Report Title:

Housing

 

Description:

Makes various technical amendments to the affordable housing laws and related tax laws.  Appropriates general obligation bonds for affordable housing.  Creates an anti-speculation capital gains tax on real property.  Authorizes the counties to condition subdivision approval upon affordable housing requirements.  Authorizes the employees' retirement system to invest in affordable housing.


THE SENATE

S.B. NO.

1341

TWENTY-FIFTH LEGISLATURE, 2009

 

STATE OF HAWAII

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO HOUSING.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


     SECTION 1.  Chapter 46, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§46-    Affordable housing requirement; subdivision or building permit stage.  (a)  For the purposes of this section:

     "Affordable housing unit" means a dwelling unit, the rent or purchase price of which is affordable to a low- or moderate-income family for a minimum period, as determined by the applicable county.

     "Eligible project" means a project on a discrete parcel of land that will be developed for either of the following:

     (1)  A building for a commercial, industrial, resort, or commercial-, industrial-, or resort-emphasis mixed use; or

     (2)  A multi-family dwelling.

     "Eligible subdivision" means a subdivision or consolidation of land that will result in separate parcels zoned for residential, commercial, industrial, resort, or commercial-, industrial-, or resort-emphasis mixed use.

     (b)  Each county shall have the power to require a subdivider applying for an eligible subdivision approval to provide a certain number of affordable housing units within or outside the subdivision as a condition of the issuance of the final subdivision approval, and may:

     (1)  Impose the affordable housing requirement only upon a subdivider of an eligible subdivision that will have a minimum number of parcels specified by the county; or

     (2)  Allow a subdivider to pay the county cash in lieu of providing the required number of affordable dwelling units;

provided that any requirement imposed under this subsection shall only be imposed upon approval of the requirement by the land use commission.

     A county shall not impose an affordable housing requirement under this subsection upon a subdivider who previously has had imposed upon the subdivider or predecessor landowner an affordable housing exaction as a condition for reclassification or rezoning of the land proposed to be subdivided.

     (c)  Each county shall have the power to require a developer of an eligible project to provide a certain number of affordable housing units within or outside the project as a condition of issuance of the first building permit for the project, and may:

     (1)  Impose the affordable housing requirement only upon an eligible project that will have a minimum number of dwelling units specified by the county; or

     (2)  Allow a developer to pay the county cash in lieu of providing the required number of affordable dwelling units;

provided that any requirement imposed under this subsection shall only be imposed upon approval of the requirement by the land use commission.

     A county shall not impose an affordable housing requirement under this subsection upon a developer who previously has had imposed upon the developer or predecessor landowner an affordable housing exaction as a condition for reclassification, rezoning, or subdivision of the land upon which the project is situated.

     (d)  Any affordable housing requirement imposed by a county upon an eligible subdivision or eligible project shall have a rational nexus with the eligible subdivision or eligible project.  The county shall establish a formula for determining the affordable housing requirement to be imposed upon different types or sizes of eligible subdivisions or eligible projects.  The formula shall be established by ordinance and shall be presumed valid in any administrative or judicial proceeding unless the preponderance of the evidence shows that the county clearly abused its discretion in establishing the formula.

     (e)  A county imposing an affordable housing requirement under this section shall require the subdivider or developer to enter into an agreement binding the subdivider or developer, as well as any successor, to comply with the affordable housing requirement.  The county shall require the subdivider or developer to enter into the agreement before the issuance of the final subdivision approval or building permit.  The agreement shall be enforceable through appropriate judicial action."

     SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235-    Anti-speculation; capital gains tax.  (a)  In addition to the capital gains tax imposed under this chapter, there shall be an anti-speculation capital gains tax on the net capital gains realized by a seller of real property, less commissions, fees, and other charges, if any, related to the sale.  The tax shall be as follows:

     (1)  If the real property was held by the seller for less than six months prior to the sale, the tax shall be sixty per cent of the capital gains tax owed;

     (2)  If the real property was held by the seller for at least six months but less than twelve months prior to the sale, the tax shall be thirty per cent of the capital gains tax owed; or

     (3)  If the real property was held by the seller for at least twelve months but not more than twenty-four months, the tax shall be fifteen per cent of the capital gains tax owed.

     (b)  This section shall not apply to:

     (1)  Real property sold to provide affordable rental housing for a period of not less than ten years to a resident earning less than one hundred forty per cent of the median Hawaii income, as determined by the department;

     (2)  A principal residence sold by reason of a change in place of employment, health, or unforeseen circumstances, as exempted under section 121(c)(2) of the Internal Revenue Code; or

     (3)  Amounts realized from properties that are involuntarily converted (destroyed, stolen, seized, requisitioned, or condemned), as exempted under section 1033 of the Internal Revenue Code.

