Dwelling Unit Revolving Fund Equity Pilot Program

DEPARTMENT OF BUSINESS, ECONOMIC ECONOMIC DEVELOPMENT, TOURISM AND TOURISM

Adoption of Chapter 15-309 Hawaii Administrative Rules Hawaii

December 26, 2023 December

SUMMARY

Hawaii Administrative Rules, entitled Chapter 15-309, Hawaii entitled Unit Revolving "Dwelling Unit Revolving Fund Equity Pilot Pilot Program", is is adopted.

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HAWAII HAWAII ADM INISTRATIVE RULES ADMINISTRATIVE

TITLE TITLE 15

ECONOMIC DEVELOPMENT, DEPARTMENT OF BUSINESS, ECONOMIC TOURISM AND TOURISM

SUBTITLE 14

HAWAII HOUSING HAWAII HOUSING FINANCE AND DEVELOPMENT CORPORATION CORPORATION

CHAPTER 309 CHAPTER

DWELLING UNIT DWELLING UNIT REVOLVING REVOLVING FUND FUND EQUITY EQUITY PILOT PILOT PROGRAM PROGRAM

Subchapter 1 General Subchapter General Provisions

$15-309-1 §15-309-1 Purpose $15-309-2 §15-309-2 Definitions $15-309-3 §15-309-3 Delegation $15-309-4 §15-309-4 Fees

Subchapter 2 Dwelling Unit Subchapter Unit Revolving Fund Equity Equity Program Pilot Program

$15-309-8 §15-309-8 General provisions General $15-309-9 §15-309-9 Announcement Announcement $15-309-10 §15-309-10 Information and verification Information verification $15-309-11 §15-309-11 Corporation action Corporation action §15-309-12 Unit offering Unit offering $15-309-13 §15-309-13 equity Interest on equity $15-309-14 §15-309-14 Repayment of corporation's equity Repayment equity and and payment of equity payment equity percentage share §15-309-15 Restrictions §15-309-16 Non-compliance penalties

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SUBCHAPTER 1

GENERAL PROVISIONS

§15-309-1 Purpose. The purpose of of this this chapter is is to to implement Act implement Act 92, Session Session Laws of Hawaii Hawaii 2023, which permits the corporation to the to establish establish a dwelling unit unit revolving revolving fund fund equity pilot equity pilot program, which shall be funded funded by the the dwelling dwelling unit revolving unit revolving fund, fund, to to address thethe high, unmet unmet demand ofof for-sale units by Hawaii for-sale Hawaii residents. Under Under the the program, until June 30, 2028, thethe corporation corporation may purchase equity equity inin for-sale housing development for-sale development projects, subject to to the the forth in conditions set forth in Act Act 92, Session Laws of of Hawaii Hawaii 2023, this chapter. [Eff JAN ·115J 2U21J� 1] (Auth: SLHSLH 2023, Act Act ��

and this [Eff SLH 2023, Act 92, §2) (Imp: SLH Act 92, §2)

§15-309-2 Definitions. As As used in in this this chapter: means the "Affidavit" means the application application toto participate in in the program. the means the "Applicant" means the primary person who submits an to participate in affidavit to in the the program. "Application for relief" "Application relief" means means an application application to to the the seeking relief under corporation by a party seeking under this this chapter. "Board" means "Board" means the the board of of directors ofof the the Hawaii Hawaii finance and development housing finance development corporation corporation established established under chapter 201H, HRS. under "Corporation" means "Corporation" means the the Hawaii Hawaii housing finance finance and development corporation development corporation established established under under chapter 201H, HRS. "Corporation's equity" means the "Corporation's the difference difference between the the cost original cost of the unit the unit and the the price of the unit of the unit paid by the qualified the qualified purchaser. equity percentage share" "Corporation's equity share" means the the percentage determined as: the the corporation's equity divided equity divided the value, excluding by the excluding any options or upgrades, and established prior to established to closing closing the the purchase of the the unit, rounded to rounded to the the nearest nearest one perper cent. "Dwelling unit "Dwelling unit revolving fund" fund" means the the fund fund established established pursuant to pursuant to section section 201H-191, HRS. "Dwelling unit "Dwelling unit revolving revolving fund fund equity equity pilot pilot program" or means the "program" means the program program established established by ActAct 92, Session Session Laws of Hawaii Laws Hawaii 2023. "Eligible buyer" means an applicant who: ( 1) owns no "Eligible receives no gift funds for purchase other real property; (2) receives the unit; (3) works in of the in a profession that is is facing facing a shortage as determined by the the corporation, including including health health 309-3 309-3

