THE SENATE	S.B. NO.	858
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII

A BILL FOR AN ACT

relating to housing.

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

SECTION 1. The Legislature finds that Hawaii housing finance and development corporation has been designated as the agency responsible for the administration of the federal and state low-income housing tax credit program. The regulations that govern this program are contained in section 42 of the Internal Revenue Code. The low-income housing tax credit program uses a point system to facilitate project ranking based on the established evaluation criteria. States have discretion over the point system and rating criteria used to score and evaluate applications of projects for allocation of the tax credit.

Tax credits are grants, not loans. When the State allocates the tax credit to a developer, it does not receive an ownership interest in return. Any profits generated by a housing project stay with the developer, who is not required to use the profits to build additional housing. In addition, the State often purchases low-income housing development projects from the developer after the affordability period ends to guarantee tenant stability. In these cases, the taxpayer has paid for the project twice.

The legislature further finds that it would be in the best interest of the State to consider Vienna's Limited-Profit Housing Act of 1979 as a model. Currently, over sixty per cent of the city's population live in income blind, well-maintained, innovatively constructed and designed public housing. Limited-profit housing operates on a cost-recovery as opposed to a subsidized basis. Any profits generated are used to build more housing, which means that each new public housing project built enables the creation of more housing. As a result of this system, there is an annual production of over seventeen thousand units, which comprises thirty per cent of their national total, with little to no new taxpayer money added.

The purpose of this Act is to recycle low-income housing tax credits to produce housing over and over again by requiring the Hawaii housing finance and development corporation to award additional points to developers that convey ownership of the proposed housing to the State or an organization obligated to use all financial surpluses generated by the project to construct more housing and to developers that repay their rental housing revolving fund loans early.

SECTION 2. With respect to the qualified allocation plan and the criteria point system therein developed by the Hawaii housing and finance development corporation in accordance with section 42 of the Internal Revenue Code of 1986, as amended, beginning with calendar year 2024, the corporation shall:

(1) Add a new criteria category that allows for up to twenty per cent of the maximum one hundred twenty points on the application criteria point system to be allocated to projects offering to convey ownership of the finished project to the State or an organization obliged to use all financial surpluses generated by the project to construct more housing; and

(2) Prioritize applications based on both the timing and loan amount repaid early to the rental housing revolving fund.

SECTION 3. This Act shall take effect upon its approval.

INTRODUCED BY:

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Report Title:

Hawaii Housing Finance and Development Corporation; Low-Income Housing Tax Credit Program; Qualified Allocation Plan

Description:

Requires Hawaii Housing Finance and Development Corporation to amend the Low-Income Housing Tax Credit Program and Qualified Allocation Plan to allow up to twenty per cent of the maximum one hundred-twenty points on the criteria point system to be allocated to projects offering to convey ownership of the completed project to the State or an organization obliged to use all financial surpluses generated by the project to construct more housing and prioritize applicants based on the timeliness and loan amount repaid to the Rental Housing Revolving Fund.

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