By-Right Approval, Not Density, Is the Variable That Moves Hawaii Housing Economics

Discussions of housing legislation tend to center on density: how many units a parcel can carry, how tall a building can go, how much floor area a site will support. Those numbers matter, and they are the ones that make headlines.

For anyone actually underwriting a development in Honolulu, though, a different variable carries more weight. It is whether the project can be approved as of right – and it is the reason Bill 18 has drawn the attention it has.

Most market-rate residential development on Oahu currently moves through the 201H process, which functions as a form of spot zoning.

A developer takes the project through a political pathway: neighborhood boards, public hearings, and a period of consultation whose outcome cannot be forecast at the point capital is committed. The requirement is reasonable in principle. The difficulty for a pro forma is that neither the duration nor the result can be modeled.

“It provides a lot of uncertainty to the process,” says Mike Perkins of The Bratton Team at Colliers International Hawaii. That uncertainty is priced, and it is priced conservatively, because a developer carrying land through an indeterminate approval period is carrying a cost with no defined endpoint.

Bill 18, introduced by Council Vice Chair Andria Tupola, would expand the reach of the Chapter 32 Affordable Rental Housing program – known as Bill 7 after the 2019 ordinance that established it – into apartment, apartment mixed-use, business and business mixed-use zoning districts, together with the apartment precinct of Waikiki.

The program it would extend already offers relaxed zoning standards, property tax relief and fee waivers, in exchange for at least eighty percent of units being rented for a minimum of fifteen years at rates affordable to households at or below one hundred percent of area median income. For 2026, that threshold sits at $93,400 for a single person and $133,400 for a family of four.

Successive drafts have also addressed lot area limits, replaced the blanket sixty-foot height cap with the height permitted under the underlying zoning, allowed additional units near high-service bus stops within the Primary Urban Center Development Plan area, and repealed maximum square footage rules across unit configurations.

The density provisions genuinely help. Greater floor area ratio on a site, and the ability to assemble across larger lots, improve the economics directly.

But the provision Perkins identifies as decisive is that Chapter 32 projects proceed directly to the building permit process. A developer knows at the outset what is permitted, and can proceed on that basis.

The financial consequence is substantial. Certainty compresses the timeline, which reduces the carry, which reduces the cost of capital across the project. A shorter and more predictable path to delivery also widens the pool of capital willing to participate at all, because the risk being underwritten becomes a construction and lease-up risk rather than a political one.

“That in and of itself would help speed up the process,” Perkins says – and for the delivery of housing, timing is where the leverage sits. The 2024 update to the Hawaii housing planning study put Honolulu’s requirement at 27,710 new units between 2023 and 2027, a figure that argues for pathways measured in months rather than years.

Two further regulatory developments are shaping how investors read the market.

On Maui, Bill 9 is phasing out short-term rental use in apartment-zoned condominiums, while Bill 88 – passed in June – created the H-3 and H-4 rezoning pathway. Values in apartment-zoned product and hotel-zoned product have moved differently as a result, and the divergence has become a live consideration in underwriting across both counties.

Separately, every Hawaii county must permit two accessory dwelling units per lot by the end of the year under the 2024 state law. Perkins’s assessment is that this operates largely on the single-family side, supporting housing stock and purchasing capacity without materially affecting commercial-scale multifamily development.

Asked whether the regulatory picture now weighs more heavily in underwriting Hawaii income property than interest rates, Perkins’s answer is unambiguous: it does.

Entitled land carries a version of the same question. Buyers acquiring an entitled position may still need to reaffirm those entitlements, and where the original approval is some years old, that reaffirmation introduces a variable. Time is the cost, and buyers discount for it.

This is precisely why legislation of Bill 18’s kind matters beyond the affordable segment it addresses directly. Anything that converts a discretionary process into a defined one removes a discount that currently applies across the market.

For developers and investors, the practical implication is that the regulatory pathway attached to a site belongs alongside its physical characteristics in any valuation.

Two parcels with identical zoning and identical dimensions are not equivalent if one qualifies for a by-right pathway and the other requires a discretionary approval. The difference shows up in carry cost, in financing terms, and in the breadth of the buyer pool.

That understanding is also where established local knowledge earns its value. Current Hawaii inventory and monthly market statistics describe what is available and how it is pricing. Knowing which approval pathway attaches to a given position is what turns that into an investment decision – and as Hawaii’s approval framework becomes more defined, the sites positioned to use it stand to benefit first.

About the Expert: Mike Perkins (S) is Associate Vice President with The Bratton Team at Colliers International Hawaii in Honolulu, specializing in development and income-producing commercial assets.

The Bratton Team is a Hawaii commercial real estate and investment sales group, exclusively contracted to Colliers International HI, LLC. Led by Mark D. Bratton (R) CCIM and Mike Perkins (S), the team has advised buyers and sellers across all Hawaii asset classes for 40 years.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.

Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.

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