RELATING TO HOUSING.

HB1868

HOUSE OF REPRESENTATIVES

H.B. NO.

1868

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

Relating
to Housing
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

PART I

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SECTION
1.
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The legislature finds that the 2026
qualified allocation plan proposed by the Hawaii housing finance and
development corporation falls short of what Hawaii's taxpayers and low-income
residents deserve.
�
As the State
continues to face a worsening housing shortage, the qualified allocation plan
must do more to prioritize perpetual affordability, government‑owned
housing, and shorter loan terms.
�

Further, criteria such as readiness and income targeting should be de‑emphasized
to better align with long-term public interest and housing system reform.

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The
legislature also finds that the low-income housing tax credit is a direct
handout of tax revenue to developers.
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The
low-income housing tax credit is not a loan and thus is never repaid.
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The state rental housing revolving fund
provides gap financing for most low-income housing tax credit projects and has
become Hawaii's largest financing source for housing development, supporting
more than half of all housing construction statewide and crowding out other
financing options due to its extremely generous terms.
�
A typical rental housing revolving fund loan
lasts for fifty-seven years, has an interest rate of only 0.15 per cent, defers
repayment until the senior private loan is fully paid off, which often occurs
decades later, and allows payments to be reduced based on the developer's cash
flow.
�
This represents a massive
commitment of taxpayer dollars.
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Over the
past decade, the rental housing revolving fund has received approximately $1.047
billion in general fund appropriations, making it the second largest line‑item
investment in the state budget after the emergency and budget reserve fund.

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The
legislature further finds that Hawaii faces an urgent need for lasting,
sustainable affordable housing, and strengthening the qualified allocation plan
is critical to addressing this crisis.
�
The
State has a fiduciary duty to ensure that funds are used efficiently and
responsibly to maximize housing production and reach as many residents as
possible.
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Requiring perpetual
affordability, prioritizing government-led developments, and incentivizing
early loan repayment will protect public investments, prevent displacement, and
ensure that taxpayer dollars have long-term impact.

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Accordingly,
the purpose of this Act is to:

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(1)
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Establish a working group to:

���������
(A)
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Revise
the Hawaii housing finance and development corporation's qualified allocation
plan; and

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(B)
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Propose
revisions to the prioritization of the rental housing revolving fund and the
terms of loans made from the rental housing revolving fund;

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(2)
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Require the Hawaii housing finance and
development corporation to revise the 2026 qualified allocation plan to:

���������
(A)
�
Require perpetual affordability and
prioritize government-owned development projects, applicants required to
reinvest financial surpluses to produce more housing, and shorter loan terms;
and

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(B)
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Deprioritize readiness and financially
unsustainable income targeting categories; and

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(3)
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Prohibit the Hawaii housing finance and
development corporation from allocating low-income housing tax credits or
rental housing revolving fund moneys to projects without a perpetual
affordability commitment.

PART II

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SECTION
2.
�
(a)
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There is established a working group to revise the Hawaii housing
finance and development corporation's qualified allocation plan and consider
how to revise the prioritization of the rental housing revolving fund and the
terms of loans made from the revolving fund.
�

The Hawaii housing finance and development corporation shall provide
administrative support to the working group.

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(b)
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The working group shall:

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(1)
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Revise the Hawaii housing finance and
development corporation's qualified allocation plan to more effectively
allocate federal and state low-income housing tax credits to projects that best
meet the housing needs of the State; and

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(2)
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Make recommendations to revise the
prioritization of the rental housing revolving fund and the terms of loans made
from the revolving fund to support low-income rental housing projects and
mixed-income rental projects.

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(c)
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The working group shall consist of the
following members:

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(1)
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The executive director of the Hawaii
housing finance and development corporation, or the executive director's
designee, who shall serve as the chairperson of the working group;

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(2)
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The executive director of the Hawaii
public housing authority, or the executive director's designee;

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(3)
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The chairpersons of the senate and
house of representatives standing committees having jurisdiction over housing
issues, or their designees;

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(4)
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The chairperson of the senate standing committee
on ways and means, or the chairperson's designee;

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(5)
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The chairperson of the house of
representatives standing committee on finance, or the chairperson's designee;
and

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(6)
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Relevant stakeholders, as recommended
by the members of the working group, who shall be invited by the working
group's chairperson.

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(d)
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The working group shall submit a report of
its findings and recommendations, including any proposed legislation, to the
legislature no later than twenty days prior to the convening of the regular
session of
2027.

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(e)
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The members of the working group shall serve
without compensation but shall be reimbursed for expenses, including travel
expenses, necessary for the performance of their duties.

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(f)
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No member of the working group shall be
subject to chapter 84, Hawaii Revised Statutes, solely because of the member's
participation in the working group.

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(g)
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The working group shall be dissolved on June 30,
2027.

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SECTION
3.
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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 2026-2027 to support the working
group established by this part.

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The
sum appropriated shall be expended by the Hawaii housing finance and
development corporation for the purposes of this part.

