HB516

SECTION 1. Act 39, Session Laws of Hawaii 2024, enacted section 46-4.8, Hawaii Revised Statutes, and mandated that the counties adopt or amend an ordinance to allow at least two additional accessory dwelling units, commonly known as ADUs, on residential-zoned lots across the State. The legislature finds that the new statewide mandate would make residential neighborhoods overly dense and impede the counties' ability to take a thoughtful, island-by-island approach to affordable housing.

The legislature further finds that, rather than the aggressive mandate, financial incentives for the construction of low-cost accessory dwelling units would provide a better remedy for Hawaii's extensive housing supply shortage. Incentivizing the construction of low-cost accessory dwelling units is a greatly underutilized solution to spur affordable housing development.

The purpose of this Act is to:

(1) Repeal statutory requirements imposed on the counties to allow for the construction of at least two accessory dwellings on all residentially zoned lots; and

(2) Establish 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. Section 46-4.8, Hawaii Revised Statutes, is repealed.

["[~~§46-4.8] Accessory dwelling units on residentially zoned lots.~~ (a) Each county shall adopt or amend accessory dwelling unit ordinances pursuant to this section to help address deficits in their housing inventory based on Hawaii housing planning studies published by the Hawaii housing finance and development corporation.

~~(b)~~ Except as provided in subsections (c) and (d), each county shall adopt or amend ordinances defining reasonable standards that allow for the construction of at least two accessory dwelling units, or the reasonable equivalent, for residential use on all residentially zoned lots.

~~(c) A county that does not adopt or amend an ordinance pursuant to subsection (b) shall adopt or amend ordinances pursuant to this subsection and subsection (d), if applicable, defining:~~

~~(1)~~ Districts that authorize at least two accessory dwelling units, or the reasonable equivalent, for residential use per each permitted existing single-family dwelling on a residentially zoned lot; provided that these districts shall be:

~~(A)~~ ~~Consistent with the county's comprehensive general plan;~~

~~(B)~~ ~~Reasonably distributed throughout the county's various regional planning areas; and~~

~~(C)~~ Estimated to add development potential equivalent to half of the county's projected five-year demand of needed housing units for ownership or rental as stated in the 2019 Hawaii housing planning study; and

~~(2)~~ Districts that authorize at least two accessory dwelling units or the reasonable equivalent for residential use per each permitted existing single-family dwelling on a residentially zoned lot within a reasonable walking distance to and from:

~~(A)~~ ~~Stations of a locally preferred alternative for a mass transit project; and~~

~~(B)~~ Urban principal arterials as classified by the Federal Highway Administration for purposes of federal-aid highways projects and situated within a primary urban area, urban core, or county equivalent identified by a county comprehensive general plan.

(d) In addition to the requirements under subsection (c), a county with a population of five hundred thousand or more shall adopt or amend an ordinance defining reasonable standards to add development potential in existing apartment districts or apartment mixed-use districts equivalent to the county's projected five-year demand of needed housing units for ownership or rental in the 2019 Hawaii housing planning study.

(e) Accessory dwelling units developed pursuant to this section shall be subject to all development standards adopted by the respective county, including but not limited to those adopted pursuant to this chapter.

(f) Nothing in this section shall preclude a county from denying applications for permits if there is insufficient utility infrastructure to service the additional demand caused by the development of accessory dwelling units pursuant to this section.

(g) If a county does not adopt or amend zoning ordinances pursuant to this section by December 31, 2026, the county shall not deny any permit application on the basis of exceeding the maximum number of housing units allowed if any owner, or their designated representative, of a single-family dwelling in a residentially zoned lot applies for construction of up to two accessory dwelling units, or the reasonable equivalent, until the county adopts or amends an ordinance pursuant to this section; provided that a county may deny a permit application on the basis of infrastructure, design, or development standards.

~~(h) No county shall adopt prohibitions on using any dwelling unit on a residentially zoned lot as separately leased long-term rentals, as defined by each county.~~

~~(i) This section shall not apply to:~~

~~(1)~~ ~~Any area outside of the urban district established by chapter 205;~~

~~(2)~~ ~~County powers within special management areas delineated pursuant to chapter 205A; and~~

~~(3)~~ Any area within an urban district that a county deems to be at high risk of a natural hazard such as flooding, lava, or fire, as determined by the most current data and maps issued by a federal or state department or agency.

