, establish criteria for determining what areas qualify as affordable housing receiving zones; provided that no affordable housing receiving zone shall include any lands designated important agricultural lands or conservation lands; provided further that the criteria shall be the minimum required for implementation of the purpose of this part;

(2) Monitor the implementation and operation of this part;

(3) Conduct a continuing evaluation program of affordable housing receiving zones;

(4) Assist counties in obtaining the reduction of rules within affordable housing receiving zones;

(5) Submit annual reports evaluating the effectiveness of the program and any recommendations for legislation to the legislature and the governor;

(6) Administer and enforce the rules adopted by the corporation; and

(7) Administer this part in such a manner that the area to be designated as an affordable housing receiving zone will most benefit the area and the State.

§201H-D Affordable housing receiving zone designation. (a) The governing body of each county shall identify, in the form of a written application to the corporation, areas that may be declared affordable housing receiving zones. Each application shall include a description of the location of the area or areas in question, and a general statement identifying proposed local incentives to complement state and federal incentives, if any.

(b) The corporation shall approve the designation of up to twenty areas in each county as affordable housing receiving zones for a period of twenty years. The corporation shall adopt rules setting forth appropriate standards for the designation of affordable housing receiving zones. Private landowners may request that their lands be included in the zones in the form of an overlay zone such that they lose no other previous or future authorized land use zonings and may later negotiate with developers for sufficient consideration to effectuate affordable housing being provided on their lands.

§201H-E Application review. (a) The corporation shall review each application upon receipt and shall secure any additional information that the corporation deems necessary for the purpose of determining whether the area or areas described qualify as affordable housing receiving zones.

(b) In the designation of affordable housing receiving zones, priority shall be given to areas within proximity to new or existing transit facilities.

(c) The corporation shall complete its review of the application within sixty days of the last date designated for receipt of an application. After review of an application, the corporation shall approve, in writing, those applications that have provided at least ten areas that qualify as affordable housing receiving zones; provided that the number of allowable affordable housing receiving zones for the county as established under section 201H‑D(b), is not exceeded. If an application is denied, the corporation shall inform the governing body in writing of that fact together with the reasons for the denial. Upon denial, the county shall resubmit the application with the changes or modifications necessary until the application is approved.

§201H-F Rules. The corporation, in consultation with the counties, shall adopt rules pursuant to chapter 91 to implement this part, including rules relating to health, safety, building, planning, zoning, and land use that shall supersede all other inconsistent ordinances and rules relating to the use, zoning, planning, and development of land and construction in an affordable housing receiving zone. Rules adopted under this section shall follow existing law, rules, and ordinances as closely as is consistent with standards meeting minimum requirements of energy efficiency, health, and safety. The corporation may provide by rule that lands within an affordable housing receiving zone shall not be developed beyond existing uses or that improvements thereon shall not be demolished or substantially reconstructed, or provide other restrictions on the use of the zone.

§201H-G Eligibility; qualified affordable housing project. (a) Any housing project may be eligible to be designated a qualified affordable housing project for purposes of this part if:

(1) The housing project is established within an affordable housing receiving zone;

(2) No less than twenty per cent of the units in the housing project are affordable to households with incomes at or below one hundred forty per cent of the area median family income as determined by the United States Department of Housing and Urban Development; and

(3) The housing project consists of at least fifteen units.

(b) A housing project also may be eligible to be designated a qualified affordable housing project for purposes of this part if the housing project qualified as a qualified affordable housing project in an area prior to an area being designated an affordable housing receiving zone.

(c) After designation as an affordable housing receiving zone, each qualified affordable housing project in the zone shall annually complete and submit to the corporation, on a form supplied by the corporation, the information necessary for the department to determine whether the housing project qualifies as a qualified affordable housing project. If the corporation determines that the housing project qualifies as a qualified affordable housing project, then the corporation shall approve the completed form and forward copies of the completed and approved form to the governing body of the county.

(d) A completed form approved by the corporation, referred to in subsection (c), shall be prima facie evidence of the eligibility of a housing project for the purposes of this section.

§201H-H Local incentives, waivers, and regulatory flexibility. (a) In applying for designation as an affordable housing receiving zone, the applying county shall propose in its application local incentives, which may include, but not be limited to:

(1) Reduction or waiver of permit fees;

(2) Reduction or waiver of user fees;

(3) Reduction or waiver of impact fees;

(4) Reduction or waiver of water and sewer connection fees;

(5) Reduction or waiver of parking requirements;

(6) Reduction of real property taxes;

(7) Priority permit review;

(8) Priority financing, construction, and dedication of infrastructure;

(9) Density bonuses;

(10) Height waivers;

(11) Cluster zoning;

(12) Exemption from environmental impact reviews for any affordable housing project on property that has already been zoned for development;

(13) Design flexibility;

(14) Site flexibility;

(15) Reduction or waiver of public facility set aside and fees;

(16) Public facility requirement flexibility; and

(17) Other public incentives and exemptions proposed in the locality's application, which shall be binding upon the locality upon designation of the affordable housing receiving zone.

