REQUESTING THE DEPARTMENT OF BUSINESS, ECONOMIC DEVELOPMENT, AND TOURISM TO CONDUCT A STUDY ON THE FEASIBILITY OF UTILIZING MEZZANINE LOANS TO INCREASE THE RATE OF HOUSING PRODUCTION IN THE STATE.

SR38

THE SENATE

S.R. NO.

38

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

SENATE RESOLUTION

requesting the department of business, economic
development, and tourism to conduct a study on the feasibility of UTILIZING mezzanine
loans to increase the rate of housing production in the State
.

����
WHEREAS, Hawaii
is experiencing one of the worst housing shortages in the State's history; and

����
WHEREAS, with
the most expensive housing costs in the nation, the State primarily struggles
with insufficient housing production and affordable housing inventory; and

����
WHEREAS, the State's
housing market is stuck in a problematic cycle that decreases affordability caused
by high consumer demand relative to housing stock; and

����
WHEREAS, housing
developers today face a predicament where, in addition to higher development
costs, the total availability of construction mortgages for housing development
projects is falling, requiring them to utilize higher-cost equity financing, such
as private equity and other non-traditional lenders that typically ask for
significant equity (ownership stake) in the project, higher returns, and more;
and

����
WHEREAS, additionally, as the State's key housing agency, the
Hawaii housing finance and development corporation determined via a cash flow
analysis of their various housing programs that many programs held significant
revolving periods, or the time it takes for the State to recoup the funding
spent for each program; and

����
WHEREAS, a mezzanine loan is a
debt-equity instrument that is backed by the value of the project based on its
historic and projected cash flows; and

����
WHEREAS,
mezzanine loans provide more flexibility in repayment terms and enables the
financing of unsecured intangible assets, making it a much more attainable form
of funding for smaller-sized companies; and

����
WHEREAS, for
housing developers, mezzanine loans could potentially help in financing a
housing project by decreasing the amount of equity the developer will need to
provide lenders to finance the construction; and

����
WHEREAS, a
state housing project using mezzanine loans tailored specifically for Hawaii's
housing challenges could generate both more housing units and accelerate the
recycling of revolving funds, utilizing taxpayer dollars in a more efficient
manner than traditional state-funded housing programs; and

����
WHEREAS, by
conducting further research into mezzanine financing, the State can make
informed decisions on the utilization of the debt equity financing mechanism to
ease the housing shortage and address the needs of Hawaii's residents;

now, therefore,

����
BE IT
RESOLVED by the Senate of the Thirty-third Legislature of the State of Hawaii,
Regular Session of 2026, that the Department of Business, Economic Development,
and Tourism is requested to conduct a study on the feasibility of utilizing
mezzanine loans to increase the rate of housing production in the State; and

����
BE IT FURTHER
RESOLVED that the Department of Business, Economic Development, and Tourism is
requested to 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
;
and

����
BE IT FURTHER
RESOLVED that a certified copy of this Resolution be transmitted to the Director
of Business, Economic Development, and Tourism.

OFFERED BY:

_____________________________

Report Title:
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DBEDT;
Mezzanine Loans; Housing Development; Study; Report