Hawaii Act 121 puts a rule-based rental ban on HCDA leasehold condominiums
Hawaii Act 121 puts a rule-based rental ban on HCDA leasehold condominiums
2026-09-10 · Hawaii · Legislation
A class of Hawaii condominium units is being created where the rental restriction comes from a state agency’s rules, not from the declaration. Act 121 (2026) restructures the Hawaii Community Development Authority’s Ninety-Nine Year Leasehold Program for residential condominium units in urban redevelopment sites. Signed June 8, 2026, effective that day.12
It amends HRS §§ 206E-281, 206E-283, 206E-284 and 206E-288. It does not amend chapter 514B.
What HCDA must now put in its rules
The Act works by directing rulemaking rather than by legislating the terms directly. HCDA must adopt rules that:
- “For the period within sixty days from the initial offering, require residential condominium units within the project to be offered only to eligible buyers… for owner-occupied residential use,” with HCDA setting “the durational requirements for owner-occupied residential use”;
- require an eligible buyer who holds other real property or a beneficial trust interest to “sell the leasehold interest in the residential condominium unit to another eligible buyer within six months from the date of purchase or acquisition” or divest the beneficial interest in the same period;
- “require at least sixty per cent of the residential condominium units be sold to an individual or household with an income of up to one hundred forty per cent of the area median income”;
- allow a unit that is not income-restricted and “not sold within sixty days from the initial offering” to be sold to other buyers “without an owner-occupancy requirement”;
- include “strict enforcement of owner-occupancy, unless otherwise exempted by rule, including a prohibition on renting or subleasing a residential condominium unit within an urban redevelopment site to any tenant or sublessee”; and
- establish “buyback pricing similar to other state agencies’ existing pricing formulas.”
The structural change
The rental prohibition used to sit in the statute. Act 121 moves it into HCDA rulemaking. That is the change most worth noticing, because it means the operative detail — the exemptions, the enforcement mechanism, the definition of a prohibited sublease — will live in administrative rules that have not been adopted yet.
Why an AOAO should care about a program statute
Because it produces a building where two independent regimes govern the same use. The declaration and house rules say what the association permits. HCDA’s rules say what the lease programme permits. They can differ, and the association is not a party to the second one.
The practical consequences for a managing agent of any future project in these districts:
An association cannot rely on its own documents to answer a rental question. A declaration silent on leasing, or permissive about it, does not authorize what the HCDA rules prohibit. Conversely, an association that wants to relax a rental restriction cannot do so for these units by amending the declaration alone.
Enforcement runs on two tracks. A prohibited sublease is potentially both a house-rule violation, enforceable by the association through its ordinary fining and enforcement powers, and a programme violation, enforceable by HCDA against the lessee. Nothing in the Act coordinates the two, and nothing says HCDA enforcement relieves a board of its own obligations to other owners.
Transfer approval becomes a real function. The six-month divestment rule and the eligible-buyer definition mean resales in these projects carry conditions that a routine estoppel or resale package does not currently ask about.
The sixty-day window, read carefully
Two different sixty-day rules are doing different work. The first reserves the initial offering to eligible buyers for owner-occupied use. The second says a unit that is not income-restricted and does not sell in that window may then be sold to other buyers “without an owner-occupancy requirement.”
So a single building can end up holding units on different terms — some owner-occupancy-restricted, some not, depending only on whether they moved in the first sixty days. That is a governance fact an association in such a project will have to live with, and a disclosure fact for every subsequent resale.
Procurement and prevailing wage
The Act exempts design, development and construction contracts for these units from the Hawaii public procurement code, “provided that every laborer and mechanic performing work on the job site… shall be paid the prevailing wage,” and repeals the prior construction-contracts provision. It also redefines “owner-occupied residential use” as “any use currently permitted in existing residential zones consistent with owner occupancy.”
The part that does not exist yet
All of the above is a direction to make rules. We found no HCDA rulemaking filings implementing Act 121 as of this writing, and until those rules are adopted the operative terms — especially the exemptions to the rental ban, which the Act contemplates (“unless otherwise exempted by rule”) but does not describe — are unknown.
What to watch
HCDA’s rulemaking calendar, and specifically three things when the rules appear: the duration of the owner-occupancy requirement, which the Act leaves entirely to the agency; the exemptions to the rental prohibition; and the buyback pricing formula, which determines what an owner actually realizes on exit.
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