PART III

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SECTION
4.
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(a)
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The Hawaii housing finance and development corporation shall amend the
2026 qualified allocation plan to:

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(1)
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Require all projects to make a
perpetual affordability commitment to qualify for receipt of federal and state
low-income housing tax credits;

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(2)
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Increase the number of points awarded
for:

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(A)
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Government-owned projects, including:

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(i)
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Projects owned by the State or a
county;

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(ii)
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Projects on state- or county-owned
land; and

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(iii)
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Projects that are required to be
conveyed to the State or a county at a definite time for nominal consideration;

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(B)
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Projects owned by an organization
obliged to use all financial surpluses generated by the project to construct,
manage, or rehabilitate more housing; and

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(C)
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Projects of applicant developers who:

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(i)
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Have demonstrated accelerated full
repayment into the rental housing revolving fund of past rental housing
revolving fund loans; or

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(ii)
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Request a shorter repayment term; and

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(3)
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Reduce the number of points awarded for
the:

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(A)
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Applicant's readiness criterion; and

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(B)
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Units targeted at average area median
income levels that are below those required pursuant to section 42 of the
Internal Revenue Code of 1986, as amended.

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(b)
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The Hawaii housing finance and development
corporation may adopt rules pursuant to chapter 91, Hawaii Revised Statutes, to
carry out the purposes of this part.

PART IV

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SECTION

5
.
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Section
201H-15, Hawaii Revised Statutes, is amended by amending subsection (a) to read
as follows:

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"(a)
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The corporation is designated as a state
housing credit agency to carry out section 42(h) (with respect to limitation on
aggregate credit allowable with respect to a project located in a state) of the
Internal Revenue Code of 1986, as amended.
�

As a state housing credit agency, the corporation shall determine the
eligibility basis for a qualified low-income building, make the allocation of
housing credit dollar amounts within the State, and determine the portion of
the State's housing credit ceiling set aside for projects involving qualified
nonprofit organizations[
.
]
; provided that the corporation shall not
allocate low-income housing credits to any project without a perpetual
affordability commitment; provided further that, as used in this subsection,
"perpetual" means the useful life of the project.
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The corporation shall file any certifications
and annual reports required by section 42 (with respect to low-income housing
credit) of the Internal Revenue Code of 1986, as amended."

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SECTION

6
.
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Section
201H-202, Hawaii Revised Statutes, is amended by amending subsection (e) to
read as follows:

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"(e)
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Except as provided in subsection (f), moneys
available in the fund shall be used for the purpose of providing, in whole or
in part, loans for rental housing projects [
demonstrating
]
with a
perpetual affordability commitment that demonstrate
project readiness,
efficiency, and feasibility acceptable to the corporation in the following
order of priority:

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(1)
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Projects or units in projects that are
allocated low‑income housing credits pursuant to the state housing credit
ceiling under section 42(h) of the Internal Revenue Code of 1986, as amended,
or projects or units in projects that are funded by programs of the United
States Department of Housing and Urban Development and United States Department
of Agriculture Rural Development wherein:

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(A)
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At least fifty per cent of the
available units are for persons and families with incomes at or below eighty
per cent of the median family income of which at least five per cent of the
available units are for persons and families with incomes at or below thirty
per cent of the median family income; and

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(B)
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The remaining units are for persons and
families with incomes at or below one hundred per cent of the median family
income;

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provided
that the corporation may establish rules to ensure full occupancy of fund
projects; [
provided further that f
or projects that were awarded
low-income housing credits pursuant to this paragraph, priority shall be given
to p
rojects with a perpetual affordability commitment.
�
For purposes of this paragraph,
"perpetual" means the useful life of the project;
] and

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(2)
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Mixed-income rental projects or units
in a mixed‑income rental project for persons and families with incomes at
or below one hundred forty per cent of the median family income.

As used
in this subsection "perpetual" means the useful life of the project.
"

PART V

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SECTION
7.
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Statutory material to be repealed is
bracketed and stricken.
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New statutory
material is underscored.

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SECTION
8.
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This Act shall take effect on July 1,
2050; provided that the amendments made to section 201H-202, Hawaii Revised
Statutes, by section 6 of this Act shall not be repealed when that section is
reenacted on June 30, 2030, pursuant to section 8 of Act 159, Session Laws of
Hawaii 2025.

INTRODUCED BY:

_____________________________

Report Title:

HHFDC;
LIHTC; RHRF; Qualified Allocation Plan; Perpetual Affordability; Working Group;
Report; Appropriation

Description:

Part
II:
�
Establishes a Working Group to revise
the Hawaii Housing Finance and Development Corporation's Qualified Allocation Plan
and propose revisions to the prioritization of the Rental Housing Revolving Fund
and the terms of loans made from the Rental Housing Revolving Fund.
�
Requires a report to the Legislature.
�
Appropriates funds.
�
Part III:
�

Requires the HHFDC to make certain revisions to the 2026 Qualified Allocation
Plan.
�
Part IV:
�
Prohibits the HHFDC from allocating
Low-Income Housing Tax Credits or moneys from the Rental Housing Revolving Fund
to projects without a perpetual affordability commitment.

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not legislation or evidence of legislative intent.