Clarifies that projects seeking exemptions from planning and development laws and rules may be modified by the Hawaii Housing Finance and Development Corporation under certain conditions. Authorizes HHFDC to make recommendations to appropriate legislative bodies. Requires HHFDC or a county to accept an application seeking certain exemptions within thirty days, and to process the application within one hundred twenty days before final approval by a county legislative body for certain housing projects. Provides that any application that is neither approved nor denied by the county within one hundred twenty days shall be approved unless the county can demonstrate why an approval of the project would not be appropriate or would adversely affect public safety.