State's school impact fees earn 'F' in new Grassroot Institute white paper

The report says the fees are not needed, are likely unconstitutional, have never been spent, and are driving up Hawaii housing costs

News Release from Grassroot Institute, Feb 26, 2025

HONOLULU, February 26 >> The Grassroot Institute of Hawaii issued a white paper today urging Hawaii's lawmakers to follow through on work started by Gov. Josh Green in his emergency housing proclamations by abolishing the state's school impact fees completely.

The new white paper, titled “Getting schooled: The case against school impact fees in Hawaii,” notes that such fees are intended to fund the construction and renovation of K-12 schools.

But data uncovered by Grassroot policy researchers Jonathan Helton and Drew Luff show they are not really needed due to declining student enrollment, and have never been spent.

In addition, they are likely unconstitutional due to a lack of “nexus” and "rough proportionality." And — most unfortunate — they are driving up Hawaii housing prices by adding to the cost of homebuilding.

"Hawaii’s school impact fees add thousands of dollars to the prices of new housing units built in school impact districts." the white paper states, adding that Gov. Josh Green authorized waivers from them in his emergency proclamations related to affordable housing starting in July 2023.

In fact, the white paper says, “the first action taken in 2024 by the Beyond Barriers Working Group, established as part of the emergency orders and since disbanded, was to waive the school impact fee for a 52-unit rental project in downtown Honolulu. The school impact fee for projects in the downtown area is $3,864 per unit, which would have added $200,928 to the project’s overall construction costs."

The white paper states that 17 housing projects comprising 8,960 units have been authorized so far to proceed under the governor’s successive affordable housing proclamations, of which 13 received exemptions from the school impact fees, reducing their building costs by almost $23 million.

Less lucky homebuilders include Maui residents Rosemary and Christian Blando, who applied in 2022 for a permit to build an accessory dwelling unit in the yard of their Kahului home. The Blandos had to pay $5,373 in school impact fees for the right to build their ADU — more than five times the fee for the building permit, and more than 6% of the value of the $80,000 project.

“Likewise,” the white paper states, “the Howard Schechter Trust applied in 2022 to build two ADUs on a property in Lahaina. Also charged an impact fee, the trust had to pay $5,778 to the Department of Education — more than 9% of the construction cost of the two ADUs.”

The report concludes with a recommendation that state lawmakers approve HB422, currently being considered by the 2025 state Legislature. The bill proposes repealing school impact fees and transferring the unspent funds to the School Facilities Special Fund, where, according to the white paper, "they could be used to actually support educational facilities.”

In addition, the white paper says, "passage of HB422 would ensure that cumbersome expenses such as the state’s school impact fees do not hinder homebuilding and efforts to lower Hawaii's cost of living.”

PDF: DOWNLOAD THE WHITE PAPER

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The Grassroot Institute of Hawaii is a nonpartisan, nonprofit research and educational institute devoted to promoting individual liberty, economic freedom and limited, accountable government. Its goal is to improve the quality of life in Hawaii by lowering the cost of living and expanding opportunities for all.