The state Senate Committee on Housing on Tuesday unanimously passed out a bill that would provide up to $50,000 for a down payment on a first-time home for Hawaii residents and expatriates to entice them back to the islands.
The bill — Senate Bill 2409 — is aimed at addressing the loss of 13,537 people who left Hawaii between 2016 and 2017, often citing the cost of living in the islands. The $50,000 would be provided as a dollar-for-dollar match.
The bill originally was written to apply to anyone who graduated from a Hawaii high school, left the state to pursue a four-year undergraduate degree and now plans to live in their first home — in Hawaii — for a minimum of two years. Those who sell their homes before two years would have to repay the state’s down payment at an annual interest rate of 8%.
“The legislature … finds that many who move out of Hawaii are often the most skilled and educated members of the workforce since those individuals have the greatest opportunity for
career choices in the mainland United States. Failure to stem this loss represents a danger to Hawaii’s economic future,” the bill states.
The “Returning resident down payment special fund” — as it was originally drafted — would rely on taxes on real estate investment trusts, which are known as REITs.
The bill was amended Tuesday to include Hawaii residents who do not own property and want to buy their first homes after the state Department of Business, Economic Development and Tourism wrote to the Housing Committee that it may be discriminatory to base a government grant
program on residency.
Also, the source for funding the housing down payments fell into doubt Tuesday after state Sen. Stanley Chang, chairman of the Housing Committee, amended the bill to remove references to REITs.
REITs own landmark island properties including Ala Moana Center, Waikele Premium Outlets and the International Market Place. Because of their structures, REITs can avoid paying Hawaii’s corporate income tax.
As originally written, SB 2409 was opposed by Ala Moana Center, Waikele Premium Outlets, Alexander &Baldwin, Public Storage and the Hawai‘i Association of Realtors, among others. Other critics of funding the special fund through taxes on REITs came from the University of Georgia and REITs based in New York and Washington, D.C.
In July, Gov. David Ige vetoed a bill that would have imposed the state’s corporate income tax on REITs.
State tax officials had estimated that taxing REITs could generate about $9 million in annual revenue, but Ige said he was concerned the tax could stifle economic development and deter investment capital.
REITs were created under federal law to allow small investors to buy into large commercial developments. Critics counter that Hawaii should require them to pay corporate income taxes on their earnings.