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care workers, care workers, educators, educators, law law enforcement enforcement officers, officers, staff staff atat correctional facilities, correctional facilities, and and agricultural agricultural field field workers; workers; and, if and, if applicable, applicable, (4) (4) meets meets the the eligibility eligibility requirements requirements set forth set forth inin section section 15-308-22, 15-308-22, Hawaii Hawaii Administrative Administrative Rules. Rules. "Housing development "Housing development project" means aa plan, project" means plan, design, design, oror undertaking by undertaking by the the corporation corporation or or an an eligible eligible developer developer forfor the development the development of of units. units. "Housing "Housing development development project" project" includes all includes all real real and and personal personal property, property, buildings buildings andand improvements, commercial improvements, commercial spaces, spaces, lands lands for for farming farming and and gardening, community gardening, community facilities facilities acquired acquired or or constructed constructed or or to be to be acquired acquired or or constructed, constructed, andand all all tangible tangible or or intangible assets intangible assets held held or or used used inin connection connection with with the the housing development housing development project. project. "Interest rate" "Interest rate" means means the the fixed fixed rate rate charged charged onon the the corporation's equity corporation's equity at at one one per per cent cent per per year, year, unless unless otherwise indicated otherwise indicated in in the the qualified qualified purchaser's purchaser's program program agreement. agreement. "Qualified purchaser" "Qualified purchaser" means means anan eligible eligible buyer buyer who who meets meets the criteria the criteria of of thethe program program forfor which which an an affidavit affidavit is is submitted and submitted and has has entered entered into into aa purchase purchase contract contract andand program agreement. program agreement. "Starter unit" "Starter means aa unit unit" means unit that that is is designed designed toto meet meet the basic the basic living living capacity capacity requirements requirements of of homebuyers homebuyers with with families of families of limited limited size size by by eliminating eliminating needless needless design design and and space amenities. space amenities. means: 1) "Unit" means: "Unit" 1) the the structure structure and and land land upon upon which which the structure the structure is is constructed, constructed, whether whether on on fee fee simple simple oror leasehold property, leasehold property, developed developed forfor residential residential purposes purposes pursuant to pursuant to chapter chapter 201H,201H, HRS; HRS; oror (2) (2) improved improved oror unimproved real unimproved real property property that that isis developed developed for for residential residential purposes pursuant purposes pursuant to to chapter chapter 201H, 201H, HRS. HRS. "Unit" "Unit" includes includes dwelling units. dwelling units. "Value" means "Value" means the the unencumbered unencumbered value of aa unit, value of unit, without without options and options and upgrades upgrades at at the the time time of of purchase purchase oror capital capital improvements made improvements made by by the the purchaser purchaser after after the the property property is is purchased, as purchased, as determined determined by by aa qualified qualified appraiser. appraiser. JAN ·155 , 0I'" � ] (Auth: 24 [E£f [Eff JAi~ � (Auth: SLH SLH 2023, 2023, Act Act 92, 92, §2) $2) (Imp: (Imp: SLH SLH 2023, Act 2023, Act 92, 92, §2) §2)

The corporation §15-309-3 Delegation. The corporation delegates delegates to to the the executive director executive director the the authority authority to to implement implement and and carry carry out out purposes of the purposes the of this this chapter. chapter. [Eff [Eff JAN 155 c.02! 2024 ]J (Auth: (Auth: HRS §201H-4) HRS §201H-4) (Imp: (Imp: HRS HRS §201H-4) S201H-4)

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the right §15-309-4 Fees. The corporation shall have the to charge reasonable fees to fees for administrative administrative expenses incurred in incurred in processing the required required real estate estate documents under this chapter, as provided below. These fees under fees shall be nonrefundable.

