In a 1970 campaign speech, then-Lt. Gov. Tom Gill warned that the housing legislation of that era would be “a bonanza for developers” and not “necessarily produce any substantial amount of low-priced housing.”

Fifty years later, soaring home prices are pushing more families to move away, and there is an urgent need for thousands of new units to be added to our housing stock every year just to catch up with demand. The cost of developing new units in Hawaii is especially high, and lawmakers today are looking at a number of creative ways to increase inventory through nontraditional means, such as accessory dwelling units.

Bringing the overall cost of development down is critical to meet demand, and one way to help is by eliminating costly and ineffective school impact fees. House Bill 422, which is being considered this year by the Legislature, would do just that.

Established in 2007, Hawaii’s school impact fees were intended to fund the construction and renovation of public schools in areas where population growth was expected to create the need for one or more new schools or the expansion of existing ones. More than $21 million has been collected since then — yet none of this revenue has been spent. Instead, the money has simply accumulated, benefiting no one.

The state Department of Education claims in a report submitted to its Board of Education that eliminating these unused fees would strip the department of a crucial funding source, leading to overcrowded schools and a lack of educational infrastructure.

To be clear, there are only four school impact districts statewide — two on Oahu and two on Maui. According to the DOE’s official numbers, enrollment in those districts has fallen by nearly 12% since the 2017-18 school year.

Additionally, a 2019 audit found significant mismanagement of the school impact fee program, including that the areas designated as school impact districts were based on a “feel” by a state Department of Education staffer for development trends rather than any actual data.

It’s also important to note that existing legislative appropriations, which have historically funded school construction, would remain in place, along with a mechanism to get land for school construction through the district boundary amendment process at the state Land Use Commission.

Instead of improving educational resources, Hawaii’s school impact fees have, for the past two decades, functioned as a hidden tax on homebuyers.

In Leeward Oahu, for example, homebuilders must pay up to $5,504 in school impact fees for each new single-family home. In West Maui, the fees go as high as $5,778 per new home. And in Kakaako, Howard Hughes Holdings was required to pay over $2.18 million for one condominium development.

Smaller projects face even greater burdens. On Maui, one couple paid $5,373 — more than five times their building permit cost — just to build a small second home on their property. Essentially, these fees discourage accessory dwelling unit construction, which otherwise has great promise to help relieve Hawaii’s acute housing shortage.

Gov. Josh Green acknowledged the burden that school impact fees place on housing when he issued his emergency proclamation on affordable housing in 2023. He specifically authorized waivers from these fees, allowing critical housing projects to move forward without this unnecessary cost.

The Legislature now has the opportunity to build on the governor’s initiative by repealing school impact fees permanently.

HB 422 would remove this hidden tax on homebuilding and move the unspent funds to the School Facilities Authority, which could actually use the money for school construction or expansion. It’s time to turn the page on Hawaii’s housing crisis, and ringing the bell on school impact fees will help.

Arjuna Heim is director of housing policy at the Hawaii Appleseed Center for Law & Economic Justice; Ted Kefalas is director of strategic campaigns at the Grassroot Institute of Hawaii.