STAND. COM. REP. NO. 2040

Honolulu, Hawaii

RE: S.B. No. 2757

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

Sir:

Your Committee on Housing, to which was referred S.B. No. 2757 entitled:

"A BILL FOR AN ACT RELATING TO HOUSING,"

begs leave to report as follows:

The purpose and intent of this measure is to:

(1) Extend to June 30, 2026, the certification requirements for exemption from the general excise tax for certain affordable rental housing projects; and

(2) Amend the certification requirements for exemption from the general excise tax for those affordable rental housing projects by:

(A) Applying the exemption to only newly constructed affordable rental housing projects;

(B) Repealing the per annum cap of $7,000,000 for contracting costs; and

(C) Conditioning certification upon the project owners not refusing to lease units in the projects to qualified applicants because they hold a voucher or certificate of eligibility under the Section 8 Housing Choice Voucher Program.

Your Committee received testimony in support of this measure from the Office of the Governor; Department of Business, Economic Development, and Tourism; Department of Taxation; Hawaii Housing Finance and Development Corporation; Hawaii Public Housing Authority; League of Women Voters of Hawaii; Hawaii Regional Council of Carpenters; Hawai‘i Construction Alliance; Pacific Resource Partnership; and Helping Hands Hawai‘i. Your Committee received comments on this measure from the Tax Foundation of Hawaii.

Your Committee finds that the Special Action Team on Affordable Rental Housing has determined that additional incentives are needed to spur rental housing development to meet housing demands. Under existing law, the Hawaii Housing Finance and Development Corporation is authorized to certify that a housing project is entitled to an exemption from the general excise tax. Only after receiving this certification can a taxpayer claim the tax exemption. This measure provides incentives for developers to immediately start their housing developments to take advantage of the exemption from the general excise tax before the exemption sunsets. Furthermore, by requiring project owners to accept section 8 Housing Choice Vouchers as a condition of certification, this measure will increase the use of the Section 8 program statewide.

Your Committee has amended this measure by:

(1) Adopting the language suggested by the Hawai‘i Construction Alliance that clarifies that the exemption applies to approved or certified projects developed by a person or firm to provide affordable rental housing through new construction or substantial rehabilitation, to ensure that substantial rehabilitation projects, rather than only newly constructed projects, are included within the program; and

(2) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2757, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2757, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Housing,

________________________________

WILL ESPERO, Chair