2024) Fee Schedule (January 2024)

PURPOSE PURPOSE AMOUNT CHARGED CHARGED 1. Calculation of program program payoff payoff amount amount $250 2.. Releases of dwelling Release of dwelling unit unit $250 revolving fund revolvinq fund equity equity pilot pilot proqram program 3. Notices Notice of demand $250 of non-compliance Notice of $250

[Er£ lt,I~ (Auth: HRS §201H-4) (Imp: HRS [Eff $201H-4) §201H-4) JAN 1 5S c..U?. 202

SUBCHAPTER 2

DWELLING UNIT DWELLING UNIT REVOLVING REVOLVING FUND FUND EQUITY EQUITY PILOT PILOT PROGRAM PROGRAM

§15-309-8 General provisions. (a) The corporation General corporation may purchase equity in in for-sale for-sale housing development development projects; that this provided that this equity shall be allocated allocated to to specific specific units within the housing development development projects and the price price to to be paid by each eligible eligible buyer of a unit shall be reduced buyer of reduced by the the equity amount corporation's equity amount for that unit. The corporation's corporation's allocated to equity shall be allocated to specific units, and thethe units offered to shall be offered to qualified qualified purchasers prioritized prioritized by the the corporation. (a) In determining In determining units to to be allocated allocated the the corporation shall give priority corporation's equity, the corporation priority to to starter starter units. (b) The corporation corporation shall determine the the total equity equity contribution to to a housing development development project, and the the allocation of allocation of the the corporation's equity equity to to units in in the the development project. housing development (c) The corporation may partner corporation may partner with a developer developer of units to to implement implement the program.

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(d) corporation shall enter into The corporation into an agreement agreement with the developer to to purchase equity equity in in specified specified units units of a development project. The agreement housing development agreement shall specify specify corporation's equity, the units to the corporation's to which the equity is corporation's equity is allocated, and the amount amount to to be paid eligible buyers factoring by eligible factoring in in the corporation's corporation's equity. agreement shall be subject The agreement subject to to the approval approval of the board. allocated equity (e) The corporation's allocated equity shall be paid toto closing of the sale the developer at the time of the closing sale of the the unit. [Eff unit. [Eff JANN 155 02~ (24 ] (Auth: (Auth: SLH SLH 2023, 2023, Act Act 92, 92, §2) §2) (Imp: SLH 2023, AcL 92, §2) SLH

Announcement. When marketing units for sale, §15-309-09 Announcement. identify units that are the developer shall identify are part part of the: (1) Location of the units; and Amount of the corporation's equity (2) Amount equity and, if applicable, the corporation's equityequity percentage share, as determined between the developer and corporation. [Eff [Eff J,AI~ 155 ·(l~ JAN 021� 1] (Auth: SLH sLH 2023, Act Act 92, §2) $2) (Imp: SLH 2023, Act SLH Act 92, §2)

§15-309-10 Information Information and verification. (a) Eligible buyers interested Eligible interested inin participating participating in in the equity equity pilot program pilot submit a completed affidavit to program shall submit to the respective developer or developer's broker and provide respective information relating information relating to to household income, composition, financial condition, and status changes, prior to to close of the purchase. broker shall compile a (b) The developer or developer's broker consisting list consisting of the names, addresses, and phone numbers individuals who have submitted of all individuals submitted an affidavit toto in the announced program participate in the program and shall submit the to the corporation list to corporation for review review and approval. (c) The list shall be compiled in in the order in in which submitted to applicants have submitted to the developer or developer's broker a duly executed affidavit that the applicant meets broker definition of "eligible the definition "eligible buyer" and intends toto become a purchaser of a unit. purchaser signing the affidavit, (d) By signing affidavit, the applicant certifies certifies information provided is that the information is complete and accurate. AnAn applicant found to applicant found to have wilfully wilfully submitted false false made misstatements, or withheld important information, made important information shall be deemed to information to be ineligible; provided that 309-6 309-6

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the corporation the corporation shall shall not not waive waive its its right right to to pursue pursue any any other recourse provided by law. [Eff other recourse provided by law. [Eff JAN 1,1 5 JAN 5 " 2024 '.);1) ]] (Auth: (Auth: SLH 2023, SLH 2023, Act Act 92, 92, §2) §2) (Imp: SLH (Imp: SLH 2023, 2023, Act Act 92, 92, §2)

§15-309-11 Corporation action. The The corporation corporation will will evaluate the evaluate the completed completed affidavits affidavits from from the the developer developer for for acceptance. The acceptance. The corporation corporation may may deny deny the the affidavit affidavit or or defer defer action and action and request request that that additional additional information information be be submitted; submitted; provided that provided that the the applicant applicant shall shall respond respond within within ten ten working working days, otherwise days, otherwise the the corporation corporation will will inform inform the the applicant applicant that that the affidavit has been denied and the reasons why. If the the affidavit has been denied and the reasons why. If the affidavit is affidavit is acceptable, acceptable, the the applicant's applicant's namename shall shall go go onon aa list of list of qualified qualified purchasers purchasers and and the the name name shall shall be be provided provided to the to the developer. [Eff developer. [Eff JAN JAN 1155 2024 (Auth: HRS (Auth: HRS §20 $201H-4) lH-4) (Imp: (Imp: HRS §201H-4) HRS §201H-4)

