HB516 would repeal Hawaii’s 2024 statewide requirement that counties allow at least two accessory dwelling units (ADUs) on residentially zoned lots, replacing that mandate with a voluntary incentive-based approach. The bill states that the prior mandate could create overly dense neighborhoods and reduce county flexibility, and it instead seeks to encourage ADU construction through state subsidies and a temporary general excise tax exemption for rental income from qualifying ADUs.
The bill creates an Accessory Dwelling Unit Housing Development Program within the Hawaii Community Development Authority (HCDA) to provide matching funds to homeowners who build ADUs in compliance with county rules. It also establishes a special fund for the program and appropriates state general revenues for fiscal years 2025-2026 and 2026-2027 to support the fund and the matching grants. In addition, the bill adds a new tax exemption chapter provision that would exempt rental income from funded ADUs from general excise tax for the first three years of rental, subject to conditions and recordkeeping requirements.
HB516 would also amend existing zoning and covenant laws. It repeals section 46-4.8, which currently requires counties to adopt ordinances allowing at least two ADUs on residentially zoned lots, and revises county zoning law so counties may, rather than must, adopt standards allowing two single-family dwelling units on lots where residential use is permitted. The bill further limits private covenants recorded after May 28, 2024, from restricting long-term rental of residential units on affected lots, while preserving county authority over zoning, infrastructure, design, and permit review.
The overall sentiment reflected in the bill text is supportive of ADU development but skeptical of a statewide mandate. The measure frames itself as a more balanced, county-driven housing strategy that uses financial incentives instead of compulsory upzoning. Because there are no committee transcripts or recorded votes provided, there is no documented public debate in the materials beyond the bill’s own findings and purpose statement.
The main point of contention is the policy choice between mandatory density and incentive-based housing production. The bill explicitly argues that the existing statewide ADU requirement is too aggressive and could over-densify neighborhoods, while supporters of the prior law would likely view the repeal as weakening a direct tool for expanding housing supply. Other likely areas of concern include the fiscal cost of the subsidy program, the tax exemption’s effect on state revenue, and the extent to which the bill preserves or limits county land-use authority.
Impact
HB516 would repeal section 46-4.8 of the Hawaii Revised Statutes and remove the current statewide requirement that counties allow at least two ADUs on residentially zoned lots. It would amend county zoning law to make ADU allowances permissive rather than mandatory, while also modifying private covenant rules to protect long-term rental use on certain residential lots. The bill would create a new HCDA-administered ADU matching-fund program, establish a special fund, and add a temporary general excise tax exemption for rental income from qualifying subsidized ADUs, thereby affecting homeowners, renters, counties, HCDA, and state tax administration.
Sentiment
The bill’s tone is generally pro-housing and pro-ADU development, but it favors incentives and local discretion over statewide mandates. The legislative findings describe the existing ADU mandate as overly aggressive and emphasize a preference for a more measured, island-by-island approach. No committee testimony or vote history is provided, so there is no external record of support or opposition beyond the bill’s own framing.
Contention
The central controversy is whether Hawaii should require counties to allow more ADUs statewide or instead encourage them through subsidies and tax relief. The bill’s sponsors appear to believe the mandate would create excessive density and undermine county planning, while likely opponents would argue that repealing the mandate could slow housing production and reduce the certainty needed to expand supply. Additional likely points of contention are the cost of the proposed appropriations, the administrative role of HCDA, the scope of the tax exemption, and the bill’s effect on county zoning autonomy and private property restrictions.