Sustainable Affordable Housing
Requires a portion of housing units in residential developments constructed with state assistance, on land purchase or leased from the State and on land located in a community development district, to be sold pursuant to restrictions that ensure continued affordability over time.
HOUSE OF REPRESENTATIVES
TWENTY-FIFTH LEGISLATURE, 2009
STATE OF HAWAII
A BILL FOR AN ACT
relating to sustainable affordable housing.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the cost of living in Hawaii has been and continues to be high. A significant contributing factor to the high cost of living is the high cost of housing, and the high cost of land contributes significantly to the high cost of housing. For this and other reasons, there continues to be a shortage of affordable housing in many areas of the State, notwithstanding significant declines in housing prices nationally. The legislature further finds that efforts of both the public and private sectors to provide affordable housing are undermined if the initial purchasers of such housing are allowed to re-sell their dwellings without limitations on resale prices. Such efforts are likely to benefit only the initial purchasers but fail to address the need for sustained affordability.
SECTION 2. Chapter 201H, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§201H- Sustainable affordable housing developed on state land. (a) With respect to any residential property developed on land purchased or leased from the State of Hawaii or any department, agency, or instrumentality thereof, after the date of enactment of this law, not less than per cent of the total residential floor area in the development shall constitute affordable housing and shall be sold pursuant to sustainable affordable leases.
(b) For purposes of this section:
"Affordable housing" has the same meaning as in section 201H-57.
"Sustainable affordable lease" has the same meaning as in section 516-1, regardless of whether the housing is in a sustainable affordable development as defined therein.
(c) The restrictions prescribed in this section shall be automatically extinguished under the same circumstances as described in section 201H-47(e).
(d) The provisions of this section shall be incorporated in any deed, lease, agreement of sale, or any other instrument of conveyance issued by the seller of the dwelling unit."
SECTION 3. Section 201H-47, Hawaii Revised Statutes, is amended to read as follows:
"§201H-47 Real property; restrictions on transfer; waiver of restrictions. (a) The following restrictions shall apply to the transfer of real property developed and sold under this chapter, whether in fee simple or leasehold:
(1) For a period of ten years after the purchase, whether by lease, assignment of lease, deed, or agreement of sale, if the purchaser wishes to transfer title to the real property, the corporation shall have the first option to purchase the real property at a price that shall not exceed the sum of:
(A) The original cost to the purchaser, as defined in rules adopted by the corporation;
(B) The cost of any improvements added by the purchaser, as defined in rules adopted by the corporation; and
(C) Simple interest on the original cost and capital improvements to the purchaser at the rate of one per cent a year;
(2) The corporation may purchase the real property either:
(A) By conveyance free and clear of all mortgages and liens; or
(B) By conveyance subject to existing mortgages and liens.
If the real property is conveyed in the manner provided in subparagraph (A), it shall be conveyed to the corporation only after all mortgages and liens are released. If the real property is conveyed in the manner provided in subparagraph (B), the corporation shall acquire the property subject to any first mortgage created for the purpose of securing the payment of a loan of funds expended solely for the purchase of the real property by the seller; and any mortgage or lien created for any other purpose provided that the corporation has previously consented to it in writing.
The corporation's interest created by this paragraph shall constitute a statutory lien on the real property and shall be superior to any other mortgage or lien except for:
(i) Any first mortgage created for the purpose of securing the payment of a loan of funds expended solely for the purchase of the real property by the seller;
(ii) Any mortgage insured or held by a federal housing agency; and
(iii) Any mortgage or lien created for any other purpose; provided that the corporation has previously consented to it in writing.
