SB2563 SD1.DOC

SECTION 1. The purpose of this Act is to address rental housing.

The legislature finds that projects of the Hawaii public housing authority are operated for low-income family and elderly renters and, consequently, provide affordable rental housing for the class of people who most need state assistance.

Thus, the legislature believes that the Hawaii public housing authority should have the opportunity to compete for funds from the rental housing revolving fund, which will receive substantial revenues from the conveyance tax going forward.

This Act also makes the Hawaii public housing authority eligible for the lease of land of the Hawaii housing finance and development corporation at a token lease rent. The legislature finds that the authority should have the opportunity to benefit from such favorable leases if issued by the corporation.

This Act also re-orders the preferences for the funding of projects from the rental housing revolving fund. The legislature finds that the re-ordered preferences are more reflective of the contemporary needs of the people of Hawaii.

SECTION 2. Section 201H-57, Hawaii Revised Statutes, is amended to read as follows:

"[[]201H-57[]] Land leases to nonprofit organizations providing affordable housing[.] and the Hawaii public housing authority. (a) Notwithstanding any provision to the contrary, the [[]corporation[]], pursuant to section 201H-4(b), may lease land to the Hawaii public housing authority or any qualified nonprofit organization providing affordable housing, under the following terms and conditions:

(1) Leases shall be for ninety-nine years at $1 per year per parcel; and

(2) The instrument of lease shall include provisions, enforceable by the [[]corporation[]], that the land shall:

(A) Be used only for providing affordable housing through long-term, renewable, and transferable leases or other means that are in accordance with rules adopted by the [[]corporation[]] under chapter 91; and

(B) Revert back to the [[]corporation[]] if:

(i) The land is used for any purpose other than as provided under subparagraph (A); or

(ii) The qualified nonprofit organization or Hawaii public housing authority ceases operations.

(b) For the purposes of this section:

"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.

"Hawaii public housing authority" includes any successor agency to the authority.

"Qualified nonprofit organization" means any private entity that is organized and operated:

(1) In accordance with section 501(c)(3) of the Internal Revenue Code of 1986, as amended; and

(2) For the purpose of providing affordable housing through long-term, renewable, and transferable leases."

SECTION 3. Section 201H-202, Hawaii Revised Statutes, is amended to read as follows:

"§201H-202 Rental housing revolving fund. (a) There is established the rental housing revolving 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, conveyance tax revenues under section 247-7, 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, projects or units in projects of the Hawaii public housing authority, 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.

(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, 2009, 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 4. 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~~]:

(1) Nonprofit and for-profit organizations, limited liability companies, partnerships, and government agencies, who are qualified in accordance with rules adopted by the corporation pursuant to chapter 91[.]; and

(2) The Hawaii public housing authority, to the extent authorized by law."

SECTION 5. Section 201H-204, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201H-204[]] Eligible projects[.], preferences, priorities. (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 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 housing units for the purpose of preservation as low-income or very low-income housing.

(b) Preference shall be given to projects producing units in at least one of the following categories:

(1) [~~Multifamily units;~~] Units in a multifamily dwelling;

(2) [~~Attached single-family units;~~] Semi-attached and side-by-side single-family housing units;

(3) Apartments;

[~~(4)~~ ~~Townhouses;~~

~~(5)~~ ~~Housing~~] (4) Apartment units above commercial or industrial space;

[~~(6)~~] (5) Single room occupancy units;

[~~(7)~~] (6) Accessory apartment units;

[~~(8)~~] (7) Employee housing;

[~~(9)~~] (8) United States Department of Housing and Urban Development mixed finance development of public housing units; and

[~~(10)~~] (9) Other types of units meeting the criteria for eligibility set forth in subsection (c).

(c) The corporation shall establish an application process for fund allocation that gives preference to projects meeting the following criteria that are listed in descending order of priority:

(1) Are committed to serving families and individuals transitioning from homeless shelters;

[~~(1)~~] (2) Serve the original target group;

[~~(2)~~] (3) Provide at least five per cent of the total number of units for persons and families with incomes at or below thirty per cent of the median family income;

[~~(3)~~] (4) Provide the maximum number of units for persons or families with incomes at or below eighty per cent of the median family income;

[~~(4)~~] (5) Are committed to serving the target group over a longer period of time;

[~~(5)~~] (6) Increase the integration of income levels of the immediate community area;

[~~(6)~~] (7) Meet the geographic needs of the target group of the proposed rental housing project, such as proximity to employment centers and services; and

[~~(7)~~] (8) Have favorable past performance in developing, owning, managing, or maintaining affordable rental housing.

The corporation may include other criteria as it deems necessary to carry out the purposes of this subpart.

(d) If the corporation, after applying the process described in [~~this~~] subsection[,] (c) finds [a] that:

(1) A Hawaii public housing authority project is equally ranked with another project, the corporation shall give preference to the Hawaii public housing authority project; and

(2) A nonprofit project is equally ranked with a for-profit or government project[,] the corporation shall give preference to the nonprofit project in allotting fund moneys."

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2016.

THE SENATE	S.B. NO.	2563
TWENTY-EIGHTH LEGISLATURE, 2016		S.D. 1
STATE OF HAWAII