Honolulu’s Bill 7 Features and Incentives

Here are some of the features and incentives provided by Bill 7 

The building is not required to provide parking spaces according to a mandated ratio. This allows the developer to determine the optimum number of parking spaces that will yield the most apartments, given the demand in the market for parking stalls. Buildings near transit stations may offer fewer parking spaces than buildings without easy access to mass transit.
Building permit review will be expedited. The intent is to approve permit applications within 90 days through “check-the-box” permitting rather than discretionary permitting.
Fire safety is integrated into each building using cost saving strategies. Fire sprinklers can use domestic water lines as designed by a licensed mechanical engineer rather than dedicated fire sprinkler lines. Buildings that have fewer than 36 units can have one 45” staircase or two 36” staircases. Elevators are not required.
In addition to design allowances, there are financial incentives available to qualifying projects.

Park dedication requirements are waived, and wastewater system facility charges are waived (the capacity must be available). Plan review and building permit fees may be waived . The property may qualify for exemption from real property taxes during construction and marketing lease-up period for apartments that are to be rented to tenants who earn no more than 100% of the area median income at rents that are no more than area median rents. Exemption from real property tax can extend to 10 years for apartments that are rented to tenants who earn no more than 80% of the area median income at rents that are no more than 80% of area median rents.

Up to 20% of the apartments can be occupied by the owner or members of the owner’s family. The remaining units must be rented for no more than 100%of the area median rent to tenants who earn no more than 100% of area median income.

2019 HUD AMI (Area Median Income) for households in Honolulu

• 1 person $84.000
• 2 people $96,400
• 3 people $108,500
• 4 people $120,500

2019 HUD maximum rents in Honolulu for 100% AMI households

Studio $2,260

One bedroom $2,411

Two bedroom $2,848

Three bedroom $3,243

Four bedroom $3,646

Not including utilities

Example of Bill 7 and a 5,000 Square Foot Property

An Example of what Bill 7 Can Mean for a 5,000 Square Foot Property
What can be built on a 5,000 square foot lot that qualifies for Bill 7 incentives? Every property is unique, so we encourage you to contact us for a quick analysis of your property; but here is a sample of what might be possible.

If we start with a 5,000 square foot lot measuring 50’ by 100’ and a 60-foot height limit, the street front setback is 10 feet and side setbacks are 5 feet. The ground floor can be used for parking spaces, rental apartments or commercial space if the underlying zoning allows commercial use. (Note that tax incentives and fee waivers apply ONLY to the portion of the project that is to be rented to tenants who earn 80% to 100% pf Area Median Income for qualifying rents.)

With an allowable Floor Area Ratio (FAR) of 4.0, a 5,000 square foot lot might support a 20,000 square foot building with up to 25 apartments. The maximum number of apartments that can be built is calculated by dividing the maximum allowable FAR by a factor of 800 and rounding down to the next whole number.

Parking or No Parking?

One of the features of Bill 7 is there’s no requirement for on-site parking. It’s expensive to build a parking garage large enough to provide space for one or two cars for each apartment so, to keep development costs lower, Bill 7 does not require parking.

Parking Stalls in Honolulu

In the current market, does it make sense to build an apartment building with no parking spaces? In many neighborhoods, on-street parking is already tight. Will buildings that don’t offer parking be harder to rent? Will they have higher vacancy rates? Will the rents be lower than rents in similar buildings that do have tenant parking? How much does parking impact the profitability of a project?

Parking Options
The least expensive parking solution is to use the ground level of the building for parking by raising the first level of apartments to the second floor. Bill 7 allows ground floor parking spaces to encroach into the side and rear yards of the building, but despite that allowance, in most cases one level of parking will provide a parking space for just about half of the proposed units in a typical Bill 7 project. If the building has fewer than one parking space for each apartment, tenants who want a parking space would compete to rent the available spaces and some tenants would be unable to rent a parking space.

Mechanical parking systems can provide an alternative. These systems “stack” vehicles so that twice as many cars can park in the same ground floor parking area. These systems have proven reliable and efficient in urban markets around the world, and the monthly rent tenants pay for a parking space would cover the increased cost of purchasing and installing the system. Cars parked in mechanical parking systems also may be more secure since access to the cars is limited to tenants.

Transportation planners in Honolulu believe residents’ transportation habits already are changing and a growing number of people will choose to ride a bike, use a car sharing service (Servco), an on-call driver service (Lyft, Uber) and/or mass transit instead of owning a car. In the meantime, what is the best parking configuration for a Bill 7 property? The best solution depends on the size and shape of the property, the distance between the property and a rail station or bus line and the unique characteristics of the community.

What is a parking space worth? Let us help you decide.