RELATING TO CREATING A LOCAL HOUSING MARKET.

HB2203

HOUSE OF REPRESENTATIVES

H.B. NO.

2203

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to creating a local housing market
.

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

����
SECTION 1.
�
The legislature finds that housing costs are
out of reach in Hawaii's current housing market for most residents.
�
As housing is a basic need, this is one of
the pressing problems for our State to address.
�

The root of this problem is our housing prices are based on the wages
and resources of buyers from around the world.
�

In most housing market prices are based on the incomes of the residents
of the local area.

����
To solve the problem of unaffordable
market rate housing, the State can create a separate local housing market.
�
To do this, for all housing built with
government funds or assistance the State should place deed restrictions to keep
the housing in the same area median income range pricing that it was initially
offered at.
�
This will build an inventory
of housing that will always be affordable to the local wage earner.

����
The Hawaii State Planning Act
(HRS �226-19) lays out the State's socio-cultural advancement with regard to
housing.
�
Its purpose is to achieve
greater opportunities for Hawaii's people to secure reasonably priced, safe,
sanitary, and livable homes, located in suitable environments that
satisfactorily accommodate the needs and desires of families and individuals,
through collaboration and cooperation between government and nonprofit and
for-profit developers to ensure that more rental and for sale affordable
housing is made available to extremely low
‑
, very low-, lower-,
moderate-, and above moderate-income segments of Hawaii's population.

����
Two of the policies of our
State are to:

����
(1)
�
Stimulate and
promote feasible approaches that increase affordable rental and for sale
housing choices for extremely low-, very low-, lower-, moderate-, and above
moderate-income households; and

����
(2)
�
Increase
homeownership and rental opportunities and choices in terms of quality,
location, cost, densities, style, and size of housing.

����
In 2019, this Legislature
requested a study of policies and practices around achieving these housing
objectives.
�
One of the findings of the
ALOHA Homes Implementation Study was a recommendation "that the sales
price of affordable units be restricted so that subsequent buyers can purchase
a home at the same area median income level as their predecessors."
�
And that in their focus groups, "most
participants felt it would be unfair for people to sell affordable units at
market-rate value at any time after the initial purchase."

����
The purpose of this Act is to
make changes to �201H-47, �201H-49, and �201H-023 to keep affordable housing
units affordable to the initial targeted area median income level in
perpetuity.

����
SECTION
2
.
�
Section
201H-47, Hawaii Revised Statutes, is amended to read as follows:

����
"
�201H-47
�
Real property;
restrictions on transfer; waiver of restrictions.
�
(a)
�

The following restrictions shall apply to the transfer of real property
developed and sold under this chapter, whether in fee simple or leasehold:

����
(1)
�
[
For a period
of ten years
]
In perpetuity
after the purchase, whether by lease,
assignment of lease, deed, or agreement of sale, if the purchaser wishes to
transfer title to the real property, the corporation shall have the first
option to purchase the real property at a price that shall not exceed the
same
regulations it was purchased under and remain affordable to the same area
median income as it was originally purchased at.
�
If applicable the sales price shall be
adjusted to include the
sum of:

���������
(A)
�
[
The original
cost to the purchaser, as defined in rules adopted by the corporation;

��������
(B)
]
�
The
cost of any improvements added by the purchaser, as defined in rules adopted by
the corporation;
and

��������
[
(C)
�
Simple
interest on the original cost and capital improvements to the purchaser at the
rate of one per cent per year; and

�����
(D)
]
(B)
�
The
amount, if any, previously paid by the purchaser to the corporation [
as the
corporation's share of net appreciation in the real property;
]
.

����
(2)
�
The corporation
may purchase the real property either:

���������
(A)
�
By conveyance free
and clear of all mortgages and liens; or

���������
(B)
�
By conveyance
subject to existing mortgages and liens.

���������
If the real property is
conveyed in the manner provided in subparagraph (A), it shall be conveyed to
the corporation only after all mortgages and liens are released.
�
If the real property is conveyed in the
manner provided in subparagraph (B), the corporation shall acquire the real
property subject to any first mortgage created for the purpose of securing the
payment of a loan of funds expended solely for the purchase of the real
property by the seller; and any mortgage or lien created for any other purpose;
provided that the corporation has previously consented to it in writing.

