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Home My WebLink AboutCOM 0948.002 2022-2024Ashley L. Kierkiewicz Council Member District 4 Puna MEMORANDUM Office: (808) 961-8265 Fax: (808) 961-8912 ashley.kierkiewicz@hawaiicounty.gov IIAWAI`I COUNTY COUNCIL Hawaii County Building 25 Aupuni Street • Hilo, Hawaii 96720 DATE: October 25, 2024 TO: Heather Kimball, Council Chairperson And Members of the Hawaii County Council FROM:Ashley L. Kierkiewicz, Council Member d SUBJECT: Chapter 11 Ad Hoc Committee Recommendations Enclosed for your review is the Chapter 11 Ad Hoc Committee's set of recommendations. These proposals are the result of an extensive engagement and deliberation process designed to address critical gaps and opportunities within Hawaii Island's affordable housing policies. On August 6, 2024, at a meeting of the Policy Committee on Planning, Land Use, and Development, an Ad Hoc Committee was formed to analyze and propose changes to Chapter 11, which outlines affordable housing requirements. This initiative followed an in-depth report and analysis by Keyser Marston Associates. The Ad Hoc Committee was comprised of Council Members Holeka Inaba, Jennifer Kagiwada, Sue Lee Loy, and was chaired by Ashley Kierkiewicz. The Ad Hoc's goal was to review existing affordable housing policies, engage a range of stakeholders, and develop a suite of recommendations that would more effectively promote affordable housing development on Hawaii Island. Though Chapter 11 was the primary focus, discussions uncovered broader challenges within the housing ecosystem that extend beyond the scope of the Office of Housing & Community Development (OHCD). Addressing these will also be vital in moving the needle on affordable housing development. From August to October 2024, the Ad Hoc held formal meetings with Council Members, OHCD representatives, and various stakeholders. Below is a schedule of meeting dates and topics covered: - Thurs, Aug. 15, 9AM-11AM — Established meeting schedule and focus areas - Thurs, Aug. 22, 9AM-12PM — Training on Ch. 11 by Deputy Corporation Counsel Sylvia Wan - Wed, Aug. 28, 9AM-1PM — Review of State Housing package by Rep. Luke Evslin, with participation from the Office of U.S. Senator Brian Schatz (Michael Dahilig); review and discussion of the Keyser Marston Report with David Doezema - Thurs, Sept. 5, 9AM-12PM — Discussion on housing credits and excess credits, with insights from County Auditor Tyler Benner - Tues, Sept. 10, 9AM-12PM — Discussion on in -lieu fees - Wed, Sept. 25, 9AM-1PM — Exploration of potential development incentives, with Mark Roy (Munekiyo Hiraga) available to discuss Maui County's 2.97 program - Thurs, Oct. 3, 9AM-1PM — Further discussion on incentives with Buddy Almedia of Maui County Housing Programs, and preparation for Oct. 10 meeting with housing contributors - Thurs, Oct. 10, 9AM-3PM — Hawai`i Island Housing Contributors Summit - Fri, Oct. 18, 9AM-1 PM — Summit debrief and Ad Hoc reflection This report details the insights and actionable steps identified through this structured and collaborative process. A full list of participants is provided at the end of the report. Context from the Hawaii Island Housing Contributors Summit A key milestone in this process was the Hawaii Island Housing Contributors Summit held on Thursday, October 10, 2024. During this convening, stakeholders in housing development provided extensive feedback on the challenges of meeting affordability standards amid rising construction costs, regulatory delays, and infrastructure demands. Participants emphasized the need for clear guidelines and timelines within governmental processes, "bridge the gap" programs to maintain affordability, as well as streamlined solutions to make projects financially viable. This feedback has been instrumental in shaping the following recommendations to refine Chapter 11, clarifying processes, and removing barriers that hinder the development of affordable housing. Chapter 11 Triggers and Broader Housing Policy Currently, Chapter 11 outlines requirements of affordable housing to be built as part of new residential developments where property is rezoned to create five or more residential units or lots, and for rezonings for resorts, hotels, and industrial uses that add more than 100 full-time equivalent jobs. The Ad Hoc recommends expanding its housing policy to encourage a range of housing developments — from single units to larger -scale projects — particularly in areas with 2 pressing workforce needs. Although significant strides were made during the three-month Ad Hoc process, additional efforts are necessary to finalize policies and conduct further stakeholder engagement, ensuring future code, programs, and