     (c)  The sale of unimproved real property shall be subject to taxation under this section, unless otherwise prohibited under this section.

     (d)  The tax realized pursuant to this section shall be deposited into an escrow account to be forwarded to the department.  The department shall deposit all such tax realizations into the rental housing trust fund under section 201H-202.

     (e)  This section shall not apply to properties that qualify the seller for a county homeowner's exemption or to military personnel selling property as a result of military relocation orders."

     SECTION 3.  Section 88-119, Hawaii Revised Statutes, is amended to read as follows:

     "§88-119  Investments.  Investments may be made in:

     (1)  Real estate loans and mortgages.  Obligations (as defined in section 431:6-101) of any of the following classes:

         (A)  Obligations secured by mortgages of nonprofit corporations desiring to build multirental units (ten units or more) subject to control of the government for occupancy by families displaced as a result of government action;

         (B)  Obligations secured by mortgages insured by the Federal Housing Administration;

         (C)  Obligations for the repayment of home loans made under the Servicemen's Readjustment Act of 1944 or under Title II of the National Housing Act;

         (D)  Other obligations secured by first mortgages on unencumbered improved real estate owned in fee simple; provided that the amount of the obligation at the time investment is made therein shall not exceed eighty per cent of the value of the real estate and improvements mortgaged to secure it, and except that the amount of the obligation at the time investment is made therein may exceed eighty per cent but no more than ninety per cent of the value of the real estate and improvements mortgaged to secure it; provided further that the obligation is insured or guaranteed against default or loss under a mortgage insurance policy issued by a casualty insurance company licensed to do business in the State.  The coverage provided by the insurer shall be sufficient to reduce the system's exposure to not more than eighty per cent of the value of the real estate and improvements mortgaged to secure it.  The insurance coverage shall remain in force until the principal amount of the obligation is reduced to eighty per cent of the market value of the real estate and improvements mortgaged to secure it, at which time the coverage shall be subject to cancellation solely at the option of the board.  Real estate shall not be deemed to be encumbered within the meaning of this subparagraph by reason of the existence of any of the restrictions, charges, or claims described in section 431:6-308;

         (E)  Other obligations secured by first mortgages of leasehold interests in improved real estate; provided that:

              (i)  Each leasehold interest at the time shall have a current term extending at least two years beyond the stated maturity of the obligation it secures; and

             (ii)  The amount of the obligation at the time investment is made therein shall not exceed eighty per cent of the value of the respective leasehold interest and improvements, and except that the amount of the obligation at the time investment is made therein may exceed eighty per cent but no more than ninety per cent of the value of the leasehold interest and improvements mortgaged to secure it;

              provided further that the obligation is insured or guaranteed against default or loss under a mortgage insurance policy issued by a casualty insurance company licensed to do business in the State.  The coverage provided by the insurer shall be sufficient to reduce the system's exposure to not more than eighty per cent of the value of the leasehold interest and improvements mortgaged to secure it.  The insurance coverage shall remain in force until the principal amount of the obligation is reduced to eighty per cent of the market value of the leasehold interest and improvements mortgaged to secure it, at which time the coverage shall be subject to cancellation solely at the option of the board;

         (F)  Obligations for the repayment of home loans guaranteed by the department of Hawaiian home lands pursuant to section 214(b) of the Hawaiian Homes Commission Act, 1920; and

         (G)  Obligations secured by second mortgages on improved real estate for which the mortgagor procures a second mortgage on the improved real estate for the purpose of acquiring the leaseholder's fee simple interest in the improved real estate; provided that any prior mortgage shall not contain provisions that might jeopardize the security position of the retirement system or the borrower's ability to repay the mortgage loan.

          The board may retain the real estate, including leasehold interests therein, as it may acquire by foreclosure of mortgages or in enforcement of security, or as may be conveyed to it in satisfaction of debts previously contracted; provided that all the real estate, other than leasehold interests, shall be sold within five years after acquiring the same, subject to extension by the governor for additional periods not exceeding five years each, and that all the leasehold interests shall be sold within one year after acquiring the same, subject to extension by the governor for additional periods not exceeding one year each;

     (2)  Government obligations, etc.  Obligations of any of the following classes:

         (A)  Obligations issued or guaranteed as to principal and interest by the United States or by any state thereof or by any municipal or political subdivision or school district of any of the foregoing; provided that principal of and interest on the obligations are payable in currency of the United States; or sovereign debt instruments issued by agencies of, or guaranteed by foreign governments;

         (B)  Revenue bonds, whether or not permitted by any other provision hereof, of the State or any municipal or political subdivision thereof, including the board of water supply of the city and county of Honolulu, and street or improvement district bonds of any district or project in the State; and

