Hawaii bill would boost rental tax credit fourfold

A Senate bill recently approved for recommendation in two Senate committees could not only quadruple proposed tax credits for low-income renters in Hawaii, but could also expand eligibility requirements across Hawaii amid the state’s housing crisis.

The Senate Ways and Means Committee – the Senate’s committee on tax-writing – showed unanimous support to recommend SB55 on Tuesday this week after the Housing Committee approved minor revisions during a second reading during their public hearing meeting, where testimony was heard on the bill late last month.

SB55 as cleared by the Senate committees would change the tax credit structure for low-income renters in the Aloha State. The bill proposes the adoption of income brackets to determine eligibility for the tax credit based on a person's, or married couple's, adjusted gross income.

Under the proposed brackets, individuals renters who earn less than $20,000 (and couples earning $40,000 or less) may be eligible to receive up to $200 in tax credits, which would be four times the current amount for the credit of $50.

The proposed credit brackets also extend eligibility to individual renters whose adjusted gross income is $40,000 or less or $60,000 for individuals who are considered "head of household" per IRS guidelines. Additionally, seniors aged 65 and older would be able to double their credit allowance, potentially maximizing it to $400.

Current legislation on the tax credit, which the bill drafted by HB55 by Democratic Senator Karl Rhoads of District 13 notes, was last updated 1989 and caps the income threshold at $30,000 for those renting in Hawaii.

The proposed legislation also includes increasing the frequency the state will determine tax credit increases for low-income renters starting in 2025.

“Renters in Hawaii spend over forty percent of their income on rent, which means Hawaii is the only state in the country where the average renter is cost-burdened according to the United State Department of Housing and Urban Development,” House Committee Chair and Senator Stanley Chang writes of the committee’s measure. “The low-income renters' tax credit provides a small amount of relief so that low-income families are more able to budget and pay for essential items and necessities.”

Advancement of HB55 to the Senate floor follows weeks of testimony during public Housing Committee meetings from state and community leaders and organizations showing support for HB55 with the current amendments. Leaders from the Office of Hawaiian Affairs, Hawai‘i YIMBY, Catholic Charities Hawai‘i, Americans for Democratic Action Hawai‘i, Hawai‘i Alliance for Community-Based Economic Development, League of Women Voters of Hawaii, Hawai‘i Children's Action Network Speaks!, Hawai‘i Health & Harm Reduction Center, as well as several Hawaiian residents presented and wrote support for passing the bill.

Nicole Woo, director of research and economic policy of the Hawaii Children Action Network, shared her testimonial support of HB55 by stating that the bill “rightly updates the renters’ credit to recover ground lost to decades of inflation.”

“This is especially helpful to families with children,” Woo added in her written support of HB55. “For example, a single mom with two children who earns $35,000 per year is not eligible for the current renters' credit, due to her income being above the outdated eligibility limit. If this bill were to become law, she would be able to claim $150 per exemption – or $450 for her family.”

HB55 is just one of many current legislation in both the House and Senate looking for solutions for affordable housing in Hawaii.

Democratic Governor Josh Green, who set housing as a top priority for 2023, also has proposed legislation and budgeting solutions to combat the housing crisis, dubbed the “Green Affordability Plan” as part of this year’s proposed governor package. Green has previously proposed spending of nearly $1 billion to add affordable housing options to the state.

“Hawaii’s housing crisis has reached a state of emergency,” Green states on the official Governor’s website. “It’s an issue that impacts us all in some way, touching almost every other major challenge we face as a state. It affects our ability to deal with urgent issues like homelessness, the cost of living, education, access to healthcare, workforce shortages, Native Hawaiian concerns, economic inequality, and more.”

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