Maui Mayor Michael Victorino has vetoed a highly contentious bill that would have applied stiffer rules to a state program offering developers incentives to build affordable housing.

The Maui County Council passed a “watered down” version of the bill earlier this month following tumultuous debate and a special public hearing.

The Council voted 6-3 to raise a primary qualification for developers to use the incentive program as a way to increase affordable-housing production.

However, bill opponents, who largely represented real estate and construction industries but also included the state agency administering the program, warned the higher bar would lead to some affordable-housing developers avoiding the county and focusing their efforts on Oahu, Kauai and Hawaii island.

The bill initially would have mandated that at least 75% of the homes in projects developed on Maui, Molokai and Lanai under the state incentive program be affordable to households with incomes between somewhat below and above the median.

This threshold compares with just over a 50% minimum under the state’s so-called 201H program, which offers developers benefits that can include general excise tax breaks, density and height bonuses, permit fee waivers and expedited permitting.

Councilman Michael Molina proposed the bill on grounds developers are receiving too many benefits in return for too few affordable-housing units.

“We’re just asking for more affordable housing,” he said at an April 6 meeting at which an amended version of the bill passed. “We’re trying to answer the needs of our community.”

Some opponents of the bill noted the 50-50 mix of affordable and market- priced homes under 201H was devised so that market-priced units subsidize the cost of affordable units. They argued that raising the bar would diminish pursuit of such projects and thus reduce affordable housing production in Maui County.

Bill supporters often characterized this argument as a scare tactic, and noted that some 201H projects are built with well over 50% affordable homes.

There are 201H projects developed with well over 50% and up to 100% affordable units, but these are often financed with tax-free bonds, low-interest loans and tax credits through the Hawaii Housing Finance and Development Corp., the state agency administering 201H.

By comparison, projects with the 50-50 mix may qualify for some but not all such financing.

HHFDC testified that it had concerns the proposed change would reduce affordable-housing development in Maui County.

To address this concern, the bill was amended to allow a developer seeking to develop a 201H project with less than 75% affordable units to seek an exemption that would have to be approved by Council resolution.

“Bill 10 has been watered down to make it more applicant-friendly,” Molina said. “Bill 10’s gate can be opened if developers cannot achieve 75%. If the project is worthy to the Council as well as the community, they can achieve the exemption.”

The Council also agreed to assess results of the measure, if enacted, within 18 months. A Council ordinance will require a review every two years.

Joining Molina in the majority were Keani Rawlins- Fernandez, Gabe Johnson, Kelly Takaya King, Tamara Paltin and Shane Sinenci.

Johnson urged his colleagues to show some gumption and vote for the bill.

King said Bill 10 presented a tough issue for her and that there is no guarantee it would have its intended consequences.

Paltin endorsed the plan to assess how it goes, and said of the raised bar, “I’m glad to give this a try.”

Council Chairwoman Alice Lee, former director of Maui’s Department of Housing and Human Concerns, said developing affordable housing is already too difficult, and voted against the bill.

Lee was joined by colleagues Tasha Kama and Yuki Lei Sugimura.

Victorino acknowledged good intentions behind the bill but said hardworking families can’t wait years to see whether the bill helps or hurts production of affordable homes.

The mayor also said his view is that another layer of regulation would delay affordable-housing production.

”In theory, Bill 10 would require more affordable housing to be built, but in reality, history has shown that such additional restrictions have the opposite effect,” he said Tuesday in a statement.