Musings: Rentals, Dogs and Taxes

As Kauai residents struggle to find affordable rentals, the Kauai County Council is looking at tax breaks for property owners who offer that sort of housing.

Councilman Ross Kagawa was first up with Bill 2600, which is set for a public hearing at Wednesday's Council meeting. It grants a one-time tax credit to property owners who have not raised the rent on their long-term affordable rental units. According to the bill:

The tax credit shall be equal to the difference of the maximum allowable monthly rental amount for tax years 2015 and 2016 and shall be based on the size of the unit (i.e., number of bedrooms).

The problem with Ross' bill is that it covers only with existing longterm affordable rentals, without offering property owners an incentive to convert their housing to that use. 

Councilman Gary Hooser, meanwhile, has upped the ante with draft Bill 2606, which will be introduced at Wednesday's meeting. 

It would prohibit the Council from raising property taxes on owner-occupied properties and affordable long-term rentals beyond the most recent actual cost of living increase, as reflected by the Consumer Price Index. 

Gary took to his blog to drum up support and offer his rationale for his bill:

While homeowners have an obligation to help pay for County services and while the cost of County services continue to increase, the obligation of existing homeowners should be to support only normal cost of living increases and not be forced to support additional increases in the cost and expansion of county government.

It's hard to follow the logic here, unless the Council is prepared to base property taxes on value of government services received.

Gary goes on to acknowledge that he recently voted to repeal a cap to eliminate the disparities that caps create and “'reset' the tax structure in a more equitable fashion.” But now, he says, “it is clear that a new CAP needs to be put into place again.” 

He continues:

Passage of this measure will require strong community support as the current majority will likely resist its passage and argue instead for a “comprehensive review” of the entire tax structure. Many on the Council have been saying this for the past two years, yet nothing has been done. I agree and support a comprehensive review, but in the meantime we need to CAP at a reasonable level increases to those that live in their homes and rent at affordable rates.

So why hasn't Gary proposed a comprehensive review? He's been sitting on the Council for the past two years. There was nothing to stop him from advancing a review of the tax structure. Instead, he chose to expend his time and political capital on a failed bid to eliminate the ag tax credit for land in seed production.

Meanwhile, neither tax bill deals with the underlying issues: a shortage of affordable rental units and steadily rising housing costs.

Hawaii News Now recently aired a report that pegged housing as “the biggest cost-of-living driver in the islands.” It quoted Lawrence Boyd, an economist and associate specialist with the University of Hawaii Center for Labor Education Research, as saying:

[O]utside demand is the biggest factor driving Hawaii's high housing costs. “Basically what Hawaii has become is a preferred place for the international 1 percent to buy property.”

Boyd said he thinks government should aim to stunt outside demand — and lower housing prices — by raising property taxes for non-residents and vacation rentals.

“If you engineered the exemption properly, more of these places would be rented long-term rather than as vacation rentals and because there would be an increase in that, that would lower the prices for local rentals.”

Kauai County lost a big chunk of housing to the TVR industry — both legal and illegal —especially on the North Shore. While it's happily raking in more dough from those higher property taxes, it's done nothing to address the loss of longterm affordable rentals that affects so many residents.

Hawaii News Now goes on to quote local economist Paul Brewbaker as saying:

"[T]he solution to Hawai's skyrocketing housing prices is reducing housing and development regulations to make it easier to build."

Hawaii already tried this, and we're still feeling the dismal results. Back in the early 1990s, it was standard practice to impose a 60 percent affordable housing component on any developer seeking to reclassify land into the urban designation. It wasn't long before the counties themselves started asking the state Land Use Commission to reduce that affordable housing requirement – perhaps because they were having a hard time extracting other conditions from developers.

If you continue to “reduce the cost of acquiring the entitlement,” as Brewbaker advises, who picks up the tab for all the associated infrastructure? Existing property owners? And if there's a cap for homeowners, is it borne solely by hotels and TVRs? Or just left undone?

These are the tough issues that the Kauai County Council needs to address, rather than adopt band-aid tax credits and caps that seem an awful lot like pre-election year pandering.

But they'd much prefer to spend their time on barking dogs, fireplace smoke and the other manini matters that have occupied this do-nothing Council for the past year. Because yes, the latest barking dog ordinance will be introduced on Wednesday, too.

Here's what renders that ordinance ridiculous (emphasis added):

A dog shall not be deemed a barking dog for purposes of this section if, at the time the dog is barking or making any other noise, a person is trespassing upon or traveling past private property in or upon which the dog is situated or for any other reasonable or apparent cause for the dog’s barking.

Mmmm, doesn't that pretty much include everything? Cats, pigs, loneliness, neglect, hunger, other barking dogs, boredom? Aren't those all reasonable reasons for a dog to bark? And who decides what's reasonable? A human, or a jury of the canine's peers?