(j) Neither this section, any permit issued in accordance with this section, or structures developed pursuant to this section shall create any vested rights for any applicant, permit holder, or land owner. This section shall not preempt a county's ability to accept, review, approve, and deny permit applications.

(k) For purposes of this section, "residentially zoned lot" means a zoning lot in a county zoning district that is principally reserved for single-family and two-family detached dwellings. "Residentially zoned lot" does not include a lot in a county zoning district that is intended for rural, low density residential development, and open space preservation."]

SECTION 3. Section 205-20, Hawaii Revised Statutes, is amended to read as follows:

"[§205-20] Private covenants; residentially zoned lots; urban district. (a) No private covenant for a residentially zoned lot within an urban district recorded after May 28, 2024, shall limit the[:

~~(1)~~ ~~Number of accessory dwelling units on that residentially zoned lot below the amount allowed pursuant to section 46-4.8; or~~

~~(2)~~ ~~Long-term~~] long-term rental of residential units on that residentially zoned lot.

(b) This section shall not apply to any private covenants recorded before May 28, 2024.

(c) For purposes of this section, "residentially zoned lot" means a zoning lot in a county zoning district that is principally reserved for single-family and two-family detached dwellings. "Residentially zoned lot" does not include a lot in a county zoning district that is intended for rural, low density residential development, and open space preservation."

SECTION 4. Section 46-4, Hawaii Revised Statutes, is amended to read as follows:

"§46-4 County zoning. (a) This section and any ordinance, rule, or regulation adopted in accordance with this section shall apply to lands not contained within the forest reserve boundaries as established on January 31, 1957, or as subsequently amended.

Zoning in all counties shall be accomplished within the framework of a long-range, comprehensive general plan prepared or being prepared to guide the overall future development of the county. Zoning shall be one of the tools available to the county to put the general plan into effect in an orderly manner. Zoning in the counties of Hawaii, Maui, and Kauai means the establishment of districts of such number, shape, and area, and the adoption of regulations for each district, to carry out the purposes of this section. In establishing or regulating the districts, full consideration shall be given to all available data as to soil classification and physical use capabilities of the land to allow and encourage the most beneficial use of the land consonant with good zoning practices. The zoning power granted in this section shall be exercised by ordinance, which may relate to:

(1) The areas within which agriculture, forestry, industry, trade, and business may be conducted;

(2) The areas in which residential uses may be regulated or prohibited;

(3) The areas bordering natural watercourses, channels, and streams, in which trades or industries, filling or dumping, erection of structures, and the location of buildings may be prohibited or restricted;

(4) The areas in which particular uses may be subjected to special restrictions;

(5) The location of buildings and structures designed for specific uses and designation of uses for which buildings and structures may not be used or altered;

(6) The location, height, bulk, number of stories, and size of buildings and other structures;

(7) The location of roads, schools, and recreation areas;

(8) Building setback lines and future street lines;

(9) The density and distribution of population;

(10) The percentage of a lot that may be occupied, size of yards, courts, and other open spaces;

(11) Minimum and maximum lot sizes;

(12) The time, place, manner, and duration in which uses of land and structures may take place; and

(13) Other regulations the boards or council of any county find necessary and proper to permit and encourage the orderly development of land resources within their jurisdictions.

The council of any county shall prescribe rules, regulations, and administrative procedures and provide personnel it finds necessary to enforce this section and any ordinance enacted in accordance with this section. The ordinances may be enforced by appropriate fines and penalties, civil or criminal, or by court order at the suit of the county or the owner or owners of real estate directly affected by the ordinances.

Any civil fine or penalty provided by ordinance under this section may be imposed by the district court, or by the zoning agency after an opportunity for a hearing pursuant to chapter 91. The proceeding shall not be a prerequisite for any injunctive relief ordered by the circuit court.

Nothing in this section shall invalidate any zoning ordinance or regulation adopted by any county or other agency of government pursuant to the statutes in effect before July 1, 1957.

The powers granted in this section shall be liberally construed in favor of the county exercising them, and in a manner that promotes the orderly development of each county or city and county in accordance with a long-range, comprehensive general plan to ensure the greatest benefit for the State as a whole. This section shall not be construed to limit or repeal any powers of any county to achieve these ends through zoning and building regulations, except insofar as forest and water reserve zones are concerned and as provided in subsections (c), (d), and (g)[~~, and section 46-4.8~~].