The amount paid by the corporation to the seller shall be the difference, if any, between the purchase price determined by paragraph (1)(A) to (C), and the total of the outstanding principal balances of the mortgages and liens assumed by the corporation;
(3) A purchaser may refinance real property developed and sold under this chapter provided that the purchaser shall not refinance the real property within ten years from the date of purchase for an amount in excess of the purchase price as determined by paragraph (1)(A) to (C);
(4) After the end of the tenth year from the date of
purchase or execution of an agreement of sale, the purchaser may sell the real
and sell or assign the property free from any price restrictions;]
for total consideration that does not exceed the maximum resale price; provided
that the purchaser shall be required to pay to the corporation the [ sum of: (A) The balance of any mortgage
note, agreement of sale, or other amount owing to the corporation; (B) Any subsidy or deferred sales
price made by the corporation in the acquisition, development, construction,
and sale of the real property, and any other amount expended by the corporation
not counted as costs under section 201H-45 but charged to the real property by
good accounting practice as determined by the corporation whose books shall be
prima facie evidence of the correctness of the costs; (C) Interest on the subsidy or
deferred sales price, if applicable, and any other amount expended at the rate
of seven per cent a year computed as to the subsidy or deferred sales price, if
applicable, from the date of purchase or execution of the agreement of sale,
and as to any amount expended, from the date of expenditure; provided that the
computed interest shall not extend beyond thirty years from the date of
purchase or execution of the agreement of sale of the real property. If any
proposed sale or transfer will not generate an amount sufficient to pay the
corporation the sum as computed under this paragraph, the corporation shall
have the first option to purchase the real property at a price that shall not
exceed the sum as computed under paragraphs (1) and (2); and (D) The] corporation's share of
appreciation in the real property as determined under rules adopted pursuant to
chapter 91, when applicable[ ; and (5) Notwithstanding any provision above to
the contrary, pursuant to rules adopted by the corporation, the subsidy or
deferred sales price described in paragraph (4)(B) and any interest accrued
pursuant to paragraph (4)(C) may be paid, in part or in full, at any time.]
The same resale requirements shall apply to each successive owner.
(b) For a period of ten years after the
purchase, whether by lease, assignment of lease, deed, or agreement of sale, if
the purchaser wishes to transfer title to the real property, and if the
corporation does not exercise the option to purchase the real property as
provided in subsection (a), then the corporation shall require the purchaser to
sell the real property to a "qualified resident" as defined in section
and upon the terms that preserve the intent of this section
and sections 201H-49 and 201H-50, and in accordance with rules adopted by the
corporation.] for total consideration that does not exceed the maximum
resale price, and the same resale requirements shall apply to each successive
(c) The corporation may waive the restrictions prescribed in subsection (a) or (b) if:
(1) The purchaser wishes to transfer title to the real property by devise or through the laws of descent to a family member who would otherwise qualify under rules established by the corporation;
(2) The sale or transfer of the real property would be at a price and upon terms that preserve the intent of this section without the necessity of the State repurchasing the real property; provided that, in this case, the purchaser shall sell the unit or lot and sell or assign the property to a person who is a "qualified resident" as defined in section 201H-32; and provided further that the purchaser shall pay to the corporation its share of appreciation in the unit as determined in rules adopted pursuant to chapter 91, when applicable; or
(3) The sale or transfer is of real property subject to a sustainable affordable lease as defined in section 516-1.
(d) The corporation may release the restrictions prescribed in subsection (a) or (b) if the real property is financed under a federally subsidized mortgage program and the restrictions would jeopardize the federal government's ability to recapture any interest credit subsidies provided to the homeowner.
(e) The restrictions prescribed in this section and sections 201H-49 to 201H-51 shall be automatically extinguished and shall not attach in subsequent transfers of title when a mortgage holder or other party becomes the owner of the real property pursuant to a mortgage foreclosure, foreclosure under power of sale, or a conveyance in lieu of foreclosure after a foreclosure action is commenced; or when a mortgage is assigned to a federal housing agency. Any law to the contrary notwithstanding, a mortgagee under a mortgage covering real property or leasehold interest encumbered by the first option to purchase in favor of the corporation, prior to commencing mortgage foreclosure proceedings, shall notify the corporation in writing of:
(1) Any default of the mortgagor under the mortgage within ninety days after the occurrence of the default; and
(2) Any intention of the mortgagee to foreclose the mortgage under chapter 667;
provided that the mortgagee's failure to provide written notice to the corporation shall not affect the mortgage holder's rights under the mortgage. The corporation shall be a party to any foreclosure action, and shall be entitled to all proceeds remaining in excess of all customary and actual costs and expenses of transfer pursuant to default, including liens and encumbrances of record; provided that the person in default shall be entitled to an amount which shall not exceed the sum of amounts determined pursuant to subsection (a)(1)(B) and (C).
