The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Water and Land on Feb. 19, 2026.
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Feb. 19, 2026, 9 a.m.
Hawaii State Capitol
Conference Room 411 and Videoconference
To: House Committee on Water and Land
Rep. Mark Hashem, Chair
Rep. Dee Morikawa, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: TESTIMONY IN SUPPORT OF HB1741 HD1 — RELATING TO INCLUSIONARY ZONING
Aloha Chair, Vice Chair and other Committee members,
The Grassroot Institute of Hawaii supports HB1741 HD1, which would treat county inclusionary zoning mandates as impact fees subject to nexus and rough proportionality legal tests.
Practically, this measure would require the counties to conduct a study analyzing the costs of requiring that housing projects include a certain amount of affordable housing as a condition of permit approval before imposing such a requirement.
And if the study found that the requirement would increase the cost of market-rate housing, that county would not be allowed to enforce inclusionary zoning unless it provided incentives to offset all of the costs associated with it.
This bill is a smart approach to dealing with affordable housing mandates that have been shown to stifle homebuilding.[1]
These mandates force homebuilders to increase the prices of market-rate homes to make up for the so-called affordable homes, and that becomes even more problematic, depending on the percentage of homes that must be so-called affordable.
Think of it this way: If a car manufacturer were required to sell three out of every 10 cars at a loss, the company would make up for those losses by increasing prices on the seven cars they are allowed to sell for profit.
Customers will respond to the higher prices by buying fewer cars, which will prompt the manufacturer to produce fewer cars.
In a real sense, this is what is happening to Hawaii’s housing market: Affordable housing mandates are reducing the total amount of housing that gets built.
Research supports this. Carl Bonham at the Economic Research Organization at the University of Hawai‘i pointed out in 2013 that inclusionary zoning “reduces incentives for developers to produce all forms of housing, and will reduce the overall supply of housing units and increase the price of housing.”[2]
And a 2024 study of a voluntary inclusionary zoning program in Los Angeles found that “increasing IZ requirements may not produce substantially more below market-rate units, and is very likely to reduce future housing production.” The study concluded that land-use reform would be a more effective way to increase the housing supply.[3]
Grassroot applauds HB1741 for recognizing that inclusionary zoning doesn’t work, and we would urge the Legislature to approve this bill.
Thank you for the opportunity to testify.
Ted Kefalas
Director of strategic campaigns
Grassroot Institute of Hawaii
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[1] Tom Means, Edward Stringham and Edward Lopez, “Below-Market Housing Mandates as Takings: Measuring their Impact,” The Independence Institute, November 2007; Carl Bohnam, Kimberly Burnett, Andrew Kato, et al., “Inclusionary Zoning: Implications for Oahu’s Housing Market,” The Economic Research Organization at the University of Hawai‘i, Feb. 12, 2010; Sanford Ikeda and Emily Washington, “How land-use regulation undermines affordable housing,” Mercatus Research, November 2015; Arjuna Heim, “We need to talk about inclusionary zoning,” Hawaii Appleseed Center for Law & Economic Justice, Aug. 13, 2025.
[2] Carl Bonham, “The Unintended Consequences of Affordable Housing Policy,” The Economic Research Organization at the University of Hawai‘i, Sept. 8, 2013.
[3] Shane Phillips, “Modeling Inclusionary Zoning’s Impact on Housing Production in Los Angeles: Tradeoffs and Policy Implications,” Terner Center for Housing Innovation, April 2024.