         (C)  Obligations issued or guaranteed by any federal home loan bank, including consolidated federal home loan bank obligations, the Home Owner's Loan Corporation, the Federal National Mortgage Association, or the Small Business Administration;

     (3)  Corporate obligations.  Below investment grade or nonrated debt instruments, foreign or domestic, in accordance with investment guidelines adopted by the board;

     (4)  Preferred and common stocks.  Shares of preferred or common stock of any corporation created or existing under the laws of the United States or of any state or district thereof or of any country;

     (5)  Obligations eligible by law for purchase in the open market by federal reserve banks;

     (6)  Obligations issued or guaranteed by the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, or the African Development Bank;

     (7)  Obligations secured by collateral consisting of any of the securities or stock listed above and worth at the time the investment is made at least fifteen per cent more than the amount of the respective obligations;

     (8)  Insurance company obligations.  Contracts and agreements supplemental thereto providing for participation in one or more accounts of a life insurance company authorized to do business in Hawaii, including its separate accounts, and whether the investments allocated thereto are comprised of stocks or other securities or of real or personal property or interests therein;

     (9)  Interests in real property.  Interests in improved or productive real property in which, in the informed opinion of the board, it is prudent to invest funds of the system.  For purposes of this paragraph, "real property" includes any property treated as real property either by local law or for federal income tax purposes.  Investments in improved or productive real property may be made directly or through pooled funds, including common or collective trust funds of banks and trust companies, group or unit trusts, limited partnerships, limited liability companies, investment trusts, title-holding corporations recognized under section 501(c) of the Internal Revenue Code of 1986, as amended, similar entities that would protect the system's interest, and other pooled funds invested on behalf of the system by investment managers retained by the system;

    (10)  Other securities and futures contracts.  Securities and futures contracts in which in the informed opinion of the board, it is prudent to invest funds of the system, including currency, interest rate, bond, and stock index futures contracts and options on the contracts to hedge against anticipated changes in currencies, interest rates, and bond and stock prices that might otherwise have an adverse effect upon the value of the system's securities portfolios; covered put and call options on securities; and stock; whether or not the securities, stock, futures contracts, or options on futures are expressly authorized by or qualify under the foregoing paragraphs, and notwithstanding any limitation of any of the foregoing paragraphs (including paragraph (4)); [and]

    (11)  Private placements.  Investments in institutional blind pool limited partnerships, limited liability companies, or direct investments that make private debt and equity investments in privately held companies, including but not limited to investments in Hawaii high technology businesses or venture capital investments that, in the informed opinion of the board, are appropriate to invest funds of the system.  In evaluating venture capital investments, the board shall consider, among other things, the impact an investment may have on job creation in Hawaii and on the state economy.  The board shall report annually to the legislature on any Hawaii venture capital investments it has made; provided that if the board determines it is not prudent to invest in any Hawaii venture capital investments the board shall report the rationale for the decision.  The board, by January 1, 2008, shall develop criteria to determine the amount of funds that may be prudently invested in Hawaii private placement investments[.]; and

    (12)  Affordable housing development projects."

     SECTION 4.  Section 201H-202, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  The following may be deposited into the fund: appropriations made by the legislature, private contributions, moneys derived from the anti-speculation capital gains taxes under section 235-  , repayment of loans, interest, other returns, and moneys from other sources."

     SECTION 5.  Section 235-51, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

     "(f)  [If] Except as provided under section 235-   , if a taxpayer has a net capital gain for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:

     (1)  The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

         (A)  The taxable income reduced by the amount of net capital gain, or

         (B)  The amount of taxable income taxed at a rate below 7.25 per cent, plus

     (2)  A tax of 7.25 per cent of the amount of taxable income in excess of the amount determined under paragraph (1).

     This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986."

     SECTION 6.  Section 235-110.8, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

     "(e)  As provided in section 42(e), rehabilitation expenditures shall be treated as separate new building and their treatment under this section shall be the same as in section 42(e).

     The definitions and special rules relating to credit period in section 42(f) and the definitions and special rules in section 42(i) shall be operative for the purposes of this section[.]; provided that in the case of any qualified low-income housing project placed in service beginning on January 1, 2009, the term "credit period" in section 42(f)(1) of the Internal Revenue Code shall be deemed to mean with respect to any building, the period of five taxable years beginning with:

     (1)  The taxable year in which the building is placed in service; or

     (2)  At the election of the taxpayer, the succeeding taxable year; provided that the election, once made, shall be irrevocable,

but only if the building is a qualified low-income building as of the close of the first year of the period."