�������������
The corporation's interest
created by this section shall constitute a statutory lien on the real property
and shall be superior to any other mortgage or lien, except for any first
mortgage created for the purpose of securing the payment of a loan of funds
expended solely for the purchase of the real property by the seller; any
mortgage insured or held by a federal housing agency; and any mortgage or lien
created for any other purpose; provided that the corporation has previously
consented to it in writing.
�
The amount
paid by the corporation to the seller shall be the difference, if any, between
the purchase price determined by paragraph (1)(A) to (D), and the total of the
outstanding principal balances of the mortgages and liens assumed by the
corporation;

����
(3)
�
A purchaser may
refinance real property developed and sold under this chapter; provided that
the purchaser shall not refinance the real property [
within ten years from
the date of purchase
] for an amount in excess of the purchase price as
determined by paragraph (1)(A) to [
(C)
]
(B)
; provided further that
the purchaser shall obtain the corporation's written consent [
if any
restriction on the transfer of the real property remains applicable
]
to
refinance
;

���
[
(4)
�
After the end
of the tenth year from the date of initial purchase or execution of an
agreement of sale, the purchaser may sell the real property and sell or assign
the property free from any price restrictions; provided that the purchaser
shall be required to pay to the corporation the sum of:

������
(A)
]
(4)

The
balance of any mortgage note, agreement of sale, or other amount owing to the
corporation[
;
]
may be paid, in part or in full, at any time after
recordation of the sale.

��������
[
(B)
�
Any
subsidy or deferred sales price made by the corporation in the acquisition,
development, construction, and sale of the real property, and any other amount
expended by the corporation not counted as costs under section 201H-45 but
charged to the real property by good accounting practice as determined by the
corporation whose books shall be prima facie evidence of the correctness of the
costs;

���������
(C)
�
[
Repeal and reenactment on June 30,
2028.
�
L 2023, c 92, �5(1).
]

�
Interest on the subsidy or deferred sales
price, if applicable, and any other amount expended at a rate established by
the corporation computed as to the subsidy or deferred sales price, if
applicable, from the date of purchase or execution of the agreement of sale,
and as to any amount expended, from the date of expenditure; provided that the
computed interest shall not extend beyond thirty years from the date of
purchase or execution of the agreement of sale of the real property.
�
If any proposed sale or transfer will not
generate an amount sufficient to pay the corporation the sum as computed under
this paragraph, the corporation shall have the first option to purchase the
real property at a price that shall not exceed the sum as computed under
paragraphs (1) and (2); and

���������
(D)
�
The
corporation's share of appreciation in the real property as determined under
rules adopted pursuant to chapter 91, when applicable;

����
(5)
�
Notwithstanding
any provision in this section to the contrary, pursuant to rules adopted by the
corporation, the subsidy or deferred sales price described in paragraph (4)(B)
and any interest accrued pursuant to paragraph (4)(C) may be paid, in part or in
full, at any time; and

����
(6)
�
Notwithstanding
any provision in this section to the contrary, the corporation's share of
appreciation in the real property described in paragraph (4)(D):

���������
(A)
�
Shall
apply when the sales price of the real property that is developed and sold
under this chapter is less than the then-current, unencumbered, fair market
value of the real property, as determined by a real property appraisal obtained
prior to the closing of the sale;

���������
(B)
�
Shall
be a restriction that runs with the land until it is paid in full and released
by the corporation, or extinguished pursuant to subsection (f); and

���������
(C)
�
May
be paid, in part or in full, at any time after recordation of the sale.
]

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[
(b)
]
(a)
�
If the corporation waives its first option to
repurchase the real property provided in subsection (a), a qualified nonprofit
housing trust shall have the option to purchase the real property at [
a
]

the same area median income level as it was originally purchased at.
[
price
that shall not exceed the sum of:

����
(1)
�
The original
cost to the purchaser, as defined in rules adopted by the corporation;

����
(2)
�
The cost of any
improvements added by the purchaser, as defined in rules adopted by the
corporation;

����
(3)
�
Simple interest
on the original cost and capital improvements to the purchaser at the rate of
one per cent per year; and

����
(4)
�
The
corporation's share of net appreciation in the real property to be paid as
determined under rules adopted pursuant to chapter 91, when applicable.

����
(c)
]
(b)
�
[
For a period of ten years after the
purchase,
]
If,
whether by lease, assignment of lease, deed, or
agreement of sale, if the purchaser wishes to transfer title to the real
property, and if the corporation or the qualified nonprofit housing trust
selected by the corporation does not exercise the option to purchase the real
property as provided in subsection (a) or (b), then the corporation shall
require the purchaser to sell the real property to a "qualified
resident" as defined in section 201H-32, and upon the terms
that they
are qualified in the same area median income level
that preserve the intent
of this section and sections 201H-49 and 201H-50, and in accordance with rules
adopted by the corporation.

