New UHERO study supports what we've been saying about housing Photo by Charley Myers
One of the researchers stresses correlation is not causation, but it's pretty clear that heavy regulation has limited housing supply "Measuring the burden of housing regulation in Hawaii." It's a new policy brief that could have been written by the Grassroot Institute of Hawaii. But we are happy that it is the prestigious Economic Research Organization at the University of Hawaii stating what most economists and housing experts have known for years. Written by Rachel Inafuku, Justin Tyndall and Carl Bonham, the report cautiously states: "One of many factors that may explain the incredibly high home prices in Hawaii is that government regulation has severely limited the ability of the housing market to create the units necessary to meet demand." A little more strongly, it says: "High home prices in Hawaii arise from a number of factors, [but] regulation plays a key role in setting the supply of housing." Some regulations, it adds, "can often be in the public interest." But they aren't without cost: "Such rules come with lengthy permitting processes and other financial obstacles that create a disincentive for developers to build new homes. Furthermore, development limits are designed to outlaw large multifamily development in virtually every neighborhood, forcing developers to seek special permission if they want to provide new multifamily housing. "The processes to secure multifamily permits can be extremely complicated, requiring coordination between many levels of government, the local community and the legal system. By raising the cost of housing production, regulation reduces the supply of new homes, and leads to higher prices." You can read the brief here or see the news articles about it in the Honolulu Star-Advertiser ("Hawaii ranks highest in nation for housing development regulations"), Honolulu Civil Beat ("How Hawaii’s Land-Use Regulations Are Helping Drive Up Housing Prices") or Maui Now ("New report: Hawaiʻi’s high home prices tied to stiff regulations; Maui 2nd strictest in state"). In the Honolulu Star-Advertiser article, UHERO Director Bonham stresses that the study "doesn’t prove that the regulation is causing home prices to go up. It’s a correlation. It doesn’t necessarily show causation." OK, duly noted.
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Auditor Persecution Continues
Hi there! This is the Hawaii State Tax Watch Doggie. Today I’m playing a real person who testified before the House Special Investigative Committee. The Committee was supposed to be looking into problems at the Department of Land and Natural Resources because of a less-than-glowing report by the State Auditor. But guess who got slammed by the Committee just as much, if not more? The Auditor. Here's the link to the report: Over one-third of the Committee’s report was on the Auditor’s Office (which was never supposed to be part of the Committee’s focus according to the House Resolution authorizing the Committee). It was also telling that the Committee issued its draft report before even hearing the testimony from all of the scheduled witnesses. That sure makes it seem like the Committee had predetermined a lot of things. I was called by the committee chair’s office to meet with her and some of her committee members twice and was later subpoenaed to testify before the full committee on October 21, 2021. I not only testified for several hours at each meeting/hearing, but also submitted numerous documents, including memos, emails, staff reports, and other information to substantiate my testimony about DLNR Land Division’s (“LD”) mismanagement of State lands. Yet, despite all of this, the Committee did not cite any of my testimony or documents in its report. My last submittal (which was in response to the draft report) included LD’s own billing invoices and ledgers that clearly showed LD had failed to bill/collect the proper base rents for the Hilo Hawaiian Hotel lease and failed to collect over $500,000 in percentage rents covering a period of 3-4 years. This response was included as an appendix to the report; however, the Committee did not even mention any of this in its report. Instead, the Committee accepted LD’s explanation that this was “an inadvertent oversight” despite documentation I submitted that shows I had given written warnings to LD administrators about this problem back in 2016. And as of January 2022, over six years later, LD had yet to address the flaws in its Hilo Hawaiian Hotel lease. Again, none of my testimony or documentation was mentioned or cited in the Committee’s report, yet DLNR’s responses (excuses) were constantly cited throughout the report. I also found it telling that the Committee’s featured witness was a former City Auditor who went so far as to call Les Kondo “the poster child for poor auditing.” That specific quote was included in the Committee’s report. Personally, I found that to be unprofessional, in poor taste, and reflecting badly on the character of the witness. And by the way, under his watch, the City failed to uncover any of the corruption that has since made news headlines, such as bribes accepted by Department of Planning and Permitting staff, the scandals involving HPD Chief of Police Kealoha and City deputy prosecutor Katherine Kealoha, the police commission’s $250,000 payout to Chief Kealoha, and federal indictments of high-ranking city officials including its corporation counsel, chief of staff, and police commission chair. With all that going on around him, I would hardly consider the former City auditor to be a credible witness to testify on sound auditing practices. This has been the Hawaii State Tax Watch Doggie. I’m playing a real person, not because anyone’s name needed to be protected but because I wanted more air time! The real person’s remarks were edited for length and clarity, and when I wanted to put in juicy stuff! As I said before, watchdogs have to watch out for each other too, When one of us gets attacked, we all suffer. A Tax Game-Changer for Nonprofits
This week again, we spotlight some legislation that has the potential to change our tax system in very bold ways. Our focus is on Senate Bill 3201, which fundamentally changes how the general excise tax (GET) applies to nonprofits. Under federal tax law, exempt organizations such as charities are still taxable on certain kinds of income, called “unrelated business taxable income“ or UBIT. The idea is that if a tax-exempt organization is conducting a business activity that competes with a for-profit organization, it should pay the same tax on that business activity as the other organization does. In contrast, our GET allows tax-exempt status to a number of organizations, including what we know of as charities, but then taxes almost anything that is considered “fund raising.” If the primary purpose of the activity is to raise money, the activity is taxable even if the money supports the charitable aims of the organization. So, under the GET, if someone buys a $100 ticket to a fundraising dinner, the charity is taxed on the $100 even though the stew and rice dinner that the ticket buys is worth $8, and everybody knows that all or most of the $100 is intended to be a donation to the charity. In both the federal and state systems, income that is importantly related to the purpose of the charity, such as tuition charged by a school, is exempt. A lot of people who help with or lead nonprofits get stuck here. Most people who have financial training know what UBIT is, so they have some idea of when federal income tax needs to be paid. Not so with “fundraising“ and the GET. That subject isn’t taught in schools, especially schools outside of Hawaii. Some people who are told the true scope of what the GET covers can’t believe what they’re hearing. That’s where SB 3201 comes in. It would change the GET law so that income of a charity’s unrelated business would be exposed to GET (as it is now) but other “fundraising” would be left alone. Bill similar to this one have been introduced in the legislature before but haven’t made it very far. This one, as of the date of this writing, has crossed over to the House and, as of this writing, has cleared two of three House committees. It shows some promise of being able to reach the finish line. If enacted, this bill would make it much easier and simpler for nonprofits to understand where tax begins and ends. This would be a big help to the nonprofits, many of which operate on a shoestring budget and can’t normally afford sophisticated financial advisors like attorneys and CPAs. But—and this may be the point the legislative committees are trying to make—the difficultly in drawing that line shouldn’t be an excuse for not doing anything about the problem. We have a social problem in that our tax system is regressive. It hits people harder when they have less of an ability to pay it. How do we address that problem in a fair and thoughtful manner, as opposed to simple-mindedly saying that we should enact more and larger taxes that really beat the heck out of those who have some money? |
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