     SECTION 7.  Section 247-2, Hawaii Revised Statutes, is amended to read as follows:

     "§247-2  Basis and rate of tax.  The tax imposed by section 247-1 shall be based on the actual and full consideration (whether cash or otherwise, including any promise, act, forbearance, property interest, value, gain, advantage, benefit, or profit), paid or to be paid for all transfers or conveyance of realty or any interest therein, that shall include any liens or encumbrances thereon at the time of sale, lease, sublease, assignment, transfer, or conveyance, and shall be at the following rates:

     (1)  Except as provided in paragraph (2):

         (A)  Ten cents per $100 for properties with a value of less than $600,000;

         (B)  Twenty cents per $100 for properties with a value of at least $600,000, but less than $1,000,000; and

         (C)  Thirty cents per $100 for properties with a value of $1,000,000 or greater; and

     (2)  For the sale of a condominium or [single family] single-family residence for which the purchaser is ineligible for a county homeowner's exemption on property tax:

         (A)  Fifteen cents per $100 for properties with a value of less than $600,000;

         (B)  Twenty-five cents per $100 for properties with a value of at least $600,000, but less than $1,000,000; and

         (C)  [Thirty-five cents] Seventy cents per $100 for properties with a value of $1,000,000 or greater,

of such actual and full consideration; provided that in the case of a lease or sublease, this chapter shall apply only to a lease or sublease whose full unexpired term is for a period of five years or more, and in those cases, including (where appropriate) those cases where the lease has been extended or amended, the tax in this chapter shall be based on the cash value of the lease rentals discounted to [present day] present-day value and capitalized at the rate of six per cent, plus the actual and full consideration paid or to be paid for any and all improvements, if any, that shall include on-site as well as off-site improvements, applicable to the leased premises; and provided further that the tax imposed for each transaction shall be not less than $1."

     SECTION 8.  Section 247-7, Hawaii Revised Statutes, is amended to read as follows:

     "§247-7  Disposition of taxes.  All taxes collected under this chapter shall be paid into the state treasury to the credit of the general fund of the State, to be used and expended for the purposes for which the general fund was created and exists by law; provided that of the taxes collected each fiscal year:

     (1)  Ten per cent shall be paid into the land conservation fund established pursuant to section 173A-5;

     (2)  [Thirty] Fifty per cent shall be paid into the rental housing trust fund established by section 201H-202; and

     (3)  Twenty-five per cent shall be paid into the natural area reserve fund established by section 195-9; provided that the funds paid into the natural area reserve fund shall be annually disbursed by the department of land and natural resources in the following priority:

         (A)  To natural area partnership and forest stewardship programs after joint consultation with the forest stewardship committee and the natural area reserves system commission;

         (B)  Projects undertaken in accordance with watershed management plans pursuant to section 171-58 or watershed management plans negotiated with private landowners, and management of the natural area reserves system pursuant to section 195-3; and

         (C)  The youth conservation corps established under chapter 193."

     SECTION 9.  The director of finance is authorized to issue general obligation bonds in the sum of $25,000,000 or so much thereof as may be necessary and the same sum or so much thereof as may be necessary is appropriated for fiscal year 2009-2010 to be deposited into the rental housing trust fund.

     SECTION 10.  There is appropriated out of the rental housing trust fund the sum of $25,000,000 or so much thereof as may be necessary for fiscal year 2009-2010 and the same sum or so much thereof as may be necessary for fiscal year 2010-2011 for the planning, development, and construction of affordable housing in cooperation with private and nonprofit developers.

     The sums appropriated shall be expended by the housing finance and development corporation for the purposes of this Act.

     SECTION 11.  The director of finance is authorized to issue general obligation bonds in the sum of $50,000,000 or so much thereof as may be necessary and the same sum or so much thereof as may be necessary is appropriated for fiscal year 2009-2010 for deposit into the dwelling unit revolving fund.

     SECTION 12.  There is appropriated out of the dwelling unit revolving fund the sum of $           or so much thereof as may be necessary for fiscal year 2009-2010 and the same sum or so much thereof as may be necessary for fiscal year 2010-2011 for housing development programs.

     The sums appropriated shall be expended by the Hawaii housing finance and development corporation for the purposes of this Act.

     SECTION 13.  There is appropriated out of the general revenues of the State of Hawaii the sum of $500,000 or so much thereof as may be necessary for fiscal year 2009-2010 and the same sum or so much thereof as may be necessary for fiscal year 2010-2011 to assist developers in contracting for third party review and certification, including but not limited to, inspections, discretionary permits, and ministerial permits, and to expedite the development of affordable homes.

     The sums appropriated shall be expended by the Hawaii housing finance and development corporation for the purposes of this Act.

     SECTION 14.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

     SECTION 15.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 16.  This Act shall take effect on July 1, 2009; provided that sections 2, 4, 5, and 6 shall apply to taxable years beginning after December 31, 2008.

 

INTRODUCED BY:

_____________________________