RELATING TO THE RENTAL HOUSING REVOLVING FUND.

HB2261

HOUSE OF REPRESENTATIVES

H.B. NO.

2261

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO THE RENTAL HOUSING REVOLVING FUND.

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

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SECTION 1.
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Section 201H-201,
Hawaii Revised Statutes, is amended by adding one new definition to be
appropriately inserted and to read as follows:

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"
"Mixed-income rental
project" means a rental housing development that provides units primarily for
households at a range of income levels, primarily for households with incomes
at or below one-hundred-forty per cent of the area median income.
"

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SECTION 2.
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Section 201H-202, Hawaii Revised Statutes, is amended to read as
follows:

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"
�201H-202
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Rental housing revolving fund.
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(a)
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There is established the rental housing revolving fund to be
administered by the corporation.

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(b)
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An amount from the fund, to be set by the corporation and authorized by
the legislature, may be used for administrative expenses incurred by the
corporation in administering the corporation's housing finance programs;
provided that fund moneys shall not be used to finance day-to-day
administrative expenses of projects allotted fund moneys.

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(c)
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The following may be deposited into the fund[
:
]
or into the
mixed-income subaccount established under subsection (f):

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(1)
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Appropriations
made by the legislature;

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(2)
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Conveyance
taxes pursuant to section 247-7;

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(3)
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Private
contributions;

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(4)
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Repayment
of loans;

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(5)
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Interest;

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(6)
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Other
returns; and

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(7)
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Moneys
from other sources.

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(d)
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Except
as provided in subsection (f), the fund shall be used to provide loans for the
development, pre-development, construction, acquisition, preservation, and
substantial rehabilitation of rental housing units.
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The corporation shall not forgive any loan
made from the fund unless the corporation forecloses on the project.
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Permitted uses of the fund may include but
are not limited to planning, design, land acquisition, costs of options,
agreements of sale, downpayments, equity financing, capacity building of
nonprofit housing developers, credit enhancement, gap financing, or other
housing development services or activities as provided in rules adopted by the
corporation pursuant to chapter 91.
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The
rules may provide for a means of recapturing loans or grants made from the fund
if a rental housing project financed under the fund is refinanced or sold at a
later date.
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The rules may also provide
that moneys from the fund shall be leveraged with other financial resources to
the extent possible.

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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 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 for projects that were awarded low-income housing credits pursuant to this
paragraph, priority shall be given to projects with a perpetual affordability
commitment.
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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.

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(f)
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There is established within the fund a mixed-income subaccount.
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Moneys in the mixed-income subaccount shall
be used for financing, including but not limited to loans, equity investments,
and credit enhancement, for mixed-income rentals for qualified residents as
defined in section 201H-32.
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The
corporation shall establish an application process for the allocation of funds
in the mixed-income subaccount, separate from the fund allocation process
pursuant to section 201H-204(c), that gives preference to projects meeting the
following criteria:

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(1)
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A
diverse range of affordability, prioritizing persons and families with incomes
up to one hundred forty per cent of the median family income;

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(2)
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Projects
located on state or county owned land or developed in partnership with the
State or a county;

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(3)
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Projects
that efficiently use state funding;

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(4)
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Mixed-income
rental projects or units in a mixed-
income rental project in an
area that satisfies transit-supportive density requirements, as defined in
section 206E-246; and

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(5)
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Any
other criteria as the corporation deems necessary to carry out the purposes of
this subsection.

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If the corporation, after applying the
process described in this subsection, finds a nonprofit or government project
equally ranked with a for-profit project, the corporation shall give preference
to the nonprofit or government project in allotting funds from the mixed-income
subaccount.

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Moneys derived from the repayment of loans
funded by the mixed-income subaccount, interest thereon, and related fees and
returns shall be deposited into the fund.

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(g)
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There is established within the fund a bond volume cap recycling program
subaccount.
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The bond volume cap
recycling program subaccount shall be maintained as a reserve for the bond
volume cap recycling program established pursuant to section 39B-2(f).

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(h)
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The corporation shall submit an annual report to the legislature no
later than twenty days prior to the convening of each regular session
describing the projects funded and, with respect to rental housing projects
targeted for persons and families with incomes at or below thirty per cent of
the median family income, its efforts to develop those rental housing projects,
a description of proposals submitted for this target group and action taken on
the proposals, and any barriers to developing housing units for this target
group.

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(i)
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For the purposes of this subpart, the applicable median family income
shall be the median family income for the county or standard metropolitan
statistical area in which the project is located as determined by the United
States Department of Housing and Urban Development, as adjusted from time to
time.

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(j)
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The corporation may provide loans under this
section; provided that the corporation shall establish loan-to-value ratios to
protect the fund from inordinate risk and that under no circumstances shall the
rules permit the loan-to-value ratio to exceed one hundred per cent; provided
further that the underwriting guidelines include a debt-coverage ratio of at
least 1.0.

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(k)
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For the period commencing July 1, 2005, through June 30, 2009, the
fund may be used to provide grants for rental units set aside for persons and
families with incomes at or below thirty per cent of the median family income
in any project financed in whole or in part by the fund in proportion of those
units to the total number of units in the project.
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At the conclusion of the period described in
this subsection, the corporation shall report to the legislature on the number
and use of grants provided and whether the grants were an effective use of the
funds for purposes of developing rental housing for families at or below thirty
per cent of the median family income.

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(l)
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Notwithstanding any law to the contrary, the corporation, with the
approval of the director of finance, may transfer moneys between the rental
housing revolving fund and any subaccount established under this section, and
between subaccounts established under this section, without further legislative
authorization, for purposes consistent with this chapter.
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The corporation may also return unexpended or
uncommitted funds from any subaccount established under this section to the
rental housing revolving fund, to be used for any lawful purpose of the fund.
"

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SECTION 3.
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Act 159, Session Laws of Hawaii 2025, is amended by amending section 8
to read as follows:

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"SECTION 8.
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This Act shall take effect upon its approval[
;

provided that sections 2 and 3 of this Act shall be repealed on June 30,
2030, and sections 201H-202 and 201H-204, Hawaii Revised Statutes, shall be
reenacted in the form in which they read on the day prior to the effective date
of this Act
]."

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SECTION 4.
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The director of finance is authorized to transfer moneys from the rental
housing revolving fund to the rental housing revolving fund mixed-income
subaccount in an amount not to exceed $100,000,000 for fiscal year 2026-2027.

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SECTION 5.
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The corporation shall submit an annual report to the legislature no
later than twenty days prior to the convening of each regular session describing
the projects funded using moneys transferred from the rental housing revolving
fund to the rental housing revolving fund mixed-income subaccount.

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SECTION 6.
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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 7.
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This Act shall take effect upon its approval.

INTRODUCED BY:

_____________________________

BY REQUEST

Report Title:

Rental Housing Revolving Fund; Mixed-Income Rental
Projects; Definition; Mixed-Income Housing; Transfers; Director of Finance;
Repeal of Sunset Date; Report

Description:

Clarifies the Rental Housing Revolving Fund statute by
defining "mixed-income rental projects" to establish consistent
eligibility and use of appropriations for mixed-income rental housing projects.
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Clarifies that mixed-income rental projects
are primarily for households at or below one-hundred-forty per cent of the area
median income, allowing participation by higher-income households.
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Authorizes the Hawaii Housing Finance and
Development Corporation to transfer funds between the Rental Housing Revolving
Fund into the mixed-income subaccount to support eligible mixed-income
projects, without legislative approval.
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Repeals the sunset date in Act 159, Session Laws of Hawaii 2025, thereby
making these provisions permanent.
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Requires a report to the Legislature.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.