Young families desperately
need help to cope with
Hawaii’s housing crisis

At 31, I'm one of the youngest legislators at the state Capitol, but I believe I can bring a perspective to government on the needs and struggles of a new generation of citizens in Hawaii. These are the young people who are just starting their families and their careers. And one of the most serious problems my peers and I face is finding affordable housing.

This session, I serve as the vice chairman of the Committee on Housing in the House of Representatives. One of our biggest priorities this session is to pass housing legislation that will help a broad spectrum of Hawaii's people with this basic need. In studying the plight of housing for working people, especially young families with modest incomes, I discovered some troublesome facts:

» Typically, families who earn $50,000 per year or less are renters. Statewide, that represents about 22 percent of the population. On the neighbor islands, the percentage increases to nearly 30 percent.
» The rule of thumb for affordable rentals is to spend 30 percent of your gross income for rent. That means that a family of four earning $50,000 per year should be paying about $1,250 per month for rent.
» For the past 15 years, since 1990, there has been virtually no rental housing development for this group.
» One unfortunate result of the real estate market boom has been a decrease in affordable rental inventory. Many owners of rental units have either sold their buildings to take advantage of the high prices, raised their rents to take advantage of the low inventory of rentals, or converted their units to vacation rentals, depleting the rental inventory even more.
» During the next five years, the Hawaii Housing Policy Study estimates that a total of 44,000 new housing units will be needed. About 50 percent of the needed units will be for families making less than $50,000 per year. These will all be renters, not owners.

To tackle this problem, the House strongly supports the Affordable Housing Omnibus Bill, SB179 HD2. From our perspective, this bill does the most to help young working families with affordable rental housing. Here's how:

» The bill increases funding to the Rental Housing Trust Fund and provides attractive incentives to private developers. We believe this will result in building 1,000 new rental units during the next two years, primarily targeting working families earning $50,000.

As background, the Rental Housing Trust Fund was created to assist private developers with leveraging financing to build affordable rentals, with a specific percentage of the rental units set aside for the very poor and low income families. Currently, the trust fund is funded by 25 percent of the conveyance tax revenues. Historically, funds from the trust have been used to build about 250 units each year.

» To increase funding for the Rental Housing Trust Fund, the bill proposes a modest increase of the conveyance tax, which is assessed on the seller of any property, based on the purchase price. It's important to note that Hawaii has the lowest conveyance tax rate in the nation. With this increase, conveyance tax revenues are expected to generate $7 million for the RHTF this year and $8-9 million next year, provided that interest rates remain low.

(For properties sold under $600,000 there is no tax increase, except for residential properties purchased by nonhomeowners. For properties $600,000 and over, the increase is 5 cents for every $100 in value over the $600,000. For residential properties in which the purchaser is not eligible for the homeowners exemption, the tax increase is 15 cents per $100 in value up to $600,000 and 20 cents per $100 in value over $600,000.)

» In 2004, only 7 percent of the transactions were $600,000 and above. Therefore, not only is the increase a very modest one, but the vast majority, 93 percent of the property sales, would not be subject to a tax increase.

To encourage developers to build more affordable rental units, the bill contains several new incentives:

» It eases the restrictions on the types of units that can be built through the Rental Housing Trust Fund, while requiring that developers set aside at least 50 percent of the units for working families earning less than $50,000.
» It increases the amount of a state low income housing tax credit for developers. It also allows developers to use both federal and state low income housing tax credits as capital to build affordable rentals. This means that the annual tax credit base may be used to leverage more than $35 million in financing over a 10-year period.
» It exempts developers from paying the 4 percent general excise tax on construction costs and rental income if the project sets aside at least 50 percent of the units as rental units for working families earning less than $50,000.
» It expands the use of the expedited permitting and approval process by the county and land use commission to any private developer who proposes to build affordable housing primarily for households earning less than 140 percent of the median family income (or $92,000 on Oahu.)
» It exempts from the conveyance tax any property transferred for low income housing development.

Make no mistake, Hawaii is in a housing crisis. I worry that people my age will face a future with a very poor quality of life because of the lack of affordable places to live and raise their families. It is clear that lawmakers cannot solve this problem alone, that developers also must step up to help find new and creative solutions. This bill is a step in the right direction by providing more funds and incentives. It's a sign of our commitment to build more affordable rentals and to give our working families a helping hand for a better life.

Rep. Scott Nishimoto is vice chairman of the Committee on Housing.

Young families desperately need help to cope with Hawaii’s housing crisis

Young families desperately
need help to cope with
Hawaii’s housing crisis