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New Incentives Approved To Spur Development Of Affordable Rentals

$40m available as affordable housing development incentive

HONOLULU -- Honolulu Mayor Rick Blangiardi signed two sets of administrative rules that significantly further the goal of increasing the island's supply of much-needed affordable housing. Additionally, the City is extending the deadline for submitting proposals for its $40 million affordable housing solicitation.

"This is about strategic and transformative change that will benefit our residents, and strengthen the City's ability to deliver affordable housing on a sustainable basis for years and decades to come," said Mayor Rick Blangiardi. "From day one our team has emphasized the need to address affordable housing for our residents and these are huge steps forward toward long term generational solutions."

The first set of rules will allow the City to approve and exempt from general excise taxes any qualified person or firm involved in a newly constructed affordable housing project, or a moderately or substantially rehabilitated affordable housing project. The rules define the types of incomes eligible for exemption, the application process for certification of projects and rents received in affordable rental housing projects, criteria for determining eligible projects, and exemption for existing rental projects. The adoption of these rules are a significant step forward in incentivizing the building of needed housing for the community.

The second set of rules govern the City's Multi-Family Rental Housing program and restores the City and County of Honolulu as an active issuer of tax-exempt special revenue bonds or private activity bonds (PAB). Under the Internal Revenue Code, a municipality such as the City can use its private activity bond volume allocation to issue tax-exempt special revenue bonds, the proceeds of which the borrower would use to construct or acquire and rehabilitate affordable rental units. The tax-exempt special revenue bonds are not secured by the City's credit, instead the bonds are secured by the borrower.

The PAB program is available to developers of projects having a minimum 20 percent of the total number of units targeted to households earning 50 percent or less of the area median income (AMI), or a minimum of 40 percent of the total number of units set aside to households earning 60 percent or less of the AMI. It has been more than 23 years since the City last had a private activity bond program and the adoption of this set of rules, represents the City once again taking an aggressive stance on the development of affordable housing units.

Taken together, the new rules significantly change the incentives surrounding the development of much needed housing and are just one part of the City's strategy to bring about transformative change to the island. The Department of Planning and Permitting (DPP) will administer both the general excise tax exemption and the PAB programs. It is currently structuring and developing both programs and will be taking applications once they are established.

Available now, is the City's Department of Community Services (DCS) active solicitation for project proposals using the available balance of the City Affordable Housing Fund (AHF). Up to $40 million of the City's AHF will be awarded to eligible projects that create rental units available to low-income individuals and families earning 60% of Area Median Income or less. In Honolulu for 2021, this would include a family of three earning less than $65,280, a couple earning less than $58,020, or a single earning less than $52,920. This solicitation closes on Feb. 25, 2022 at 10 a.m. and must be received by the City and County of Honolulu's Division of Purchasing by the deadline. To apply or learn more about this opportunity please click here.

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