����
[
(d)
]
(c)

�
The corporati
on may waive the restrictions prescribed in subsections (a)
through
[
(c)
]
(b)

if:

����
(1)
�
The
purchaser wishes to transfer title to the real property by devise or through
the laws of descent to a family member who would otherwise qualify under rules
established by the corporation;

����
(2)
�
The
sale or transfer of the real property would be at a price and upon terms that
preserve the intent of this section without the necessity of the State
repurchasing the real property; provided that, in this case, the purchaser
shall sell the real property and sell or assign the real property to a person
who is a "qualified resident" as defined in section 201H-32
in the
same area median income level
; [
and provided further that the purchaser
shall pay to the corporation its share of appreciation in the real property as
determined in rules adopted pursuant to chapter 91, when applicable; or

����
(3)
�
The sale or
transfer is of real property subject to a sustainable affordable lease as
defined in section 516-1.
]

����
(e)
�

The corporation may release the restrictions prescribed in
subsections (a) through (c)

if the real property is financed under a federally subsidized mortgage program
and the restrictions would jeopardize the federal government's ability to
recapture any interest credit subsidies provided to the homeowner.

����
(f)
�

The restrictions prescribed in this section and sections 201H-49 to
201H-51 shall be automatically [
extinguished
]
retained
and shall [
not
]
attach in subsequent transfers of title when a qualified nonprofit housing
trust becomes the owner of the real property pursuant to subsection (b); or a
mortgage holder or other party becomes the owner of the real property pursuant
to a mortgage foreclosure, foreclosure under power of sale, or a conveyance in
lieu of foreclosure after a foreclosure action is commenced; provided that the
mortgage is the initial purchase money mortgage, or that the corporation
consented to and agreed to subordinate the restrictions to the mortgage when
originated, if the mortgage is not the initial purchase money mortgage; or when
a mortgage is assigned to a federal housing agency.
�
Any law to the contrary notwithstanding, a
mortgagee under a mortgage covering real property or leasehold interest
encumbered by the first option to purchase in favor of the corporation, prior
to commencing mortgage foreclosure proceedings, shall notify the corporation in
writing of:

����
(1)
�
Any
default of the mortgagor under the mortgage within ninety days after the
occurrence of the default; and

����
(2)
�
Any
intention of the mortgagee to foreclose the mortgage under chapter 667
forty-five days prior to commencing mortgage foreclosure proceedings;

provided
that the mortgagee's failure to provide written notice to the corporation shall
not affect the mortgage holder's rights under the mortgage.
�
The corporation shall be a party to any
foreclosure action, and shall be entitled to its share of appreciation in the
real property as determined under this chapter in lien priority when the
payment is applicable, and if foreclosure occurs within the ten-year period
after the purchase, the corporation shall also be entitled to all proceeds
remaining in excess of all customary and actual costs and expenses of transfer
pursuant to default, including liens and encumbrances of record; provided that
the person in default shall be entitled to an amount that shall not exceed the
sum of amounts determined pursuant to subsection [
(a)(1)(B) and (C)
]
(1)(A)
and (B)
.

����
(g)
�

The provisions of this section shall be incorporated in any deed, lease,
agreement of sale, or any other instrument of conveyance issued by the
corporation.
�
[
In any sale by the
corporation of real property for which a subsidy or deferred sales price was
made by the corporation, the amount of the subsidy or deferred sales price
described in subsection (a)(4)(B), a description of the cost items that
constitute the subsidy or deferred sales price, and the conditions of the
subsidy or deferred sales price shall be clearly stated at the beginning of the
contract document issued by the corporation.
�

In any sale in which the corporation's share of appreciation in real property
is a restriction, the terms of the shared appreciation equity program shall be
clearly stated and included as an exhibit in any deed, lease, agreement of
sale, or any other instrument of conveyance.
]

����
(h)
�

This section need not apply to market-priced units in an economically
integrated housing project, except as otherwise determined by the developer of
the units; provided that preference shall be given to qualified residents in
the initial sale of market-priced units.

����
(i)
�

The corporation is authorized to waive any of the restrictions set forth
in this section in order to comply with or conform to requirements set forth in
federal law or regulations governing mortgage insurance or guarantee programs
or requirements set forth by federally chartered secondary mortgage market
participants.

����
(j)
�

Notwithstanding any law to the contrary, if real property is purchased
by a qualified nonprofit housing trust pursuant to subsection (b), the housing
trust shall establish new buyback restrictions for the purpose of maintaining
the unit as affordable for [
as long as practicable, or as otherwise required
by the corporation
]
in perpetuity
.

����
(k)
�

A qualified nonprofit housing trust shall report the status and use of
its housing units to the corporation by November 30 of each calendar year."

