Renters’ Credit

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One of the main drivers of our high cost of living is housing costs. Currently, a worker in Hawai?i needs to earn more than $60,000 per year to afford a two-bedroom apartment. Even if a minimum wage worker were somehow able to devote 100% of their earnings toward housing (i.e., not spending any money on food, ultilities, etc.), they still wouldn’t be able to afford a market-rate apartment.

The Low-Income Household Renters Credit was created in 1977 to provide meaningful tax relief to low- and moderate-income households in Hawai?i. However, it has not been updated in nearly three decades. In 1981, the LIHRC was set to $50 per exemption. The income eligibility cut off was set to $30,000 in 1989, which was just above the median household income at the time. Neither of those levels have budged since then.

72% percent of people in Hawai?i living at or near the poverty line now spend more than half of their incomes on rent, and more than half of Hawai?i’s renters are cost-burdened, spending more than 30% of their income on rent.

The Erosive Power of Inflation

The current value of the Renters Credit came into effect in tax year 1981, and the current eligibility cutoff (i.e., the amount a household can make and still receive the credit) took effect in tax year 1989. Presently, a qualified filer with a Hawai‘i Adjusted Gross Income (AGI) under $30,000 who has spent at least $1,000 on rent can receive a refundable tax credit of $50 per qualified exemption.

The current Renters Credit is worth less than 40 percent of its original value based on inflation alone. This adjustment does not take into account the dramatic increase in rent over the last few decades. Average rents in Hawai‘i increased by 45 percent from 2005 to 2012, more than twice the rate of inflation during just that seven-year period.

Catching Up to Inflation

If the Renters Credit amount and income eligibility cutoff were adjusted for inflation, tax filers with a federal AGI of $59,700 would receive $146 per exemption credit. Updating the Hawai‘i Department of Taxation’s most recent estimates, if adjusted, the Renters Credit would benefit roughly 83,000 households and put an additional $11.2 million into the pockets of Hawai?i’s low- and moderate-income families.

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Renters in Hawai‘i face a staggering housing cost burden. In a February 2016 survey of Hawai?i residents, 95% of people polled said that the housing costs in the state make it difficult for families to live a quality life. Approximately 43 percent of our households rent, the highest rate in the nation. More than half of them are cost-burdened, meaning that they pay more than 30 percent of their income toward rent (the standard definition of housing affordability).This is no surprise, as the fair market rent for a two-bedroom unit in Hawai‘i is $1,644 per month. A full-time worker would need to earn $31.61 per hour for this rent to be affordable — the highest housing wage in the nation. Yet, the mean wage for a renter is just $14.49. At this wage a family needs 2.2 full-time jobs to afford rent. Average rents in Hawai‘i increased by 45 percent from 2005 to 2012, more than twice the rate of inflation during that seven-year period.

The lowest-income households face a crushing cost burden: 72 percent are paying more than half of their income in rent. Even moderate income households struggle 65 percent of households earning 51–80% of the area median income face a housing cost burden. These households are generally ineligible for public assistance. These housing cost burdens leave families with precious little left over to make ends meet, let alone build assets or save for a down payment on a home.

In addition, the tax system in Hawai?i places extreme burdens on renters in the state, as renters don’t benefit from mortgage interest or property tax deductions, but still pay their landlords’ GET and property taxes in the form of higher rents.

Despite the acute need for affordable housing, the shortfall only continues to grow. A total of 64,000 housing units is estimated to be needed by 2020 to meet pent-up and future projected demand. Of these units, 23 percent must be rentals for households earning less than 80 percent of the area median income. The increasing scarcity of affordable housing means this number will likely continue to rise. Meanwhile, almost no affordable market units are being produced.

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Even though renters do not own the property they reside in, they are affected by both county property taxes and the state general excise tax. Owners pay landlords pass these costs along to tenants. However, renters don’t benefit from the property tax home exemption granted to owner-occupied residences. The Renters Credit would provide some tax equity to renters who functionally pay their landlords property taxes and the GET without the benefits of home ownership.

In 2013, the last year for which data are available, the Renters Credit provided about $4 million in tax relief to low-income filers. Bringing the number closer to inflation as measured by the Consumer Price Index would benefit roughly 83,000 households and put an additional $11 million into the pockets of Hawai?i’s low and moderate-income families.

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Lawmakers OK Millions To Build Housing But Deny Renters Tax Relief Honolulu Civil Beat

Hawaii state lawmakers have agreed to set aside nearly $62 million of this year’s budget to subsidize the construction of rental housing units and $35 million to repair aging public housing units. But Sen. Jill Tokuda and Rep. Sylvia Luke, who lead each chamber’s money committees, said they don’t plan to hold a hearing for a proposal to increase a tax credit for renters, even though Hawaii renters are among the most cost-burdened in the nation.

The Conversation: Thursday, April 28th, 2016 Hawaii Public Radio

Advocates for more help for low income renters tried again this year to increase the housing credit. And up until the ten days ago that looked pretty good. But following the appointment of conferees to duke out the differences between the House and Senate versions of the bill, nothing happened. No conference committee hearing was scheduled and now time is running out. Final decking ends tomorrow. Victor Geminiani is one of 11 nonprofit leaders and advocates supporting the bill and who wrote to lawmakers earlier this week asking for HB2166 to be scheduled.

Adjusting low-income renters credit long overdue Honolulu Star-Advertiser

The Legislature has an opportunity to make a real difference in the lives of our low- and moderate-income renters throughout the islands.

Hawai’i Non-Profit Leaders and Advocates Urge Lawmakers to Move Low-Income Renters Tax Credit Bill Hawaii Appleseed

In a letter sent yesterday, eleven prominent non-profit leaders and advocates called on all Hawai’i state lawmakers to push a measure that would update the Low Income Renters Housing Credit, HB 2166, through the legislature’s conference process this week. “By updating the credit, HB 2166 is a modest but effective step toward addressing our affordable housing crisis, reducing homelessness, and improving the inequity of our tax structure,” they write in the letter. “It will not only keep more money in the pockets of our most economically challenged, but will help create a fairer, more just Hawai?i.”

Report: Hawaii’s economic recovery hasn’t helped state’s poorest Hawaii News Now

On the surface, Hawaii’s economy looks like it’s rebounded from the Great Recession. Construction and tourism are up, unemployment is low, and the housing market is booming. But dig a little deeper, a new report argues, and you’ll find a state where many working families are still struggling to get by – and, in some cases, are worse off than they were before the economic downturn.

Addressing Tax Credits For Low Income Renters Honolulu Civil Beat

Public conversations about tax policy are usually focused on tax rates. We are accustomed to thinking about tax policy as little more than a means for the government to raise revenues. This is unfortunate because these discussions too often overlook the important ways that we use tax policy to promote other state policy priorities.

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Tax & Economic Fairness Report

2013 Tax Report

State of Poverty Report

State of Poverty 2016[/vc_column_text][/vc_column][/vc_row]