Chapter 201H - A Solution to Hawaii's Affordable Housing Needs

Chapter 201H - A Solution to Hawaii's Affordable Housing Needs

The Honolulu Board of REALTORS® ("HBR") reported record median sales prices for single-family homes and condominiums in May, at $1,153,500 and $516,500, respectively. The HBR cited "declining affordable inventory and sales" as contributing to the record prices. Building more affordable housing is a potential solution to lowering housing costs, but the development of affordable housing in Hawaii does not come without its challenges. The challenges of development in Hawaii include the lack of reasonably priced, developable land, lack of major off-site infrastructure, high development costs, government regulations, and environmental challenges. Chapter 201H of the Hawaii Revised Statutes ("Chapter 201H") offers developers of affordable housing projects an opportunity to modify certain development and building requirements to make such projects viable, and also, to some degree, offer an expedited process for obtaining land use and zoning approvals. 

The Hawaii Housing Finance and Development Corporation ("HHFDC") administers the State's Chapter 201H exemption program. Pursuant to Section 201H-38 of Chapter 201H, HHFDC may offer exemptions from "all statutes, ordinances, charter provisions, and rules of any government agency relating to planning, zoning, construction standards for subdivisions, development and improvement of land, and the construction of dwelling units" for projects that meet minimum requirements of health and safety and other requirements imposed by HHFDC ("Chapter 201H project"). Possible exemptions include reduced parking stall requirements, relief from park dedication and subdivision requirements, and additional building height or density bonuses.

Applying for a Chapter 201H Exemption

Q: How does one apply for a Chapter 201H exemption?

A: The developer of a Chapter 201H project must first contact the relevant county housing agency to request Chapter 201H exemptions: 

→   County of Hawaii, Office of Housing and Community Development;

→   City and County of Honolulu, Department of Planning and Permitting;

→   County of Kauai, Housing Agency; or

→   County of Maui, Department of Housing and Human Concerns.

If the county housing agency accepts the Chapter 201H exemption request, the Chapter 201H project will be subject to the respective county's review and approval process, which may differ from HHFDC's process.

Q: What happens if the county denies the exemption request?

A: If the county denies the exemption request, the developer may apply to HHFDC, as described below. 

HHFDC's Exemption Request and Expedited Processing for Chapter 201H Projects 

Q: Is there anything the developer must do before submitting the Chapter 201H application to HHFDC?

A: Yes. Before submitting the Chapter 201H Application to HHFDC, the developer must meet with HHFDC staff to discuss the project and hold at least one public meeting to solicit community input.

Q: What projects are eligible for HHFDC's Chapter 201H exemptions and expedited processing?

A: Projects meeting the following minimum requirements may be eligible for HHFDC's Chapter 201H exemptions and expedited processing:

→ The developer has site control.

→ At least 50% plus one of the units in the Chapter 201H project are affordable to households with incomes at or below 140% of Area Median Income, as defined by the U.S. Department of Housing and Urban Development ("HUD"). HUD's 2022 income limits are available on HHFDC's website. County governments sometimes seek to set their own affordability criteria.

→ Affordable units are subject to HHFDC's buyback and shared appreciation restrictions.

→ In some cases, an Environmental Assessment ("EA") or Environmental Impact Statement ("EIS") will be required.

Q: What does HHFDC do after reviewing a Chapter 201H application for eligibility and completeness?

A: Within 90 days after receipt of a complete Chapter 201H application, HHFDC's Executive Director will recommend to HHFDC's board either approval or disapproval of the Chapter 201H project. 

Q:  What does HHFDC do during the 90-day review period described above?

A: During the review period, HHFDC's staff prepares a cover letter for use by the developer to distribute the Chapter 201H plans to other state and county agencies for review and comment.

→ HHFDC gives the relevant agencies a deadline for commenting on the Chapter 201H application.

→ The agencies review the plans and exemptions requested to ensure that the proposed Chapter 201H project does not negatively affect public health or safety.

→ The developer and/or the project architect, engineer, or consultant must work with the agencies to address any health or safety concerns and modify the project plans accordingly.

Q: What actions may the HHFDC board take on the Chapter 201H application?

A: At a board meeting, HHFDC's board may approve, reject, defer, or re-refer the application to the Executive Director for further review and recommendation. The HHFDC board's approval may include conditions, such as the completion of an EA or EIS.

Q: What happens if the HHFDC board approves the Chapter 201H project?

A: Upon the HHFDC board's approval of the Chapter 201H project and the developer's satisfaction of any conditions to the approval, HHFDC compiles a Chapter 201H exemption request package, which includes the project plans, as amended and agreed upon during the agency reviews, and a draft resolution itemizing the proposed exemptions. HHFDC then transmits the package to the appropriate city or county council. 

Q: What does the city or county council do with the Chapter 201H exemption request package?

A: Upon receipt of the package, the city or county council has 45 days to review the package and decide whether to adopt the proposed resolution.  

→ The council may first review the package in a committee hearing. If the committee approves, then the resolution is referred to the full council for adoption. 

→ The city or county council may approve, approve with conditions, or deny the exemption request. 

→ If the council fails to act on the request, the request is deemed approved on the 46th day.

Q: When can one obtain a State land use district boundary amendment, if needed?

A: After HHFDC's board approves the Chapter 201H project, HHFDC may petition the State's Land Use Commission ("LUC") for a boundary amendment.

→ No less than 60 days before filing a land use petition with the LUC, HHFDC provides notices of the intent to file to the public, the LUC, appropriate state and county officials, and parties with a property interest in the project land.

→ The LUC has 45 days to review the land use petition and approve, approve with modifications, or disapprove of the petition. 

→ If the LUC fails to act on the request, the request for boundary amendment is deemed approved on the 46th day.

Q: What happens after the developer obtains the city or county council and LUC approvals, if applicable?

A: After the appropriate council and/or LUC approvals have been obtained, the developer enters into a development agreement with HHFDC containing the approved exemptions.

Developers planning affordable housing projects may consider taking advantage of the exemptions offered by Chapter 201H and thereby be a part of the solution to the State's housing crisis.

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