Unit offering. (a) §15-309-12 Unit (a) The The developer developer will will offer offer units to units to the the qualified qualified purchaser purchaser by by one one of of the the following following means: means: (1) In (1) In the the order order inin which which the the names appear on names appear on the the list of list of qualified qualified purchasers purchasers provided provided by by the the corporation pursuant corporation pursuant to to section section 15-309-10; 15-309-10; (2) By (2) By the the drawing drawing of of lots; lots; or or (3) By any other reasonable and (3) By any other reasonable and fair fair method method asas determined by determined by the the developer developer and and approved approved by by the the corporation. corporation. (b) Qualified (b) Qualified purchasers purchasers may select aa unit may select unit within within their their prequalified loan prequalified loan amount, amount, including including the the corporation's corporation's equity. [Eff equity. [Eff JAN 1 5 ('') JAN 15 ���� 90 21 ] ] (Auth: (Auth: SLH SLH 2023, Act 2 02 Act 92, 92, §2) $2) (Imp: (Imp: SLH 2023, SLH 2023, Act Act 92, 92, §2) §2)

Interest on equity. The §15-309-13 Interest The corporation corporation may may charge an charge an interest interest rate rate on on the the corporation's corporation's equity, equity, which which shall be shall be stated stated in in the the agreement agreement with with qualified qualified purchasers. purchasers. [Eff JAN 155 2024 [Eff I] (Auth: (Auth: SLH sLH 2023, 2023, Act Act 92, 92, §§1 SS1 and and 2) 2) (Imp: (Imp: SLH 2023, SLH 2023, Act Act 92, 92, §§1 §§1 and and 2) 2)

§15-309-14 Repayment Repayment of of corporation's equity and payment of payment (a) Qualified of equity percentage share. (a) Qualified purchasers purchasers shall repay shall repay the the corporation's corporation's equity equity (1) Any time after financial closing closing at will will of of the the

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purchaser; (2) sale or transfer of the Upon sale the unit; (3) Prior to Prior to expiration of the the thirty thirty years from from the the qualified qualified purchaser's sale closing sale closing date; (4) When the the qualified qualified purchaser obtains obtains additional financing financing the original or refinances the original mortgage loan loan including including to to pay the corporation's the corporation's net net share share of appreciation; the qualified (5) When the qualified purchaser no longer uses the the unit unit as the qualified the qualified purchaser's principal principal and physical physical residence but residence but continues toto retain retain legal or equitable equitable title to title to the the unit, or both; the qualified (6) When the qualified purchaser rents rents the the unit unit or any part part the unit of the unit to to someone someone else else but but continues continues to to retain retain legal title to or equitable title to the the unit, or both; or 7) When the qualified (7) qualified purchaser purchaser fails fails to to reoccupy the unit at the unit the end of the the temporary temporary waiver waiver period. accepted shall be applied (b) Payments accepted applied inin the the following order of priority: corporation's (i) following (i) equity equity interest; (ii)(ii) equity equity percentage share, if if any; and (iii) (iii) equity. the corporation's equity (c) If the equity and equity equity percentage share isis not not paid when due, interest on the the corporation's corporation's equity share shall accrue at the equity the simple annual annual rate rate of ten ten per cent per cent per per year until paid. purchaser has not thirty years a purchaser (d) If after thirty not repaid repaid the corporation's equity, including the including any accrued accrued interest, the corporation's equity and the equity percentage share, if any, the the corporation may undertake corporation undertake the following following actions to to seek seek repayment: Submittal of a demand letter to (1 Submittal to the the qualified qualified purchaser; (2 Placement Placement of a lien lien on the the unit; and (3) Judicial foreclosure Judicial foreclosure of thethe unit. (e) Payment of the Payment the corporation's equity equity and equity equity percentage share, if any, shall be the sum sum of the the following: following: equity plus simple interest (1 The corporation's equity rate of one per cent at the rate cent per year, unless otherwise indicated otherwise indicated inin the the qualified qualified purchaser's program program agreement, on the the corporation's equity corporation's equity to to the the qualified qualified purchaser; and (2 The net appreciation on the net appreciation the corporation's equity calculated equity calculated as the the current current value of the the the original value of the unit, minus the the unit unit specified in specified in the the purchaser's program program agreement, and multip lied by the multiplied the equity percentage share. corporation's equity 309-8

