Honolulu's Bill 7 Housing Program Misses Targets, UHERO Report Says

Honolulu has completed only 224 affordable rental units since the inception of its Bill 7 program in 2019, falling far short of its goal to produce 500 units every year, according to a report from the University of Hawai‘i Economic Research Organization (UHERO).

The program was designed to spark urban infill development by offering developers extra density, tax incentives, and fee waivers in exchange for long-term affordability restrictions. While the incentives have made some projects more financially viable, the actual number of keys hitting the market has not kept pace with the city’s legislative ambitions, staradvertiser.com reported.

The discrepancy between the program's intent and its results shows tension in the city's attempt to manage a housing crisis as economic realities change. While 85 projects containing 2,280 units have entered the program, the slow pace of completion remains a primary hurdle for residents seeking moderate-income housing.

Permitting delays stall construction

The time it takes to move from application to construction drives the program's sluggishness. Although Bill 7 includes a mandate for the city to approve or deny building permit applications within 90 days, UHERO found that this deadline has never been met.

Rising costs, delays hobble Honolulu's affordable housing plan

In a review of 19 Bill 7 permits issued before July 2025, not a single one was ready for pickup within the statutory 90-day window. Instead, the median processing time was 531 days, which averages out to roughly one year and five months. This delay creates a massive financial drag on developers; UHERO estimates that for a hypothetical project, every month of delay costs approximately $74,000.

The Department of Planning and Permitting (DPP) has responded to these findings by emphasizing modernization. Davis Pitner, a spokesperson for the DPP, noted that the department is focusing on reducing unnecessary review cycles through clearer guidance and the potential use of AI-assisted plan reviews. He also noted that while the UHERO data was based on earlier figures, the number of completed units has since grown to 412 across 11 projects.

“The fact that Bill 7 has fallen so far short of its goal of producing 500 units annually is concerning, but UHERO’s report provides valuable insight into where improvements are needed, particularly in reducing permitting delays,” said Honolulu City Council Chair Tommy Waters.

Zoning changes erode program advantages

The report also identifies a “narrowing” of the competitive edge Bill 7 once held. Previously, the program offered more density and feasibility than conventional zoning. However, recent legislative shifts have changed that math.

Ordinance 26-7, which went into effect in April, increased allowable density in apartment districts for standard developments. This means developers can now build more units without having to accept the affordability restrictions required by Bill 7. UHERO’s modeling shows that for a hypothetical 10,000-square-foot parcel, the return-on-cost advantage of Bill 7 over conventional development dropped from 1.22 percentage points to 0.74 percentage points following these changes.

The following table compares the program’s performance against its intended benchmarks and the impact of recent economic shifts:

Metric	Statutory Goal / Industry Target	Actual / Modeled Result
Annual Unit Production	500 units per year	224 units (total since 2019)
Permit Processing Time	90 days	531 days (median)
Project Return on Cost	6.6% (Industry Target)	6.2% (Modeled Bill 7 project)
Density (10k sq ft parcel)	26 units (Pre-2026)	49 units (Under Bill 7)

Beyond regulatory hurdles, the report cites broader macroeconomic headwinds, including rising construction costs and higher interest rates, which have made the margin for error much slimmer for developers since 2019.

The search for a better return

City leaders are now looking toward new legislation to bridge the gap between feasibility and reality. Council Vice Chair Andria Tupola introduced Bill 18 in February, which proposes adjustments to development standards and incentives for affordable rental housing. However, the measure stalled in the Council’s Housing, Homelessness and Parks Committee on October 20.

Tommy Waters has advocated for Bill 11, which is currently awaiting the mayor’s signature, as part of a broader effort to assess which incentives actually deliver results. He cautioned against evaluating Bill 7 in isolation, suggesting the city must look at the full spectrum of housing incentives to ensure taxpayer dollars are being used effectively.

UHERO’s analysis suggests that if the city wants to maintain a real advantage for affordable projects, it may need to consider raising the limits on units per project or restructuring subsidies. While the program remains more attractive than standard development in terms of residual land value—largely due to the city waiving roughly $950,500 in fees for a typical project—the narrow profit margins continue to deter large-scale participation.

As the city weighs new funding and potential zoning adjustments, the fundamental question remains whether administrative reform can outpace the rising costs of building in Hawaii.