A Honolulu program meant to boost the development of affordable rental housing is falling short of its goals, according to a new report from University of Hawaiʻi economists.

Bill 7, enacted in 2019, offered Honolulu developers incentives to keep units affordable to moderate-income households. The law was intended to ease housing costs in a city that is increasingly unaffordable.  

A report by the UH Economic Research Organization, or UHERO, found that as of September, only seven out of 85 projects have been completed since the program began — amounting to only 224 out of 2,280 units that applied for a permit since 2019. The original goal of the program was to complete 500 units per year.

The UHERO report notes development has been made harder since 2019 because of persistently high interest rates and construction costs, the latter of which increased by 30% since the program began.

Permitting has also been slow. Of the 19 city building permits issued before July 2025, none were ready within the 90 days the law calls for, with the median waiting time being 531 days. 

More: Honolulu’s Effort to Fast-Track Affordable Housing Projects Hasn’t Worked

Davis Pitner, spokesperson at the Department of Planning and Permitting, has made progress on Bill 7 projects in recent months. The most up to date totals show 412 units across 11 projects have been completed, he said.

“While annual production is below the program’s goal of 500 units,” Pitner wrote in a statement, “a complete assessment should consider both completed housing and projects moving toward construction and occupancy.”

The Department of Planning and Permitting’s processing times seem to be improving, said Trey Gordner, lead policy researcher of the UHERO report. But challenges remain. Researchers estimated every month of permit delays add roughly $74,000 to the cost of the project, which is not as significant as construction or financing costs, but it quickly adds up. 

Gordner said that the Bill 7 program works on paper, but it may not be enough under current building conditions.

“It’s directionally right,” Gordner said, “But it’s much more expensive today to build under this program.” 

Bill 7 was designed to encourage small-scale apartment projects on lots of 20,000 square feet or less in areas already zoned for apartments or mixed-use development. 

In exchange for the benefits, developers must rent at least 80% of the units to households earning 100% or less of area median income, which Honolulu considers to be $107,800 for an individual and $154,000 for a family of four. Pricing restrictions last at least 15 years.

Some of the incentives include an exemption from off-street parking requirements and relaxed density and height limits. 

Hono­lulu City Council Chair Tommy Waters told the Star Advertiser that increasing the supply of affordable housing remained a “top priority” for the city. The bill falling short of its goal is concerning, he said, but that UHERO’s report “provides valuable insight into where improvements are needed, particularly in reducing permitting delays.”

UHERO put together a housing policy simulator based on pro forma, a spreadsheet model that real estate developers use to evaluate whether a project makes financial sense. 

The simulator is an interactive tool meant to estimate how much Bill 7 improves project feasibility and what sort of policy changes can improve it further. According to the simulator, the program raised estimated return on cost from 5% to 6.2%, although this still falls short of the 6.6% investors look for. 

Gorder encourages those interested to test other potential policy changes for themselves using the tool.

While Bill 7 isn’t producing the number of units policymakers had hoped for, it is still providing community benefits, according to Gordner.

The program “is ostensibly an affordable housing program,” he said, but “it also furthers many of the city’s other goals with respect to sustainability, use of transit, creating walkable communities and making the best use of existing infrastructure.”