While Hawaii rents have soared, a tax credit for low-income renters has stagnated for a quarter-century at $50 annually per dependent.
The legislative session that begins Wednesday will see an effort to raise the credit and extend it to renters who earn up to $60,000.
Honolulu’s current fair market rent exceeds $1,800 a month for a two-bedroom apartment, so these days the credit does little to help families and individuals struggling with the high cost of housing.
“Given the cost of living increases and so forth, it probably makes sense to adjust the amount if we’re still going to have the credit,” said Tom Yamachika, president of the Tax Foundation of Hawaii. “The amount in that current law is not meaningful.”
Brothers Katin and Dayten Tilton enjoy a morning bike ride in their cul-de-sac off of Booth Road in Pauoa Valley in 2014.
Cory Lum/Civil Beat
When the renters tax credit was created in 1977, it was set at $20 annually per dependent. But rents were far lower. The 1980 Census estimated the median rent at just $311.
The Honolulu Advertiser ran the news of the tax relief on May 1, 1977, next to an advertisement that carried an $85,325 price tag for a two-bedroom home in Makiki complete with a tennis court, swimming pool and two covered parking stalls.
Last year, Honolulu’s median home price surpassed $700,000. A single parking stall in Waikiki can sell for as much as $100,000.
Another Try at Increasing the Credit
Jenny Lee, an attorney at the Hawaii Appleseed Center for Law and Economic Justice, is urging lawmakers to bump up the tax credit to $150 per person in a qualifying household and raise the income limit from $30,000 to $60,000.
That would open the door for an additional 100,000 residents to claim the tax credit, including service workers and some state and county employees.
It’s unclear whether lawmakers will embrace the idea. The state paid $4.3 million to compensate more than 41,000 taxpayers who claimed the credit in 2012, the latest year for which data was available. Lee estimates her proposal could add another $23 million to that price tag.
“It’s hard convincing people to pay attention to the problems of low-income folks,” Lee said. “When I go in to lobby, we don’t represent a powerful or wealthy interest, just the opposite.”
A headline in the May 1, 1977, edition of the Honolulu Advertiser referred to the credit as “modest” at its creation. On the same page, a two-bedroom home in Makiki was advertised for $85,325.
Last year, the House and Senate both approved an omnibus bill that would have boosted the renters tax credit, as well as other credits intended to help low-income people. But the measure died in a conference committee led by Rep. Sylvia Luke and now-Gov. David Ige, who chaired the House and Senate money committees.
Neither responded to requests to comment for this story.
Sen. Suzanne Chun Oakland, who leads the Senate Housing and Human Services Committee, surmises that fiscal concerns might have doomed the bill. She plans to advocate again for raising the renters tax credit as part of a larger effort to ease the burden of housing costs in Hawaii.
Sen. Sam Slom, the only Republican in the Hawaii Senate, argues that rather than raising credits for some people, the state should simply decrease taxes for everyone.
The renters tax credit, he said, “has not been a solution.”
Should Credits Go to Developers Instead?
There may be more effective ways to address today’s high rents, said Megan Bolton, research director at the National Low Income Housing Coalition. State tax credits that go directly to renters, she said, are not as common as providing credits to developers to help them build more low-income housing.
“I think part of it is, too often people just don’t know about that type of program and refund,” Bolton said of the renters tax credit. “So I think there’s a feeling that if you go the other route you may be more effective in actually reaching low-income households.”
She also noted that voucher programs like Section 8, a federally funded program supplementing rent costs for certain low-income households, provide ongoing support and may be more useful than a one-time tax refund.
Still, Chun Oakland said the renters tax credit is useful because it provides immediate relief. Building more housing takes time, and the state needs to add thousands more units to its housing stock to keep up with the need.
More than a fourth of renters in Hawaii spend at least half of their income on housing, according to the Center for Housing Policy. A fifth of homeowners are in the same boat, but many are eligible for federal tax breaks such as the mortgage interest deduction, which nationwide saves homeowners $70 billion a year.
When Three Jobs Aren’t Enough
The 43 percent of Hawaii residents who rent are not so lucky. They include Joleen Kibas, a 28-year-old who rents a two-bedroom apartment with her husband and two sons on Liliha Street.
Originally from the Marshall Islands, Kibas has lived in Hawaii since the age of 3 and works as a caregiver. Even though her husband works two jobs as a parking attendant and a carpenter’s assistant, it’s a struggle to afford the high cost of groceries, child care and health care for their sons, ages 5 and 1.
“We’re not with them when they’re awake in the daytime,” said Kibas, who adds a bigger tax refund could help offset the expenses that make it hard for her and her husband to spend time with their kids.
Lee from Appleseed Center sees raising and extending the tax credit as a quick way to help Kibas and many residents like her.
“Our reasoning is that this is the most efficient, straightforward way to help people right now,” Lee said. “Because the situation has really gotten desperate.”
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