State efforts to supercharge housing creation picked up steam on Tuesday when Gov. Josh Green signed a group of consequential housing bills, all of which reduce roadblocks to or strengthen potential incentives for development of new housing. Taken as a whole, they are expected to produce additional rental and owned housing that’s affordable to the state’s residents. That’s incredibly important in Hawaii, where the state’s median-priced home costs $875,000 — a price only 1 in 5 local households can afford — and 28% of households spend more than 50% of their income on housing, according to the University of Hawaii’s Economic Research Organization (UHERO).
Two of these bills, Senate Bill 3202 and Senate Bill 2066, significantly alter county regulations statewide. While implementation must be closely monitored, they have potential to add significantly to Hawaii’s housing stock, and deserve the chance to succeed.
Senate Bill 3202, now Act 39, started out as an overreaching bill that would have radically reduced minimum lot sizes statewide and required counties to approve a minimum of four housing units on each smaller lot, potentially increasing density drastically in suburban-style neighborhoods. It garnered plenty of opposition, especially from Oahu’s single-family homeowners and their political representatives. But SB 3202 was cut back, considerably and necessarily, as it wended through the Legislature.
In its final form, SB 3202 requires counties to allow at least two accessory dwelling units (ADUs), in addition to a primary unit, on residential lots within the state’s urban (residential) districts — but considerable leeway remains with counties to prescribe where and under what conditions these additional ADUs can be built. That’s an important factor, as county residents largely, and for good reason, favor a system that preserves community preferences.
At Tuesday’s event signing SB 3202 into law, Green said he expected ADUs would spring up most quickly on Maui, where thousands of units are needed to meet demand that has reached emergency levels with the destruction of Lahaina by last year’s tragic wildfire, and on Hawaii island, where demand is high and suitable lots are numerous. Relatively speaking, the law will lead to fewer added units on Oahu, where building is already dense; and on Kauai, which is restrained by its lack of infrastructure, particularly sewage systems.
Statewide, properties without adequate infrastructure — water, sewer or roadways — are excluded from the ADU law, and developments with existing private covenants prohibiting ADUs, such as Mililani, are also excluded. The law prohibits covenants in developments going forward, but also gives counties two years, until Dec. 31, 2026, to adapt zoning and permitting regulations with development standards, such as setback rules and maximum square footage, and infrastructure conditions, such as water supply.
As the state Office of Planning and Sustainable Development testified, the bill as adapted provides a desirable balance between reducing regulatory barriers in areas with urban infrastructure, “while maintaining county home rule authority,” and it’s a good start. Counties must now carefully analyze and update their zoning regulations to ensure additional housing is built without negative consequences, such as overcrowding that impedes emergency access, or overburdened sewage systems.
As for Senate Bill 2066, now Act 38: It curiously didn’t receive much attention during the legislative session, but does significantly alter the powers of the Hawaii Housing Finance and Development Corp., allowing it to override county requirements that are more strict than the state’s on a development’s portion and type of affordable housing. In exchange, each and every unit must be exclusively sold to Hawaii residents who own no other residential properties and are owner-occupants, in perpetuity.
The rationale is that restricting a project’s housing to Hawaii residents and owner-occupants with just one property will in itself impose a price limit on the units — and data indicates this may hold true. UHERO’s report shows that Hawaii’s high proportion of housing owned by non-Hawaii residents has pushed up sale prices — and in fact, on Maui, 32% of all housing units had an out-of-state owner in 2023. That’s followed by 29% on Kauai, 23% on Hawaii island and 13% on Oahu. On Kauai, the number of affordable units available is often functionally zero, and in 2023, 37% of single-family homes and a whopping 60% of condos were bought by out-of-state residents. On Hawaii island, the respective figures are 30% and 52%; on Maui County, 25% and 53%; on Oahu, 10% and 17%.
Nationwide, expanding housing supply by allowing more units has been shown to improve affordability. To ensure SB 3202 and SB 2066 accomplish this, the state and counties must closely monitor development proposals that follow. If any laws prove to favor production of costly, out-of-reach housing that benefits developers and investors over state residents, the state must reverse or refine its approach.
