The Honolulu City Council is considering a measure to give private developers of affordable rental projects greater financial incentives to build.

City Council member Tyler Dos Santos-Tam this week introduced Bill 3, which would augment older city legislation meant to increase affordable housing options on Oahu.

As drafted, the new measure — developed in collaboration with the city’s Office of Housing — is designed to tap an existing $10 million grant, comprising city general fund money, toward planned construction of over 1,100 new homes.

Representing District 6, which spans from Kakaako to Kalihi, Dos Santos-Tam asserts those properties would be housed in parts of the city zoned for apartment, apartment mixed-use and business mixed-use units.

“Essentially, the homes would be located in areas that are zoned to be more dense,” Dos Santos-Tam told the Honolulu Star- Advertiser via email. “They would not be located in rural areas or in single-family neighborhoods.”

The new measure bolsters Bill 7. Adopted by former Mayor Kirk Caldwell’s administration, that 2019 legislation relaxed private development standards and provided incentives — such as property tax exemption for 10 years, and no fees for the city application process — for qualifying developers’ projects.

In 2021 the city added a grant program, Bill 1, to the existing Bill 7.

That action provided projects with a “completion bonus” of up to $15,000 per unit, while the program was given a $10 million cap, Dos Santos-Tam’s office said.

Under the latest measure, builders would be offered an alternate path to the existing completion bonus — this time, a grant of up to $35,000 per unit before construction begins, Dos Santos-Tam’s office said.

As drafted, Bill 3 will offer the following incentives to developers:

>> Provide up to $25,000 for units between 60% and 100% of area median income — for one person, that means between $55,000 and $85,000, respectively.

>> Provide up to $35,000 for units at 60% AMI and below — an income at or below $55,000.

>> Require that grant recipients pay their workers’ prevailing wage.

>> Utilize the existing $10 million cap for Bill 7 grants.

According to Dos Santos-Tam’s office, median rent in Honolulu is currently $2,700.

And citing a study by the state Department of Business, Economic Development and Tourism, Dos Santos-Tam’s office said Oahu might need up to 21,392 rental units by 2030 to meet demand.

The Council member also said the need for the new measure rests on the mixed performance of Bill 7.

As of September over 40 Bill 7 projects applied for permits, the city says. Of those projects, eight have begun construction, two have been finished and one has successfully applied for and received its completion bonus.

For the grant program specifically, Dos Santos-Tam’s office said about $140,000 has been spent from the $10 million cap since its creation nearly three years ago — or just 1.4% — as $9.86 million remains.

Meantime, Bill 3 has been championed by the city.

“We need housing at all income levels — especially for our working middle class residents,” city Office of Housing Executive Director Denise Iseri-Matsubara said in a written statement. “That’s why this bill is so important. It provides financial subsidy to help make affordable rentals feasible to build while also providing an opportunity to revitalize urban neighborhoods.”

Although the city touts affordable housing development under Bill 7, the pace of development under the older measure — which had a goal of producing 500 affordable rental units per year — has been markedly slow.

In August, city Department of Planning and Permitting Director Dawn Takeuchi Apuna told the Star-Advertiser that Bill 7 projects — offering 229 units — were among 43 projects that fall under its purview.

“If all are approved, they will result in nearly 1,300 affordable rental units available to our residents,” she said.

She asserted that part of the reason for delays in advancing Bill 7 projects was due to Bill 7 itself.

“Bill 7 is not the easiest law to work with because it tries to strike a balance between life/safety issues and providing more flexibility for cost savings for these smaller developments,” she said.

In spite of the slow pace, Takeuchi Apuna said the city’s commitment to Bill 7 and its affordable housing projects will continue for years to come, albeit in a new form.

“The City Council believes there is a future for Bill 7 projects, and therefore approved the extension of the waivers and incentives for another seven years,” she said, alluding to the fact that the law was set to expire in 2024. “On June 1, Mayor Blangiardi signed Bill 8, which extended Bill 7 for another seven years.”

Still, a recent Bill 7 project — a three-story walk-up for low- income renters in Makiki — gained support from the city as well as the state.

In November, developer partners Paul Lam, Greg Thielen and Evan Amakata said their newly opened, 26-unit development was Honolulu’s second, but their first, affordable rental housing project constructed under the auspices of Bill 7.

Constructed in prefabricated concrete in under nine months, the building at 1427 Ernest St. offers 24 studio apartments and two one-bedroom units on a more than 5,300-square-foot property.

Within the building, studio units are 260 square feet, while its one-bedroom units are 430 square feet. Monthly rents for studios start around $1,500 — including all utilities like gas, water, trash and electricity.

One-bedroom units will lease for about $1,900, with all utilities included, the developers said.

To qualify, a single-person household requires an annual income of less than $73,360, or an annual income of less than $83,840 for a two-person family.

At the Nov. 7 opening event, Gov. Josh Green and the mayor both praised the project as an example of the city and state’s joint effort to build more affordable housing for all income levels.

The units “are going to go to our teachers, firefighters and nurses,” Green said.

Meanwhile, Bill 3 is expected to be heard by the Council for first reading at its meeting Wednesday.