A bill relating to the public sale of foreclosed homes in the wake of natural disasters or economic crises passed third reading 25-0 in the Senate and crossed over to the state House of Representatives on Tuesday.
A companion bill, House Bill 467 House Draft 1, was referred to the House Judiciary & Hawaiian Affairs Committee, chaired by Rep. David Tarnas of Hawaiʻi Island, but it has not moved on from there.
Senate Bill 332 Senate Draft 1 would prohibit sellers of foreclosed homes from bundling properties at a public sale. Instead, each foreclosed home would be sold separately. The legislation specifies that the sale of a foreclosed property is not final until either 15 days after the public sale; or 45 days if an eligible bidder submits a subsequent bill or written notice of intent to submit a subsequent bid.
“Natural disasters and other economic crises can often lead homeowners to default on their mortgage payments, resulting in a wave of foreclosures,” the bill’s legislative finding says. “Previous foreclosure crises have resulted in the replacement of owner-occupied homes with investor-owned rentals, prolonged vacancies and unmaintained residential properties. As climate-related crises become more intense and frequent, and as housing cost burdens increase for low- to moderate-income homeowners, the Legislature believes it is necessary to ensure that foreclosed homes are not lost to second homebuyers or residential investors.”
A report submitted by Judiciary Committee Chairman Karl Rhoads says that “some investors exploit foreclosure crises to purchase foreclosed properties at the expense of local families. Accordingly, this measure prohibits the bulk sale of foreclosed properties, thereby providing residents with a better chance to submit more competitive offers to purchase a foreclosed property.”
Lahaina Strong submitted public testimony in favor of the bill.
The bill “addresses the urgent need to protect local residents from the devastating impacts of a looming foreclosure crisis on Maui,” Lahaina Strong wrote. “With the foreclosure moratorium ending, our community is facing another wave of grief as the economic impacts of the August 8th wildfire continue to unfold. Without intervention, disaster capitalism threatens to exploit this crisis, allowing outside investors to purchase foreclosed properties and profit at the expense of local families.”
“By requiring individual property auctions, local residents have a fairer chance to submit competitive offers,” the organization said. “Bundled auctions only benefit investors, shutting out families who want to rebuild and remain in their community.”
“When paired with the work of community land trusts, this measure can help create a pool of permanently affordable housing for local residents and generational families in Lahaina,” Lahaina Strong said.
On Feb. 21, the Maui County Council approved providing up to $5 million to the Lahaina Community Land Trust. The money would come from the County’s Managed Retreat Revolving Fund to property acquisition by the trust, giving Lahaina landowners who need to sell an option to keep wildfire-impacted lands in resident ownership and resist offers from outside investors.
Makana Hicks-Goo, organizer of LIMBY (Locals In My Backyard) Hawaiʻi, also supported the bill, saying it would provide owner-occupants and local nonprofits a sort of “right of refusal,” and substantially increase the prospects for local homeownership at lower prices.
Members of the LIMBY group, a hui of concerned kamaʻāina and kānaka working to help develop solutions to our state’s housing crisis, “are concerned that NIMBYism has driven up costs and driven our friends and families out by opposing all development. We are equally concerned that the apparent answer to this, YIMBYism, insists that anything resembling true affordability is impossible so instead they promote building housing that gets bought by overseas investors. We know we won’t solve our housing woes without building more, but we won’t solve them by simply building more.”
“The true solution is to create a housing market for locals: one that houses locals first, is tied to local wages, and is managed in trust,” the group said. “The future for kamaʻāina and kānaka will be LIMBY or Las Vegas.”
Lahaina native and certified mortgage planning specialist Tera Paleka said she lost her mortgage brokerage business in the Lahaina wildfire and supports the bill as being “crucial in protecting local families from displacement as Maui faces an impending foreclosure crisis.”
“Many (Maui residents) are struggling to pay rent while worrying about their future when the foreclosure moratorium lifts,” Paleka said. “Families are being separated because landlords cannot accommodate everyone in smaller condos and homes. This additional emotional and physical stress often leads to substance abuse, domestic violence, and, in some heartbreaking cases, suicide. Hawaiʻi has been grappling with high suicide rates, and the recent events have only exacerbated this crisis.”
Even before the 2023 wildfires, local families were struggling to stay afloat, she said. Now, with the foreclosure moratorium ending, wildfire survivors are at risk of losing properties that have been in their families for generations.
“The disaster has compounded their grief, financial ruin and collective trauma,” Paleka said. “As someone known as the ‘Local Lender,’ who has financed many of the fire victims’ homes, I am deeply immersed in their struggles. I receive numerous calls, emails and texts filled with questions, tears and frustration from families uncertain about their future. This bill is one of the most critical measures I implore you to enact promptly.”
“Without intervention, disaster capitalism will exploit this crisis, pushing local families out while outside investors profit,” she said.
The bill was introduced by Senate Housing Committee Chair Stanley Chang, who represents East Honolulu. Central Maui Sen. Troy Hashimoto is vice chair of that committee.