policies are fair and result in tangible housing outcomes. Guidance from General Plan and Community Development Plans The General Plan and Community Development Plans identify urban areas and growth opportunities, which should inform development decisions to ensure clarity and consistency regarding where growth should occur. In this context, infrastructure requirements (including water, wastewater, and roads) and natural and cultural resource preservation must be considered holistically to support balanced, sustainable growth. Recommendations by the Ad Hoc Committee Excess Housing Credits: The Ad Hoc recommends phasing out excess housing credits over a 15-year redemption period for holders of existing excess credits, and no new excess credits issued moving forward. Additionally, expanding the use of existing excess credits beyond the current 15-mile radius restriction to islandwide application would create more flexibility. It's worth noting that excess credits issued by the Department of Hawaiian Home Lands have no geographic limits and can be used throughout the County. By -Right Exemptions: By -right exemptions for affordable and workforce housing should be introduced to simplify the approval process while remaining adaptable to specific property characteristics. Certain allowances would significantly streamline the approval and building processes while ensuring all elements of a housing project fit within a development envelope. Proposed exemptions include: - Waive permitting fees. - Flexible road designs that still maintain safety standards. - Relaxed height limits to permit an additional floor. - Reduced parking requirements for kupuna (senior) housing. - Permission to use adjacent parcels with different zoning for parking. - Increased density allowances for optimal land use. - Flexible setback requirements, assessed case -by -case basis. For example, reduce the lot setback requirements for side -by -side construction. - Automatic rezoning where the State Land Use designation allows for the proposed project, such as SLU Urban and the County zoning is Agriculture. - Relaxed landscaping requirements to preserve water resources. - Adjusted energy code requirements to reduce project costs. Coordinated Permitting Review: Establishing a dedicated monthly meeting among County agencies, and including State Historic Preservation Division as well as Department of Health, and project developers would facilitate a more efficient permitting process. The coordinated approach would reduce costs and improve approval timelines. Finished Lots: While building affordable housing on finished lots was historically feasible, rising construction costs and financing difficulties have made this option increasingly challenging. The Ad Hoc Committee prioritizes turn -key homes but acknowledges the need for diverse solutions, including finished lots, to meet affordable housing requirements. To make finished lots more viable, the committee recommends expanding the affordability range to 120-140% of the area median income (AMI), making it more feasible for developers. Additionally, exploring financial assistance programs for buyers of finished lots would help ensure home construction, and extending the timeframe to build from three to five years would provide buyers with sufficient time to finance, design, permit, and construct their homes. Density Bonus Program: This program, though potentially valuable, remains underutilized due to vague language and limited infrastructure. Revising program language to clarify guidelines and incentives, and possibly relocating it to Chapter 25 (Zoning) to improve its visibility, may increase its impact. Regardless of its location in the County Code, effective administration and inter -agency coordination are essential for success. In -Lieu Fees: In -lieu fees would provide an alternative for developers who opt not to build the required affordable housing units, allowing the County to redirect these funds toward affordable housing development elsewhere. The in -lieu fee would be calculated as half the affordable sales prices for the unit, with adjustments based on geographic location. Two approaches are under consideration to limit reliance on the in -lieu fees: - Approach #1 —Projects with 50 or more units would be prohibited from using in -lieu fees to fulfill their affordable housing requirement. - Approach #2 — Projects with 200+ units may not use in -lieu fees, while those with 100-199 units could use this option to fulfill up to 50% of their obligation. Clarification is needed regarding the timing of in -lieu fee payments. The Ad Hoc did not have time to explore how in -Lieu fees would apply to rental projects or satisfy housing obligations for