Helping those without housing and others to stay in housing is a top priority for me, so I would easily support a simple solution as appeared in the Sunday article, May 15, 2022. All of the council wants to increase the supply of homes for our residents and decrease the number of houses focused on visitors or investors.
Poor policy design can create more problems then it solves.
The action proposed at the budget hearing last Wednesday would not set in place an on-going mechanism to tax vacation rentals and redirect that funding to creating affordable housing. The newspaper reporter did not effectively communicate the nuance that the real property tax increase on transient vacation rentals proposed by Councilmember Luke Evslin in our budget hearing would only shift money in the budget to affordable housing ONE TIME, THIS YEAR.
The proposed annual tax increase of roughly $4 million would actually go into the general fund and not be earmarked for affordable housing. It requires a charter amendment on the ballot to create a special account for affordable housing from a specific tax/revenue source. The county is constantly faced with demanding chartered responsibilities, such as improving infrastructure needs and collective-bargaining commitments for our employees, etc., that in all likelihood would consume that new revenue every year rather than to distribute it to affordable housing.
The decision to raise this tax would have been proposed and passed within 30 minutes without any public awareness, very probably forcing some homes to be sold as a result, carrying this increased tax burden with the sale to the new buyer. Only people with wealth can make such a purchase, not a typical, local working family.
The tax change that is needed is an ability for the tax rate to change in the middle of a year to reflect the accurate usage for the new buyer. Because the existing tax rate follows along with a home sale, almost no TVR’s or “resident investor” home sales transfer back over to a local home buyer.
The low homestead real property tax class is not applied at the time of the sale. They have to qualify to endure the $40,000/year tax rate (or whatever tax value applies to the specific house) for the first year, which is calculated into a monthly lendable amount. In contrast, the low homestead tax rate assists the up-sale transition to TVR or residential investment homes. This policy change would do more to return houses from vacation or investment applications into residential homes.
Almost half of the TVRs are owned by local families who supplement/support their families on renting a home. Many people actually live in their homes part time, maybe many months in the year, and do not generate revenue full time. These would be the houses most likely forced into sales.
The goal of shifting housing from visitor accommodation to housing our working families is noble and worth supporting. The strategy proposed last week would not have truly resulted in that outcome. I believe it would do more harm than good. That is my reason for voting NO.
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Felicia Cowden is a Kaua‘i county councilmember.