����
SECTION
3
.
�
Section
201H-49, Hawaii Revised Statutes, is amended to read as follows:

����
"
[�201H-49]
�
Real property;
restrictions on use.
�
(a)
�
Real property purchased under this chapter
shall be occupied by the purchaser at all times [
during the ten-year
restriction period
]
as
set forth in section 201H-47, except in
hardship circumstances where the inability to reside on the property arises out
of unforeseeable job or military transfer, a temporary educational sabbatical,
serious illness of the person, or in other hardship circumstances as determined
by the corporation on a case-by-case basis.

����
The corporation may waive the
owner-occupancy requirement for a total of not more than ten years after the
purchase of the dwelling, during which time the dwelling unit may be rented or
leased.
�
Waivers may be granted only to
qualified residents who have paid resident state income taxes during all years
in which they occupied the dwelling, who continue to pay resident state income
taxes during the waiver period, and whose inability to reside on the property
does not stem from a natural disaster.
�
[
The
ten-year owner-occupancy requirement shall be extended by one month for every
month or fraction thereof that the owner-occupancy requirement is waived.
]

����
The corporation shall adopt rules
under chapter 91 to implement the letter and spirit of this subsection and to
prescribe necessary terms and conditions.
�

The rules shall include:

����
(1)
�
Application and
approval procedures for the waivers;

����
(2)
�
Exceptions
authorized by this subsection;

����
(3)
�
The amounts of
rents that may be charged by persons allowed to rent or lease a dwelling unit;
and

����
(4)
�
Schedules of fees
needed to cover administrative expenses and attorneys' fees.

����
No qualified resident who fails to
reoccupy a dwelling unit after any waiver period shall receive more than the
maximum to which the person would be entitled under section 201H-47.
�
Any person who disagrees with the corporation's
determination under this section shall be entitled to a contested case
proceeding under chapter 91.

����
(b)
�

From time to time the corporation may submit a verification of
owner-occupancy form to the purchaser.
�

Failure to respond to the verification in a timely manner or violation
of subsection (a) shall be sufficient reason for the corporation, at its
option, to purchase the unit as provided in section 201H-47(a)(1),
(or)

(2), [
or (4),
] as applicable.

����
(c)
�

Any deed, lease, agreement of sale, or other instrument of conveyance
issued by the corporation shall expressly contain the restrictions on use
prescribed in this section.

����
(d)
�

The restrictions prescribed in subsection (a) shall terminate and shall
not attach in subsequent transfers of title if the corporation releases the
restrictions when the real property is financed under a federally subsidized
mortgage program.

����
(e)
�

Subsections (a) to (c) need not apply to market-priced units in an
economically integrated housing project, except as otherwise determined by the
developer of the units; provided that preference shall be given to qualified
residents in the initial sale of market-priced units.

����
(f)
�

The corporation shall be authorized to waive any of the restrictions set
forth in this section in order to comply with or conform to requirements set
forth in federal law or regulations governing mortgage insurance or guarantee
programs or requirements set forth by federally chartered secondary mortgage
market participants."

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SECTION
4
.
�
Section
201H-23, Hawaii Revised Statutes, is amended to read as follows:

����
"
[�201H-23]
�
For-sale developments.
�
[
[
]
(a)[
]
]
�
Any law to the contrary notwithstanding, new
multifamily for-sale housing condominium developments of seventy-five units or
more per acre on privately owned lands and privately financed without federal,
state, or county financing assistance or subsidies, including tax credits,
shall:

����
(1)
�
Be
exempt from the corporation's shared appreciation equity program;

����
(2)
�
Be
subject to three-year occupancy requirements and transfer restrictions;
provided that the three-year occupancy requirement shall begin upon the sale of
each unit; and

����
(3)
�
Not
be subject to the [
ten-year occupancy
] requirements and transfer
restrictions in sections 201H-47 and 201H-49, respectively;

provided
that, in order for paragraphs (1), (2), and (3) to apply, the primary purpose
of constructing the new multifamily for-sale housing condominium development of
seventy-five units or more per acre shall be to augment the existing affordable
housing unit inventory in the State and not for the purpose of satisfying any
affordable housing or reserved housing requirement under this chapter, section
206E-4(18), or any other law or ordinance.

����
[
[
](b)[
]
]
�
As used in this section:

����
"Affordable housing" means the
same as defined under section 201H-57.

����
"Reserved housing" means the same
as defined under section 206E-101.
"

����
SECTION 5.
�
Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.

����
SECTION 6.
�
This Act shall take effect on July 1, 2026.

INTRODUCED BY:

_____________________________

Report Title:

Local
Housing Market
; Affordability; Wages; Income; Cost of Living

Description:

Establishing a Local Housing Market that is tied to Hawaii
State resident's incomes and not the global economy.
�
Thus providing housing options that are
affordable relative to wages for residents of the State.

The summary description
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not legislation or evidence of legislative intent.