industrial, commercial, or hotel/resort projects. Conveyance of Land: Conveyance of land has been used as a means to satisfy affordable housing requirements, and has enabled organizations like Hawaii Island Community Development Corporation (HICDC) to build affordable units successfully. The Ad Hoc recognizes land as a critical component to housing development and advocates for future land donations to include a clear development plan and to identify an affordable housing developer to ensure timely construction. Real Property Tax: The Ad Hoc is exploring options for real property tax reductions or temporary exemptions on projects focused on affordable housing, workforce housing, rehabilitation, or adaptive reuse. Further dialogue with the Dept. of Finance and the Real Property Tax Office will help determine how these incentives might be structured and applied. Infrastructure: Although infrastructure isn't covered in Chapter 11, its high costs add complexity and financial burden to developers. Historically, the County provided core infrastructure, but the responsibility gradually shifted to developers, increasing the overall cost of housing. Government should ideally fund foundational infrastructure, allowing developers to concentrate on building homes and related key assets. Federal funding, such as that available from the Inflation Reduction Act (IRA), could be leveraged to support infrastructure costs. Vancouver's Empty Homes Tax was suggested as a potential to fund infrastructure. Wastewater remains a major challenge, especially for smaller lots such as 7,500-square-foot single family properties. HAR Ch. 11-62 notes "developments involving dwellings shall have 10,000 square feet of land area for each individual wastewater system." Developments with 50 or more units are required to install private treatment plants, which entail substantial start-up and ongoing operational costs. Collaborative efforts with the State Dept. of Health could help facilitate medium-sized, innovative wastewater solutions. A "Waiver for Innovation" could also allow for piloting new systems that meet DOH standards while establishing proof of concept. The Dept. of Environmental Management plans to include a wastewater expansion overlay in the General Plan, enabling developers to anticipate and plan for sewer connectivity. Temporary solutions should be considered for use until permanent wastewater infrastructure is established. Water access is another critical component for housing projects. The Dept. of Water Supply has been very supportive of fully affordable housing projects, offering water for such developments where market -rate projects would require additional source or storage capacity, providing a significant incentive for affordable housing projects. Advanced technology tools could improve understanding and visualization of water availability islandwide, water credits, and system capacity to support planning. A review of concurrency requirements for County water systems and landscaping regulations could further help to conserve water resources. Streamlining Permitting: The Ad Hoc advocates for expedited permitting processes for affordable and workforce housing projects to minimize delays and reduce development costs. The OHCD is encouraged to coordinate regularly with relevant County and State agencies to review projects early in the process, streamlining permitting and helping to manage costs. OHCD suggested having a dedicated Building Clerk to handle affordable and workforce housing permits, further simplifying the process. Housing Tools and Strategies The Ad Hoc discussed several "housing tools" that either exist or need establishment. The Ad Hoc is eager to work collaboratively with OHCD and the developer community to ensure that programs are straightforward and accountable. - Adaptive Reuse: Act 37 requires counties to create ordinances that incentivize converting vacant or underutilized commercial properties into residential housing, expanding affordable housing options. Members of the Ad Hoc are drafting an ordinance. - Housing/Land Trust: Hawaii Island has several land trusts that manage land to provide affordable housing. Residents can purchase or rent homes affordably, building equity until they are ready to transition to market -rate homeownership, thereby freeing up affordable housing for new families. Enhanced coordination between the County and these trusts could maximize affordable housing outcomes. - Preserve & Rehabilitate: Existing housing stock can be preserved through rehabilitation, extending its useful life. The Ad Hoc Committee is examining how to streamline regulations to incentivize preservation efforts. - Accessory Dwelling Units (ADUs): Recently, the Council