§201H-I Termination of an affordable housing receiving zone. Upon designation of an area as an affordable housing receiving zone, the proposals for regulatory flexibility, tax credits, waivers, and other public incentives authorized in this part shall be binding upon the county governing body to the extent and for the period of time specified in the application for zone designation. If the county governing body is unable or unwilling to provide any of the incentives set forth in section 201H-H or other incentives acceptable to the corporation, and the corporation has not adopted rules pursuant to section 201H-F that supersede inconsistent ordinances and rules relating to the use, zoning, planning, and development of land and construction in an affordable housing receiving zone, then the affordable housing receiving zone shall terminate. Qualified affordable housing projects located in the affordable housing receiving zone shall be eligible to receive the incentives and waivers provided by this part even though the zone designation has terminated. No housing project may become qualified after the date of zone termination. The county governing body may amend an application submitted pursuant to section 201H-D with the approval of the corporation; provided that the county governing body proposes an incentive equal to or superior to the unamended application."

SECTION 3. Section 46-15.1, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Any law to the contrary notwithstanding, any county shall have and may exercise the same powers, subject to applicable limitations, as those granted the Hawaii housing finance and development corporation pursuant to chapter 201H insofar as those powers may be reasonably construed to be exercisable by a county for the purpose of developing, constructing, and providing low- and moderate-income housing; provided that no county shall be empowered to cause the State to issue general obligation bonds to finance a project pursuant to this section; provided further that county projects shall be granted an exemption from general excise or receipts taxes in the same manner as projects of the Hawaii housing finance and development corporation pursuant to section 201H-36; and provided further that section 201H-16 shall not apply to this section unless federal guidelines specifically provide local governments with that authorization and the authorization does not conflict with any state laws. The powers shall include the power, subject to applicable limitations, to:

(1) Develop and construct dwelling units, alone or in partnership with developers;

(2) Acquire necessary land by lease, purchase, exchange, or eminent domain;

(3) Provide assistance and aid to a public agency or other person in developing and constructing new housing and rehabilitating existing housing for elders of low- and moderate-income, other persons of low- and moderate-income, and persons displaced by any governmental action, by making long-term mortgage or interim construction loans available;

(4) Contract with any eligible bidders to provide for construction of urgently needed housing for persons of low- and moderate-income;

(5) Guarantee the top twenty-five per cent of the principal balance of real property mortgage loans, plus interest thereon, made to qualified borrowers by qualified lenders;

(6) Enter into mortgage guarantee agreements with appropriate officials of any agency or instrumentality of the United States to induce those officials to commit to insure or to insure mortgages under the National Housing Act, as amended;

(7) Make a direct loan to any qualified buyer for the downpayment required by a private lender to be made by the borrower as a condition of obtaining a loan from the private lender in the purchase of residential property;

(8) Provide funds for a share, not to exceed fifty per cent, of the principal amount of a loan made to a qualified borrower by a private lender who is unable otherwise to lend the borrower sufficient funds at reasonable rates in the purchase of residential property; [~~and~~]

(9) Establish affordable housing receiving zones pursuant to part of chapter 201H; and

[~~(9)~~] (10) Sell or lease completed dwelling units.

For purposes of this section, a limitation is applicable to the extent that it may reasonably be construed to apply to a county."

SECTION 4. Section 226-58, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) County general plans shall be formulated on the basis of sound rationale, data, analyses, and input from state and county agencies and the general public, and contain objectives and policies as required by the charter of each county. Further, the county general plans should:

(1) Contain objectives to be achieved and policies to be pursued with respect to population density, land use, transportation system location, public and community facility locations, water and sewage system locations, affordable housing receiving zones, visitor destinations, urban design, and all other matters necessary for the coordinated development of the county and regions within the county; [~~and~~]

(2) Contain implementation priorities and actions to carry out policies to include but not be limited to land use maps, programs, projects, regulatory measures, standards and principles, and interagency coordination provisions[.]; and

(3) Contain implementation actions to identify, designate, and establish affordable housing receiving zones pursuant to part of chapter 201H."

SECTION 5. It is the intent of this Act not to jeopardize the receipt of any federal aid nor to impair the obligation of the State or any agency thereof to the holders of any bond issued by the State or by any such agency, and to the extent, and only to the extent, necessary to effectuate this intent, the governor may modify the strict provisions of this Act, but shall promptly report any such modification with reasons therefor to the legislature at its next session thereafter for review by the legislature.

SECTION 6. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 7. 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 8. 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, and upon codifying the new chapter that establishes the commission on transit oriented development, as proposed by S.B. No. 442 (2009) and as referred to in section 2 of this Act, the revisor of statutes shall substitute the appropriate Hawaii Revised Statutes section number for the reference to section 6 of S.B. No. 442 in section 2 of this Act.

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.

THE SENATE	S.B. NO.	735
TWENTY-FIFTH LEGISLATURE, 2009		S.D. 1
STATE OF HAWAII