Hawaii lawmakers are considering big funding increases to produce homesteads for state Department of Hawaiian Home Lands beneficiaries after a historic $600 million appropriation in 2023.

Different committees in the state House of Representatives recently advanced two bills that propose to boost DHHL homestead development funding, including one to provide an additional $600 million.

The other bill proposes to raise the state transient accommodations tax by 1 percentage point and dedicate the added revenue to DHHL, which stands to receive around $90 million or more annually from such a change.

Both bills are top priorities of the 13-member bipartisan House Native Hawaiian Affairs Caucus.

“As you all know, a few years ago, there was a very good gesture from this body here in this building to give $600 million to the department,” Rep. Diamond Garcia (R, Ewa-Kapolei) said during a Jan. 24 news conference at the state Capitol. “And as of right now, money is being spent for the better. Homes are being built across the state. Projects are underway. But more needs to be done.”

One way to do more, Garcia said, would be to pass House Bill 606, which would appropriate $600 million in the fiscal year beginning July 1, and give DHHL until June 30, 2028, to assign all the money for specific projects.

Rep. Daniel Holt (D, Sand Island-Iwilei-Chinatown) called the bill tied to the hotel room tax, HB 604, a new idea that would produce dedicated annual funding to help reduce the number of DHHL beneficiaries waiting for homestead leases.

“It’s a creative idea because we need to figure out a solution,” Holt said at the news conference. “You know, 28,000 people on the waitlist, and it hasn’t been getting smaller. So we’re looking at all the different ways we can to try to get this waitlist eliminated.”

The House Committee on Housing voted 8-0 to advance the $600 million appropriation bill after an initial public hearing Jan. 29. The other bill was taken up a day later, and also advanced after a 5-1 vote by the same committee and a 7-0 vote by the House Committee on Tourism.

Public testimony was less favorable for the tax-related bill, which would increase the hotel room tax rate to 11.25% from 10.25% and was introduced by nine House members led by Holt.

DHHL supports the bill, but it was opposed by the Grassroot Institute of Hawaii and discouraged by the Tax Foundation of Hawaii.

Ted Kefalas, director of strategic campaigns for the Grassroot Institute, said during the Jan. 30 hearing that the organization favors more housing development but that raising what is already the highest tax on tourists in the world would hurt Hawaii’s visitor industry.

“We seriously risk pricing ourselves out of the market,” he said. “Visitors have choices, and if they start choosing elsewhere, it’s going to be people, regular folks, local families that are hurt — people that run restaurants, people that are tour operators, workers at hotels — all of these people are going to face the pinch when it comes to raising the tax.”

The bill to appropriate $600 million was introduced by 19 representatives in the 51-member House, including Garcia and Holt. No one testified against this bill.

Mary Drayer, who isn’t Hawaiian and doesn’t qualify for a homestead lease, encouraged lawmakers in written testimony to pass HB 606.

“It’s (well) past time for the State of Hawaii to honor the promise and fund DHHL,” she said. “All the talk about lack of housing can actually be more than talk — time for action.”

Development push

The homestead program, created in 1921 by Congress and administered by the state since 1959, aims to return Native Hawaiians to their ancestral lands. The program offers residential, agricultural or pastoral land leases to DHHL beneficiaries who must be at least 50% Hawaiian. Lot leases cost $1 a year, and beneficiaries must pay for or build their own homes.

Over the last century, about 10,000 homesteads have been created, or 100 per year on average. Meanwhile, DHHL’s waitlist recently reached 29,543 applicants, up from a prior count of about 28,700.

At least 2,100 DHHL beneficiaries have died while on the agency’s waitlist.

Kanani Higbee said in written testimony on HB 606 that half of those on the list are seniors who will die in the next 10 or 15 years.

“My grandpa died on the list of Hawaiian homes, my mom has been on the list since the 1980s, my siblings and I have been on the list since the early 2000s,” Higbee wrote. “We are three generations on the list and dying on the list. … We have waited enough. We need housing now.”

DHHL Deputy Director Katie Lambert told the Housing Committee during the Jan. 29 hearing on HB 606 that the agency is grateful for the new funding support.

“We greatly appreciate it,” she said. “It will go a long way towards keeping up the momentum that the department has initiated.”

Kali Watson, DHHL director, briefed many lawmakers in early January on how additional funding of roughly $600 million would increase homestead lot development.

During a Jan. 6 briefing for two Senate committees — Ways and Means, and Hawaiian Affairs — Watson said DHHL could produce an additional 2,000 lots with a little over $600 million.

Gov. Josh Green did not include any new funding for DHHL lot development in his budget request submitted to the Legislature covering the next two fiscal years. However, DHHL submitted its own request that seeks $628 million for homestead production: $442 million in the fiscal year that begins July 1 and $186 million in the following fiscal year.

“One of the things that I think is important to recognize is that we have over 29,000 on our waitlist, and while $600 million seems like a lot of money, we need over $6 billion to eliminate our waitlist,” Watson said during the Jan. 6 briefing.

Watson told senators on the two committees that the 2023 appropriation is helping to fund lot development at 28 projects, and that beneficiaries will be able to occupy homesteads at five of those projects this year, followed by more new homesteads at 15 projects from 2026 to 2029.

By the end of 2030, Watson expects 10 of the 28 projects will be completed, adding 1,800 homestead lots for beneficiary use.

Watson said $471 million of the 2023 appropriation has been committed to specific projects, and that the $129 million balance will be by a 2026 deadline.

Additional funding would allow DHHL to further increase lot development, which Watson highlighted at the Jan. 6 briefing.

Projects span isle chain

The biggest use of any additional funding highlighted by Watson was $120 million to produce 250 lots on land DHHL bought on Kauai from Grove Farm Co. using some of the 2023 appropriation.

DHHL bought 295 acres in Lihue from Grove Farm and anticipates producing 1,000 homesteads there. The agency spent about $21 million to buy the property and begin planning work. The total cost to produce 1,000 homesteads is estimated by DHHL at $250 million.

On Hawaii island, Watson said $75 million in additional funding would be used to produce a 300-lot initial phase at a project in Panaewa budgeted to receive $1 million from the 2023 appropriation.

On Oahu, DHHL could use $68 million in extra funding to produce a 250-lot phase at its Ka‘uluokaha‘i community in East Kapolei where 450 lots are to be produced using $141 million from the 2023 appropriation, according to Watson.

Watson also highlighted a planned 400-lot Maui project that could be helped by additional funding. DHHL is using $45.6 million from its 2023 appropriation to start the project in Kihei called Kama­lani, including $10.5 million spent to purchase 81 acres and $35.1 million earmarked to build an initial phase with 150 lots. DHHL would like to use $40 million from its new funding request to produce 250 more Kamalani lots.

Sen. Troy Hashimoto (D, Wailuku-Kahului-Waihee) questioned whether it would make more sense to give DHHL big lump sums, which the agency can shift around amid evolving priorities, or to make line-item appropriations for individual projects with definite needs.

“I think that’s a consideration we’re going to have to figure out as well,” Hashi­moto told Watson, adding he was a little nervous about how many lots in DHHL’s pipeline of stated projects the agency will be able to deliver as planned.

The two funding bills still face a potential gamut of hearings. They are each positioned for consideration by two more House committees before a potential vote by the full House ahead of any consideration in the Senate.