adopted Bill 123, allowing up to three ADUs on residential properties in urban areas with sufficient infrastructure, meeting Act 39 requirements. This helps increase density and situates residents closer to employment, services, and recreation. Maui County's $100,000 ADU grant program is also being reviewed as a potential model. - Down Payment Assistance: Despite efforts to lower housing costs, many residents still face financial hurdles to homeownership. The Ad Hoc Committee plans to explore down payment assistance options and engage with local financial institutions to understand current offerings and identify gaps in support for first-time homebuyers. Funding: The County's Affordable Housing Production Fund has been successfully used to advance various housing projects. The Ad Hoc recommends maintaining the fund's support for production and preservation, possibly focusing on specific districts based on housing needs. The Housing Revolving Fund, with just over $800,000, must be revisited and code updated so funds can be used to support housing development. A sustained funding source, such as a portion of the Homelessness and Housing Fund, is suggested to keep the Revolving Fund active. Housing Infrastructure: Act 30 authorizes counties to use the General Excise Tax (GET) surcharge for housing infrastructure, which is currently allocated for transportation. Hawaii County uses its GET surcharge to support the Mass Transit Agency and part of the Highway Division. The Ad Hoc recommends an ordinance to expand the County's GET surcharge usage to cover housing infrastructure development. G4i I would like to extend a warm mahalo to my fellow Council Members — Holeka Inaba, Jennifer Kagiwada, and Sue Lee Loy — for their service on the Chapter 11 Ad Hoc Committee, as well as to the Office of Housing & Community Development, the Planning Department, and our Council Offices for their support throughout this significant undertaking. Addressing housing needs on Hawaii Island requires extensive collaboration, and each participant has brought invaluable insights to this effort. Recognizing the critical importance of addressing housing, this Ad Hoc committed substantial time to meetings, research, discussion, and deliberation. Our approach was thoughtful and comprehensive, involving insights from County agencies, the developer community, and other key stakeholders. Good policy is guided by real -world experiences and the needs of those it ultimately serves, and we believe these recommendations capture the complexity and urgency of Hawaii Island's housing challenges. To ensure longevity, clarity, and consistency of Chapter 11 provisions, we recommend implementing clear administrative rules. Doing so will provide developers, County officials, and the public with a cohesive framework, supporting both transparency and ease of application. As we move forward, we recommend continuing this essential work through a new Ad Hoc Committee. Maintaining momentum and building upon the strong foundation of stakeholder engagement and trust are critical. An ongoing Ad Hoc provides an opportunity to explore in greater depth, support policy development, and advance programs that effectively respond to the housing crisis. It has been my honor to lead this effort as Chair of the Chapter 11 Ad Hoc Committee. We offer these recommendations for your consideration and look forward to the ongoing collaborative work needed to make a meaningful impact on housing for Hawaii Island. AK/ak 7 Chapter 11 Ad Hoc Participants Council Members - Ashley Kierkiewicz, Ad Hoc Chair, Council District IV - Holeka Inaba, Council District VIII - Jennifer Kagiwada, Council District II - Sue Lee Loy, Council District III Council Member Staff - CD2: Shannon Matson CD3: Saleena Cox-Manoha, Shelly Ogata CD4: Ivory Quintal, Ku`uhiapo Jeong CD8: Wendy Baez Office of Housing & Community Development - Susan Kunz, Administrator - Harry Yada, Deputy Administrator - Anne Bailey, Housing & Community Development Specialist VI - Cristina Pineda, Housing & Community Development Specialist V - Kaloa Robinson, Housing & Community Development Specialist V - Chelsea Jensen, Public Information Officer Corporation Counsel Sylvia Wan, Deputy Corporation Counsel Planning Department - Jeff Darrow, Deputy Director - April Surprenant, Planning Program Manager Real Property Tax - Lisa Miura, Administrator Department of Public Works - Malia Kekai, Deputy Director Office of the County Auditor - Tyler Benner, Auditor Guest Participants - Michael Dahilig, Office of Senator Brian Schatz - Rep. Luke Evslin, Hawaii State Legislature - David Doezema, Keyser Marston Associates - Mark Alexander Roy, Munekiyo Hiraga - Buddy Almeida, Maui County Housing Programs 3