Honolulu's Newest Affordable Rental Housing Projects Ordinance

Honolulu's Newest Affordable Rental Housing Projects Ordinance

In furtherance of the City and County of Honolulu's efforts to address the affordable housing crisis, on May 21st, 2019, Mayor Kirk Caldwell approved Bill 7 (2019) (Ordinance 19-8) relating to affordable rental housing ("Bill 7"). Effective for five years upon the Mayor's approval, Bill 7 establishes a temporary program to accelerate the construction of affordable rental housing in the apartment, apartment mixed use, and business mixed use zoning districts by relaxing certain zoning and building code standards, and offering certain financial incentives. Such incentives may prove to create valuable business opportunities for interested developers.

What developments may take advantage of Bill 7?

Bill 7 governs and affords its incentives to "Affordable Rental Housing Projects." An "Affordable Rental Housing Project" ("ARH Project") under the Bill is a multifamily dwelling in which:

1. At least 80% of the total units are rented to households earning 100% and below of the AMI, and rented at or below the rental rate limits established by HUD for households earning 100% of the AMI for the applicable household size, or less;
2. No more than 20% of the total number of units are occupied by the property owner(s) or individuals who are related to property owner(s) by blood, marriage, or adoption;
3. The leases for the affordable rental housing units have a minimum six month term and a prohibition against subleasing;
4. All leases for dwelling units allow the lessee to terminate the lease early if the lessee or any of its co-habitating family members is rendered unable to access the unit due to an accident or medical condition;
5. The fee owners of the land must execute a declaration of restrictive covenants providing that the land is subject to the requirements of the Bill, and file a copy thereof with the DPP prior to the issuance of a building permit for the ARH Project; and
6. A certification must be filed annually with the director of budget and fiscal services affirming that criteria numbers 1 and 2 above are being adhered to.

Are there any restrictions on the use of Affordable Rental Housing Projects?

Bill 7 sets forth three restrictions relating to the use of ARH Projects:

1. Mixed use ARH Projects are prohibited, provided that the ground floor of an ARH Project may be put to a commercial use if commercial use is permitted by the underlying zoning.;
2. The land underlying the ARH Project may only be submitted to a condominium property regime if it contains a ground floor commercial use that is permitted by the underlying zoning of the land; provided that (1) the only condominium units created are one unit for the ground floor commercial portion of the ARH Project and one unit for the residential portion of the ARH Project, and (2) the condominium unit for the residential portion of the ARH Project may not be further divided into separate condominium units.
3. Units in an ARH Project may not be used as bed and breakfast homes or transient vacation units.

Are there any requirements that developers of Affordable Rental Housing Projects must fulfill?

Bill 7 requires that the owner(s) of the zoning lot on which an ARH Project is situated execute, and file with any building permit application, a declaration of restrictive covenants. If the owner(s) should subsequently decide to transfer the property on which the ARH Project is situated, the owner(s) must disclose the existence of the declaration of restrictive covenants to any prospective transferee(s). Upon the transfer of title, the new owner(s) must execute a declaration of restrictive covenants in substantially the same form as that executed by the previous owner(s), and file a copy of such with the DPP.

The declaration of restrictive covenants required by Bill 7 must be in a form approved by the Director of Budget and Fiscal Services and, at a minimum, provide that:

1. The land and all improvements thereon are subject to the affordable rental housing requirements of Bill 7;
2. The land or a portion thereof may qualify for a real property tax exemption during the exemption period if rented to households earning 80% or below of the AMI, and rented at or below the rental rate limits established by the U.S. Department of Housing and Urban Development for households earning 80% of the AMI for the applicable household size or less;
3. Excluding any portion of the ground floor of the ARH Project that is designated for commercial use if such use is otherwise permitted by the underlying zoning, mixed use projects are prohibited; and
4. The land underlying the ARH Project may only be submitted to a condominium property regime if it contains a ground floor commercial use that is permitted by the underlying zoning of the land; provided that (1) the only condominium units created are one unit for the ground floor commercial portion of the ARH Project and one unit for the residential portion of the ARH Project, and (2) the condominium unit for the residential portion of the ARH Project may not be further divided into separate condominium units.

What incentives does Bill 7 provide?

Bill 7 provides for a range of incentives, including:

Relaxed zoning and building code standards:

• Smaller minimum side and rear yards than generally allowed,
• Greater maximum build area than generally allowed,
• Greater building height limit than generally allowed,
• Greater maximum density than generally allowed, and
• No height setback, off-street parking, or bicycle parking requirements;

Waived wastewater system facility charges for affordable rental housing units;

Waived plan review and building permit fees for the portion of an ARH Project equal to the percentage of affordable units;

An exemption from the Subdivision Ordinance's Parks and Playgrounds dedication requirement;

Real property tax exemption for the portion of real property used for affordable rental housing units during the exemption period (10 year period ); and

Any incremental increase in the valuation of real property primarily attributable to qualify construction work is exempt from property taxes.

A copy of Bill 7 can be found at http://www4.honolulu.gov/docushare/dsweb/Get/Document-237616/DOC%20(27).pdf.