The state Senate’s Housing Committee deferred a bill Tuesday that would have paid Hawaii homeowners and homebuyers to restrict occupants to locally employed residents, instead approving a bill to promote the construction of more accessory dwelling units, commonly known as ohana units, for workforce housing.

House Bill 740 would establish the Accessory Dwelling Unit Financing and Deed Restriction Program to provide funding to the counties to distribute grants to eligible homeowners or homebuyers to construct ADUs with the condition that occupants of the property, including those living in primary or secondary units, must be employed, or use to be employed, at least 30 hours per week at a local business.

The amended version of HB 740 defines ADUs as a “second dwelling unit that includes its own kitchen, bedroom and bathroom facilities, and is attached or detached from the primary dwelling unit.”

The Senate’s approval of the measure ended the momentum for HB 739, which would have established the Kama‘aina Homes Program allowing counties to pay homeowners or homebuyers a sum of money under the condition that the home be occupied by at least one owner-occupant or tenant who works, or used to work, at a local business for at least 30 hours a week.

Sen. Stanley Chang (D, Hawaii Kai-Kahala-Diamond Head), who chairs the Senate Housing Committee, told the Honolulu Star-Advertiser on Tuesday that HB 740 will be the “vehicle” for advancing the goals of both bills to increase the inventory of affordable workplace housing.

At Tuesday’s public hearing, Chang said he appreciates the efforts to encourage more ADUs in Hawaii and wants the state to focus on the construction of new units rather than converting existing ones.

“We need to shift away from a model where the state gives away money and never gets it back,” Chang said at the hearing. “The state needs to act as an investor that realizes a gain, an appreciation on the investment of its funds, which are, after all, taxpayer funds.”

While both bills worked to enable the creation of more housing for the local workforce, Chang told the Star-Advertiser that HB 740 is one potential solution to creating low-cost financing for ADU construction statewide.

“If the state spends a lot of money and no new housing is built, then I don’t think we’re getting any closer to solving the housing shortage,” he said.

Chang noted during the hearing that similar grant programs already exist, citing Maui County’s ‘Ohana Assistance Pilot Project, which launched in July and provides grants of up to $100,000 to homeowners to design and construct attached or detached ADUs with a 10-year deed restriction to provide workforce housing.

HB 740 is supported by a number of organizations, including the Hawaii Appleseed Center for Law and Economic Justice. In written testimony the center’s director of housing policy, Arjuna Heim, said the bill addresses financial barriers to constructing ADUs, which typically cost about $250 to $350 per square foot to build.

The deed restriction, which was also a feature of the deferred HB 739, is a key aspect of HB 740, according to Heim.

“The deed restriction requirements ensuring occupancy by local workers, maintaining employment within the county, demonstrate a thoughtful approach to preserving housing for Hawai‘i’s working families,” Heim said in written testimony. “This helps prevent the conversion of these units to vacation rentals or investment properties and help establish a locals-only market.”

Joshua Wisch, president and executive director of the nonprofit Holomua Collaborative, which focuses on making Hawaii more affordable for working families, was a staunch supporter of HB 739 and said he was disappointed the bill was deferred.

“We’ll have to see what was retained in the Senate draft before we can determine any future support,” Wisch said in a statement to the Star-Advertiser.

“We still believe (the Kama‘aina Homes Program) can help create a dedicated and permanent housing supply for local working families, and are already exploring ways to lift the program up at a county level, come back to the Legislature next session or find other avenues to pursue it,” he said.

A 2023 report by the University of Hawaii Economic Research Organization found that 20% of Hawaii residents had enough income to afford a single-family home costing $875,000.

Another recent study by Holomua Collaborative, which surveyed 1,500 local workers with middle- to upper-middle incomes, found that 70% of respondents said they will or might relocate to a less expensive state in the coming years, with housing costs a major issue. Twenty-seven percent said they would move out of Hawaii within the next five years.