Return HB2091 HD1 to full repeal of school impact fees

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Finance on Feb. 26, 2024.

Feb 26, 2024, 12:30 p.m.
Hawaii State Capitol
Conference Room 308 and Videoconference

To: House Committee on Finance
      Rep. Kyle T. Yamashita, Chair
      Rep. Lisa Kitagawa, Vice-Chair

From: Grassroot Institute of Hawaii
           Ted Kefalas, Director of Strategic Campaigns


Aloha Chair Yamashita, Vice-Chair Kitagawa and Committee Members,

The Grassroot Institute of Hawaii would like to offer its comments on  HB2091 HD1, which would exempt from school impact fees the construction of accessory dwelling units and certain affordable housing developments.

Though those exemptions are a step forward, they do not go far enough to help reduce the costs associated with the development of residential housing.

The cost of school impact fees are generally passed on to homebuyers or renters, thereby contributing to the high cost of housing in Hawaii. They might even discourage housing construction or make development of low-cost housing infeasible for homebuilders.

It is no coincidence that school impact fee waivers were included in Gov. Josh Green’s emergency order streamlining housing construction. In fact, the first action taken by the Beyond Barriers Working Group established by the order was to approve a school impact fee waiver for a 52-unit rental project in downtown Honolulu.

The school impact fee for that area is $3,864 per unit, which would have added $200,928 to the project’s construction costs.[1]

Adding such fees to the cost of affordable housing simply makes such projects less attractive to homebuilders.

Meanwhile, the negative effect of school impact fees on housing growth is not offset by a commensurate benefit to local schools.

The collection and administration of the state Department of Education’s impact fee program received sharp criticism from the Hawaii State Auditor, who noted that between 2007 and 2018, the DOE collected only $5,342,886 in impact fees[2] — an insignificant amount compared to the $80 million or more required to build a new school.

The auditor’s report also warned that Hawaii’s school impact fees may violate the constitutional requirement that there be a “nexus” between proposed new units and the need for more classroom capacity.[3]

We urge the committee to reinstate the original intent of HB2091 HD1 and repeal school impact fees in their entirety rather than limiting them to a few minor exemptions.

A full repeal would be far more effective in the effort to help reduce the cost of residential construction by eliminating one of the factors contributing to Hawaii’s high housing prices.

Thank you for the opportunity to testify.

Ted Kefalas

Director of Strategic Campaigns
Grassroot Institute of Hawaii

[1] Andrew Gomes, “Housing panel makes first development decision,” Honolulu Star-Advertiser, Jan. 3, 2024.
[2] “ Audit of the Department of Education’s Administration of School Impact Fees: A Report to the Governor and the Legislature of the State of Hawai‘i,” Office of the Auditor, State of Hawaii, Sept. 2019, p. 6.
[3] Ibid, p. 14.

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