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[Eff JAN 1 5 ;024 [Eff 2024 (Auth: SLH (Auth: SLH 2023, 2023, Act Act 92, 92, §§1 SS1 and 2) and 2) (Imp: (Imp: SLH SLH 2023, 2023, Act Act 92, 92, §§1 §§1 and and 2) 2)

§15-309-15 Restrictions. (a) (a) Real Real property property purchased purchased under this under this chapter chapter shall shall be be occupied occupied at at all all timestimes by by the the qualified purchaser qualified purchaser until until such such time time the the corporation's corporation's equity, including equity, including any any accrued accrued interest, interest, and and equity equity percentage share, percentage share, ifif any any is is paid paid inin full full toto the the corporation, corporation, except in except in hardship hardship cases cases where where the the inability inability to to reside reside on on the property the property arises arises out out of of unforeseeable unforeseeable circumstances circumstances as as determined by determined by the the corporation corporation and and the the qualified qualified purchaser purchaser is is granted aa temporary granted temporary waiver waiver ofof the the owner owner occupancy occupancy requirement. The requirement. The qualified qualified purchaser purchaser shall shall submitsubmit anan application for application for relief relief to to the the corporation corporation for for review review and and approval. approval. (b) Unit (b) Unit owners owners shall shall not not transfer transfer title title to to the the dwelling unit dwelling unit unless unless the the corporation's corporation's equity, equity, including including anyany accrued interest, accrued interest, is is paid paid in in full full toto the the corporation corporation prior prior to the to the transfer. transfer. ThisThis restriction restriction includes, includes, but but is is not not limited to, limited to, transfers transfers toto the the owner's owner's spouse, spouse, child, child, parent, parent, sibling, or an inter vivas trust where the owner is the sibling, or an inter vivas trust where the owner is the beneficiary of beneficiary of the the trust. trust. [Eff [Eff J,l\AN/1 20r 21• 55 ���� (Auth: SLH (Auth: SLH 2023 2023,I Act Act 92, 92, §1) §1) (Imp: (Imp: SLH 2023 SLH 2023,I Act Act 92, 92, §1) §1) §15-309-16 Non-compliance p enalties. Upon nalties. Upon determination by determination by the the corporation corporation ofof aa qualified qualified purchaser's purchaser's non-compliance with non-compliance with program program rules rules and and requirements, requirements, the the qualified purchaser shall be notified in writing and within qualified purchaser shall be notified in writing and within sixty calendar sixty calendar days days from from the the date date of of the the notification, notification, the the qualified purchaser qualified purchaser shallshall correct correct the the non-compliance. non-compliance. The The penalty for penalty for non-compliance non-compliance with with program program rules rules and and requirements is requirements is at at the the discretion discretion ofof the the corporation. corporation. In In all cases, all cases, the the corporation corporation reserves reserves the the right right to to pursue pursue all all legal remedies legal remedies to to recapture recapture the the funds funds awarded, awarded, toto seek seek specific performance, specific performance, or or other other actions actions deemed deemed necessary. necessary. lEff J~, [Eff JAN 5 � 202 l I15 ,~~,� 1] (Auth: (Auth: SLH SLH 2023, 2023, Act Act 92, 92, §2) $2) (Imp: (Imp: SLH SLH 2023, Act 2023, Act 92, 92, §2) §2)

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DEPARTMENT OF BUSINESS, ECONOMIC DEVELOPMENT, TOURISM AND TOURISM

Hawaii Administrative Rules, on the Chapter 15-309, Hawaii the December 26, 2023, was adopted on December Summary Page dated December December November 21, following a public hearing held on November 27, 2023, following in the 2023, after public notice was given in the Honolulu Star- Star­ Island, The Maui Advertiser, The Garden Island, Maui News, West West Hawaii Hawaii Hawaii Tribune-Herald newspapers on October Today, and Hawaii October 20, 2023.

adoption of The adoption of chapter 15-309 15-309 shall take effect effect ten ten days filing with the Office of the after filing the Lieutenant Lieutenant Governor.

uary Gary fV/ac;tJer Maokler GARY MACKLER, Chairperson Hawaii Housing Finance and Hawaii Development Corporation Development Corporation

APPROVED:

2A Q:,:~ Governor Governor State of State of Hawaii Hawaii

Date:

APPROVED AS TO APPROVED TO FORM:

General Deputy Attorney General

JAN 1 5 rio?A 2 024

Filed Filed

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