Neither this section nor any ordinance enacted pursuant to this section shall prohibit the continued lawful use of any building or premises for any trade, industrial, residential, agricultural, or other purpose for which the building or premises is used at the time this section or the ordinance takes effect; provided that a zoning ordinance may provide for elimination of nonconforming uses as the uses are discontinued, or for the amortization or phasing out of nonconforming uses or signs over a reasonable period of time in commercial, industrial, resort, and apartment zoned areas only. In no event shall the amortization or phasing out of nonconforming uses apply to any existing building or premises used for residential (single-family or duplex) or agricultural uses; provided that uses that include the furnishing or offering of transient accommodations shall not be considered residential or agricultural uses and may be phased out or amortized in any zoning district by county zoning regulations; provided further that a zoning ordinance may provide that transient accommodations may be furnished to a transient for a period of less than one hundred eighty consecutive days. Nothing in this section shall affect or impair the powers and duties of the director of transportation as set forth in chapter 262.

For purposes of this subsection, "transient accommodations" has the same meaning as defined in section 237D-1. "Transient accommodations" includes uses that require the payment of transient accommodations taxes.

(b) Any final order of a zoning agency established under this section may be appealed to the circuit court of the circuit in which the land in question is found. The appeal shall be in accordance with the Hawaii rules of civil procedure.

(c) [~~Except as provided in section 46-4.8, each~~] Each county may adopt reasonable standards to allow the construction of two single-family dwelling units on any lot where a residential dwelling unit is permitted.

(d) Neither this section nor any other law, county ordinance, or rule shall prohibit group living in facilities with eight or fewer residents for purposes or functions that are licensed, certified, registered, or monitored by the State; provided that a resident manager or a resident supervisor and the resident manager's or resident supervisor's family shall not be included in this resident count. These group living facilities shall meet all applicable county requirements not inconsistent with the intent of this subsection, including but not limited to building height, setback, maximum lot coverage, parking, and floor area requirements.

(e) Neither this section nor any other law, county ordinance, or rule shall prohibit the use of land for employee housing and community buildings in plantation community subdivisions as defined in section 205-4.5(a)(12); in addition, no zoning ordinance shall provide for the elimination, amortization, or phasing out of plantation community subdivisions as a nonconforming use.

(f) Neither this section nor any other law, county ordinance, or rule shall prohibit the use of land for medical cannabis production centers or medical cannabis dispensaries established and licensed pursuant to chapter 329D; provided that the land is otherwise zoned for agriculture, manufacturing, or retail purposes.

(g) Notwithstanding any other law, county charter, county ordinance, or rule, any administrative authority to accept, reject, and approve or deny any application for subdivision, consolidation, or resubdivision of a parcel of land that has been fully zoned for residential use within the state urban district designated pursuant to section 205-2 shall be vested with the director of the county agency responsible for land use or a single county officer designated by ordinance; provided that:

(1) The parcel of land being subdivided is not located on a site that is:

(A) Designated as important agricultural land pursuant to part III of chapter 205;

(B) On wetlands, as defined in the United States Fish and Wildlife Service Manual, Part 660 FW2;

(D) A habitat for protected or endangered species;

(E) Within a state historic district:

(i) Listed on the Hawaii register of historic places or national register of historic places;

(ii) Listed as a historic property on the Hawaii register of historic places or the national register of historic places; or

(iii) During the period after a nomination for listing on the Hawaii register of historic places or national register of historic places is submitted to the department of land and natural resources' state historic preservation division and before the Hawaii historic places review board has rendered a decision; or

(F) Within lava zone 1 or lava zone 2, as designated by the United States Geological Survey;

(2) Any approval under this subsection shall be consistent with all county zoning, development standards, and requirements pursuant to part II of chapter 205A; and

(3) This subsection shall not apply to county powers within special management areas delineated pursuant to part II of chapter 205A.

Neither this subsection, any permit issued in accordance with this subsection, or structures developed pursuant to this subsection shall create any vested rights for any applicant, permit holder, or land owner."

SECTION 5. 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 6. 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 7. 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 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for deposit into the accessory dwelling unit special fund.

SECTION 8. 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 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 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 9. In codifying the new sections added by sections 5 and 6 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 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect on July 1, 2025.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	516
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII