HB1170

SECTION 1. The legislature finds that there is an inexpensive solution to the State's housing crisis. A 2019 study commissioned by the department of business, economic development, and tourism found that the State will require an additional 50,156 homes by the year 2025, which many consider to be an impossible task.

The legislature further finds that incentivizing the construction of low-cost accessory dwelling units, commonly known as ADUs, will help to reduce the housing shortage. An accessory dwelling unit is a separate additional living unit either attached or detached from the primary residential unit. Accessory dwelling units provide a legal alternative to illegal rental units and are similar to ohana dwelling units, but with less restrictions, particularly the absence of the requirement that the unit be rented to a family member only. Accessory dwelling units also cost less than traditional housing units because there is no need to purchase additional land for the structure and construction costs are considerably less. For example, a public housing unit costs between $300,000 and $400,000, whereas an eight hundred square foot accessory dwelling unit costs less than half as much.

The purpose of this Act is to mitigate the present housing crisis by establishing a program to encourage the construction of accessory dwelling units by providing a subsidy for the construction costs plus a general excise tax exemption for the first three years of renting the accessory dwelling unit.

SECTION 2. Chapter 206E, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . accessory dwelling unit Housing development program

206E-A Accessory dwelling unit housing development program. (a) There is established the accessory dwelling unit housing development program to provide matching funds to promote the construction of accessory dwelling units throughout the State.

(b) Notwithstanding any other law to the contrary, the authority shall promote and administer the accessory dwelling unit housing development program.

(c) The authority shall adopt rules without regard to chapter 91 to implement the accessory dwelling unit housing development program; provided that pursuant to the rules, the program shall award:

(1) Matching funds for homeowners who construct or contract to construct an accessory dwelling unit in conformity with applicable county accessory dwelling unit requirements; and

(2) Matching funds on a one-to-one basis, up to a maximum of $ per accessory dwelling unit.

§206E-B Accessory dwelling unit housing development program special fund. (a) There shall be established the accessory dwelling unit housing development special fund into which shall be deposited:

(1) Appropriations made by the legislature to the fund;

(2) All contributions from public or private partners;

(3) All interest earned on or accrued to moneys deposited in the special fund; and

(4) Any other moneys made available to the special fund from other sources.

(b) Moneys in the fund shall be expended by the authority to award matching funds for the accessory dwelling unit housing development program."

SECTION 3. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Accessory dwelling unit exemption. (a) Notwithstanding any law to the contrary, taxes under this chapter shall not be due on income generated by rental sales of any accessory dwelling unit funded pursuant to section 206E-A for the first three years that the accessory dwelling unit is rented by the owner of the accessory dwelling unit; provided that:

(1) This section shall not apply more than four years after the construction of the accessory dwelling unit; and

(2) The tax liability savings generated by this section shall be passed on by the owner of the accessory dwelling unit to the renter without any increase in rent price.

(b) The owner of the accessory dwelling unit shall not be required to obtain a special license, a permit, or other documentation of sales during the exemption period; provided that the owner's records shall clearly identify the address of the accessory dwelling unit, the date the construction is completed, the dates of rents owed and paid, and the amount of taxes exempted by this section."

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 for deposit into the accessory dwelling unit special fund.

SECTION 5. There is appropriated out of accessory dwelling unit special fund the sum of $ or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 to provide matching funds for the accessory dwelling unit housing development program.

The sums appropriated shall be expended by the Hawaii community development authority for the purposes of this Act.

SECTION 6. In codifying the new sections added by sections 2 and 3 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. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2023.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1170
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII