September 5, 2023  |  Articles

What the Emergency Proclamation on Housing Means for Developers

House Model Held Safely In Hands

Governor Josh Green has not been shy about issuing statewide emergency proclamations in response to issues that have plagued the state for decades. The first such proclamation addressed homelessness and was issued on January 23, less than two months after Green’s inauguration.  That proclamation – which waived certain land use laws to provide immediate housing for those experiencing homelessness – was a precursor to the Emergency Proclamation Relating to Housing (the “EP”) issued on July 17 of this year.  Like the prior proclamation, the EP suspends several state and county land use regulations to speed the construction of new housing.  But unlike the prior proclamation, the EP creates a new regulatory scheme in its place which is managed by the state’s Lead Housing Officer (LHO) and a 23-member Working Group made up of state and county officials and certain community leaders.  

If the EP is administered as intended, it could provide a much-needed streamlined system for housing developers.  Hawai´i has a complex matrix of land use regulations, and developers have experienced delays and extra costs at each required regulatory step.  Developers should therefore familiarize themselves with the new regulatory scheme created by the EP and how to get a project certified.  There are also potential legal risks with having a project certified under the EP.  While this article touches on some of those risks, we highly recommend working with our Land Use and Real Estate team to discuss these risks on a project-specific basis.

Laws Suspended and Regulations Created

There are several significant land use laws suspended by the EP.  Some of those laws are identified below along with a summary of what new regulations have been created in their place.

  • State Historic Preservation Review (Sections 6E-8 and 6E-42, HRS): The LHO alone, or in consultation with the Working Group, will determine the effect of any certified project on historic sites in consultation with the Working Group based on guidelines set forth in the EP which provide different rules for projects in highly sensitive areas; moderately sensitive areas; and nominally sensitive areas.
  • Discovery of Human Remains (Sections 6E-43 and 6E-43.6): An initial evaluation of inadvertently discovered human remains will be completed by a “qualified professional,” presumably hired by a developer, rather than by the State Historic Preservation Division (SHPD).  The qualified professional is charged with determining (1) the number of individuals identified; (2) the context in which the remains were found; and (3) the suggested ethnicity of the individuals.  Within 14 days of the discovery of human remains, the developer must submit a burial treatment plan that is reviewed by SHPD within seven days of submittal (for remains likely not of Native Hawaiian descent) or the relevant Island Burial Council (for remains likely of Native Hawaiian descent), which has 60 days to review the plan.  If either reviewing entity fails to meet the strict deadlines, the plan is deemed approved.
  • Environmental Review (Chapter 343, HRS): The approving agency or LHO will determine whether Chapter 343 should be waived after a review of documents submitted by the developer with its application.  If the LHO or approving agency determines the project is likely not to have a significant impact, the project may proceed after public notice but without further review.
  • District Boundary Amendments (Sections 205-3.1(a) and 205-4, HRS): Under existing law, district boundary amendments for land areas of 15 acres or less are handled by the respective county.  The EP raises that threshold to land areas of 100 acres or less.  The EP does not apply to lands currently in the conservation district or lands designated as important agricultural lands.
  • County Zoning Regulations (Chapter 46, HRS): The EP allows each county to adopt reasonable standards to allow for the construction of multi-family residential dwelling units on any lot where business activities are permitted, such as business or commercial zoning districts.  Certain zoning restrictions may also be suspended for certified projects, other than minimum requirements for health and safety.

Other suspended laws include the requirement to pay school impact fees (Sections 302-1601 to 1612, HRS), the Hawaii Sunshine Law (Chapter 92, HRS) to the extent that its provisions “may delay the expeditious action, decision, or approval of any board or agency,” and the procurement code (Chapter 103D, HRS) if it is not practicable or advantageous to procure services via traditional procurement methods.

How to Get a Project Certified

Developers that want to have a project certified must apply for certification.  The EP contains details on what must be included in the certification application.  Some of those requirements include: (1) a description of the developer’s experience with projects of similar size, scope, and complexity; (2) a development plan that includes the anticipated schedule of construction; (3) financing assurances; and (4) suspected cultural and environmental impacts, along with proposed mitigation measures.

While housing developments may be certified even if they do not include any affordable units, the EP requires the Working Group to prioritize projects that include affordable housing as a component.  Projects are also prioritized based on the status of financing, status of entitlements for the project, and projected commencement and completion dates.  As of the date of this article, the Working Group has started the process of reviewing applications, but has not yet certified any projects. 

Development Agreement for Certified Projects

The terms of any project approval will be set forth in the project’s development agreement which is binding on the developer and is recorded as a deed restriction or as a restriction on the leasehold interest on the property.  The development agreement will provide the conditions of certification, including, among other things, permitted uses, maximum height and size of buildings, that construction must commence within 30 months after certification, and penalties for the sale of residential units with affordability requirements during the mandatory affordability period.  The LHO is tasked with verifying compliance with the conditions of the development agreement.  If the LHO finds that a developer has violated the agreement, she is authorized to take corrective action, including decertification.

Potential Legal Risks Associated with Certification

While the EP provides a number of incentives for certification, there are risks associated with certifying a project under the EP.  By law, the governor must reissue the EP every 60 days to avoid its automatic termination. Governor Green has indicated that he intends to reissue the EP as necessary for one year.  It is not unusual for the language and requirements set forth in EPs to shift in each reissued version.  Since the regulatory scheme created by the EP is not part of the Hawai‘i Revised Statutes, its requirements or impacts could shift with each reissuance. The LHO has indicated that she expects some of the language of the EP to be amended or further clarified in subsequent versions. 

In addition, there are several laws and regulations not suspended by the EP.  Those include subdivision rules and regulations, and all regulations pursuant to the Coastal Zone Management Act, such as Special Management Area (SMA) permit requirements according to Chapter 205A, HRS.  It is not clear whether conditions attached to such discretionary approvals would be suspended by the EP, even if they relate to laws suspended by the EP.  

Finally, community groups opposed to the EP have recently filed legal actions to challenge the powers granted to the LHO and Working Group by the EP.  The first such action was filed on August 28, 2023, in the Second Circuit by a group of ten Hawai‘i residents.  The second action was filed days later in the First Circuit by Earth Justice on behalf of community organizations, including the ACLU and Sierra Club, and a Commissioner on the State Land Use Commission.  If these legal challenges are successful, and the EP is overturned, materially limited, or modified by a lower court after a project has been certified, the project could be placed in legal limbo until such lawsuits are resolved by the Hawai´i Supreme Court. 

Our Land Use and Real Estate team is updating its recommendations and guidance as it learns more about the EP from administration officials.  We look forward to working with clients to evaluate the potential benefits of the proclamation for their projects and to helping advance projects through the process.