(f) The provisions of this section shall be incorporated in any deed, lease, agreement of sale, or any other instrument of conveyance issued by the corporation. In any sale by the corporation of real property for which a subsidy or deferred sales price was made by the corporation, the amount of the subsidy or deferred sales price described in subsection (a)(4)(B), a description of the cost items that constitute the subsidy or deferred sales price, and the conditions of the subsidy or deferred sales price shall be clearly stated at the beginning of the contract document issued by the corporation.
(g) This section need not apply to market-priced units in an economically integrated housing project, except as otherwise determined by the developer of the units; provided that preference shall be given to qualified residents in the initial sale of market-priced units.
(h) The corporation is authorized to waive any of the restrictions set forth in this section in order to comply with or conform to requirements set forth in federal law or regulations governing mortgage insurance or guarantee programs or requirements set forth by federally chartered secondary mortgage market participants.
(i) For purposes of subsection (a)(4) and subsection (b), the "maximum resale price" shall be the sum of the following items:
(1) The current owner's purchase price for the property;
(2) Appreciation on the property as measured by multiplying the amount in paragraph (1) by the increase in the consumer price index for all urban consumers as determined by the United States Department of Labor for the applicable county, or if not published for the county, then for the State, from the date of the purchase to the date of the contract for resale; and
(3) The cost of all capital improvements made by the current owner."
SECTION 4. Section 206E-15, Hawaii Revised Statutes, is amended to read as follows:
"§206E-15 Residential projects; cooperative agreements. (a) If the authority deems it desirable to develop a residential project, it may enter into an agreement with qualified persons to construct, maintain, operate, or otherwise dispose of the residential project. Sale, lease, or rental of dwelling units in the project shall be as provided by the rules established by the authority. The authority may enter into cooperative agreements with the Hawaii housing finance and development corporation for the financing, development, construction, sale, lease, or rental of dwelling units and projects.
(b) The authority may transfer the housing fees collected from private residential developments for the provision of housing for residents of low- or moderate-income to the Hawaii housing finance and development corporation for the financing, development, construction, sale, lease, or rental of such housing within or without the community development districts. The fees shall be used only for projects owned by the State or owned or developed by a qualified nonprofit organization. For the purposes of this section, "nonprofit organization" means a corporation, association, or other duly chartered organization registered with the State, which organization has received charitable status under the Internal Revenue Code of 1986, as amended.
(c) Any residential project constructed within the community development district, or outside the district pursuant to section 206E-4(18), shall meet the following requirements:
(1) Not less than twenty per cent of the total residential floor area in the residential project shall be reserved housing as defined in section 206E-101 and, if sold, shall be sold pursuant to sustainable affordable leases; and
(2) The requirement in paragraph (1) shall be increased to twenty-five per cent with respect to planned developments that are located on lots of three acres or more or that are part of a master planned area.
For purposes of this subsection, "sustainable affordable lease" has the same meaning as in section 516-1, regardless of whether the housing is in a sustainable affordable development as defined therein."
SECTION 5. Section 206E-101, Hawaii Revised Statutes, is amended by amending the definition of "reserved housing" to read as follows:
""Reserved housing" means
housing that is designated for [
residents in the low- or
moderate-income ranges] and affordable to households with incomes at or
below one hundred forty per cent of the median family income as determined by
the United States Department of Housing and Urban Development who meet such
other eligibility requirements as the authority may adopt by rule."
SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 7. This Act shall take effect upon its approval.