HB516 would repeal the statewide requirement enacted in 2024 that counties adopt or amend ordinances to allow at least two accessory dwelling units (ADUs) on residentially zoned lots. In its place, the bill creates a state-run ADU housing development program administered by the Hawaii Community Development Authority (HCDA) to provide matching funds to homeowners who build ADUs in compliance with county rules. The bill also establishes a special fund for the program and authorizes general fund appropriations for fiscal years 2025-2026 and 2026-2027.
The bill further adds a tax incentive by exempting income from rental sales of qualifying ADUs funded under the program from taxes under chapter 237 for the first three years the unit is rented, subject to a four-year post-construction limit and a requirement that the tax benefit be passed through to renters. It also removes a prior statutory restriction in chapter 205 on private covenants that limited long-term rental use of residential units in urban districts, while leaving in place the general county zoning framework and other county development standards.
In practical terms, HB516 would shift Hawaii’s ADU policy away from a mandatory zoning expansion model and toward a financial-incentive model. Counties would regain more discretion over where and how many ADUs are allowed, while the state would use subsidies and a temporary tax exemption to encourage construction of lower-cost units. The bill also preserves county authority to deny permits for infrastructure, design, and development-standard reasons, and it excludes certain areas such as special management areas, areas outside the urban district, and high-hazard locations.
The general sentiment reflected in the bill text is that the sponsors view the 2024 ADU mandate as too aggressive and potentially overly densifying for residential neighborhoods, and instead favor a more flexible, incentive-based approach to addressing Hawaii’s housing shortage. Because there are no committee transcripts or recorded votes provided, there is no direct evidence of broader legislative support or opposition in the available materials. The bill’s referral to multiple committees suggests it was still early in the process.
The main point of contention is the policy tradeoff between statewide housing production mandates and local control. Supporters of the bill appear to prioritize county-by-county planning and reduced neighborhood density, while the bill’s repeal of the existing ADU mandate would likely concern housing advocates who favor stronger statewide requirements to increase supply. Another possible area of debate is the fiscal cost of the matching-fund program and tax exemption, as well as whether the incentives would be sufficient to produce meaningful ADU construction.
Impact
HB516 would repeal section 46-4.8, Hawaii Revised Statutes, eliminating the current statewide requirement that counties allow at least two ADUs on residentially zoned lots. It would amend county zoning law in section 46-4 to remove references to that repealed section and would leave counties with broader discretion to regulate ADUs under general zoning authority, subject to the bill’s remaining standards and exceptions. The bill would also amend chapter 205 to remove the prior restriction on private covenants limiting long-term rental use of residential units in urban districts for covenants recorded after May 28, 2024.
In addition, the bill would add a new HCDA-administered ADU matching-fund program and a related special fund, and it would create a temporary general excise tax exemption for rental income from qualifying ADUs funded through the program. The bill would require appropriations from general revenues to capitalize the fund and provide matching subsidies, thereby affecting state spending and HCDA’s administrative responsibilities, while leaving counties, land-use rules, and permit review authority largely intact.
Sentiment
The bill’s stated rationale is strongly pro-housing but skeptical of the existing statewide ADU mandate. Its tone suggests support for encouraging ADU construction through financial incentives rather than through mandatory county zoning changes. Because no committee testimony, discussion transcript, or vote record is provided, the available context does not show measured support or opposition from legislators, agencies, or the public beyond the bill’s own findings and purpose statement.
Contention
The central controversy is whether Hawaii should require counties to allow more ADUs as a land-use mandate or instead encourage them through subsidies and tax relief. Opponents of repeal would likely argue that removing the statewide requirement could slow housing production and weaken a key supply-side reform, while supporters would argue that the mandate could over-densify neighborhoods and ignore local conditions. A second likely point of contention is the cost and effectiveness of the proposed matching-fund program and tax exemption, including whether the benefits would reach renters as intended and whether the state should subsidize ADU construction at all. Counties may also view the bill differently depending on how much discretion it restores over zoning and permit approvals.