House Bill 1763 is well-intentioned: It aims to give priority to public, state- and county-run affordable housing projects for the low-cost loans, grants and other awards from the state’s Rental Housing Revolving Fund (RHRF).

But the pending legislation would put planned private low-income rental projects, including ones by nonprofit developers, at a disadvantage to state- or county-­owned projects when they all compete for RHRF monies administered by the Hawaii Housing Finance and Development Corp. (HHFDC).

These loans are typically used as a necessary “bridge” source to get a proposed development all the way to the finish line for funding. To prioritize public projects over those by nonprofit and private developers could result in a drop-off of project proposals, as HHFDC testimony indicates, and that’s not a good outcome.

The bottom line is that improving and increasing Hawaii’s store of affordable housing should be the state’s over-arching goal. Because HB 1763 could actually lead to less development of affordable housing, it should be set aside today when the Senate’s Ways and Means Committee holds its public decision-making on the measure.

Still, it’s easy to see why the bill has drawn strong support from the state Department of Hawaiian Home Lands and AARP Hawaii, based on the urgent need to replace current public housing that is aging and “functionally obsolete,” or at risk of becoming so.

The deteriorating status of Hawaii’s public housing — along with many of its public structures ranging from schools to hospitals — surely does pose a problem, and it’s one that the Legislature ignores at its peril. However, HB 1763 does not solve that problem, and could well create others.

The bill has been amended by the Senate Housing Committee to address some concerns expressed by HHFDC in its earlier incarnations. It gives state and county projects priority for rental fund awards, but only if those projects qualified for and were awarded tax-credit awards granted using HHFDC’s current criteria, preserving valuable competitive standards. The amended draft also would apply to applications made after June 30, and so would not affect this year’s application pool.

By linking awards more tightly with public projects, the bill’s supporters seek to support more projects with perpetual affordability. That’s a growing issue for Hawaii. Projects built by a non-public entity, whether nonprofit or for-profit, can be and often are sold after a required term of affordability, then converted to market-price units.

In its original incarnation, HB 1763 gave state- or county-owned projects top priority for HHFDC’s coveted tax credit awards, which are a prime source of funding for public and private affordable housing projects. Despite that change, the HHFDC continues to express reservations over the amended bill. It defends affordability term lengths because, the agency states, they are and “should be” connected to the “expected useful life” of a development. Further, the HHFDC states, “Nonprofit developers pledge to keep their projects affordable on a longterm basis, typically for a term of 65 years.”

As for Low Income Housing Tax Credits, which are funded by the federal government, the Internal Revenue Code itself requires that “projects serving the lowest income tenants, for the longest periods … and which will contribute to a concerted community revitalization plan” be preferred. That should create adequate preference for public projects so that the state doesn’t also need to put its thumb on the scale via HB 1763, dictating HHFDC’s scoring of affordable housing projects for bridge loans.

The impulse to give public housing projects preference for RHRF awards is understandable. But on balance, HB 1763 could complicate HHFDC decision-making on affordable housing without actually increasing supply.