USA – HAWAII Trends and Developments Contributed by: Lisa Broulik, Matthew Cohen, Michelle Chapman and Jon Pang, Case Lombardi, A Law Corporation
A notable change in 2026 for developers in Hawaiʻi is the reduction of Private Activity Bond (PAB) alloca - tions, known as the “30% Rule”. While federal legisla - tion (Public Law 119-21, also known as the One Big Beautiful Bill Act) recently lowered the eligibility floor for 4% LIHTC projects from 50% to 25%, HHFDC’s 2026 guidelines have established a 30% allocation ceiling for tax-exempt bond financing due to state - wide volume cap constraints. Consequently, devel - opers must bridge the resulting financial gap with alternative equity structures. Current market success requires increased reliance on the Rental Housing Revolving Fund and the simultaneous use of 4% and 9% credits within “twinned” projects. Furthermore, HHFDC has implemented stricter per-unit cost caps. HRS 201H (HHFDC and county exemptions) The HRS “Chapter 201H” process is a regulatory mechanism designed to increase affordable housing inventory by modifying local land-use requirements, facilitating viability through increased density rather than direct financial support. Administered by HHFDC, the statute allows developers of qualified projects – defined as those with at least 50% plus one affordable units – to seek exemptions from statutes, ordinances, charter provisions and rules related to planning, zon - ing and construction. In high-density areas like Hono - lulu, these exemptions can include bypassing floor- area ratio (FAR) limits, eliminating off-street parking requirements or exceeding height transition limits. Although the state provides this framework, County Councils retain approval authority, which can be a point of friction. Current benchmarks pressure coun - ties to approve these exemptions in order to main - tain access to state infrastructure revolving funds. The 201H process is now utilised for mainstream workforce housing due to the expanded affordabil - ity threshold from 60% to 140% of the area median income. This shift is further supported by refinements in the application process established by emergency proclamations, including the Proclamation Relating to Affordable Housing, currently in its 18th restatement. Ohana housing and accessory dwelling unit legislation Hawaiʻi leads the nation in multi-generational living, with approximately 10% of households comprising
at least two generations under one roof. This real - ity is influenced by both the high cost of living in the islands and the concept of ‘ohana (or family) that is deeply rooted in local culture. However, Hawaiʻi’s state and country level zoning laws have traditionally hin - dered such arrangements due to density restrictions, permitting barriers and construction costs. Recently, affordable housing pressures have prompted efforts to reduce these obstacles. The primary focus across all government levels appears to be allowing for and incentivising the construction of additional living units on properties referred to as accessory dwelling units (ADUs) or “Ohana units”, which were previously highly regulated and restricted. At the state level, in 2024, the legislature enacted a law requiring all counties to amend their county ordi - nances by 31 December 2026, to allow at least two ADUs on residentially zoned lots and to eliminate own - er-occupancy requirements. This framework allows a single residential lot to host a primary residence and two additional independent units, referred to as the “three-unit standard”. The law aims to boost housing supply and density through shared land costs, and effectively over-rides more restrictive county zoning. Numerous changes are also occurring at the county level. On Oʻahu, effective as of 30 September 2025, both an ADU and an Ohana unit, in addition to the main home, are now allowed on a single-family lot. On the Island of Hawaiʻi, in 2024, the county repealed ordinances that required builders to obtain a separate Ohana unit building permit in addition to a standard building permit, streamlining the permitting process. Maui county introduced the ‘Ohana Assistance Pro - gram, offering grants of up to USD100,000 to home - owners for ADU construction. Multiple counties have also implemented impact fee waivers for qualifying ADU projects, to reduce development costs for home - owners. While certain of the recent state-level and county-level changes have faced legal opposition and other imple - mentation challenges, there is a clear trend toward prioritising and fostering residential housing capac - ity and flexibility, helping families stay in the islands, together.
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