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Tax cuts could hurt Hawaii housing - Honolulu, Hawaii news, sports & weather - KITV Channel 4

Tax cuts could hurt Hawaii housing

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    Republican leaders reach an agreement over tax reform. 
   The call for sweeping changes could impact how much you pay at tax time, along with how much money is available for affordable housing in Hawaii.   

    GOP Lawmakers on Capitol Hill said they agreed to a bill that would cut taxes for businesses and individuals.

"Everybody's going to get some tax relief and that's needed right now," said Ohio Senator Rob Portman.

The bill would also repeal or reduce some current tax benefits.
Republicans haven't released exact details of their approved plan yet.
But if private activity bonds are cut, like they were in earlier versions, Hawaii's affordable housing projects would suffer.

"In Hawaii, if there are no private activity bonds and no 4% credit, that will have a devastating impact," said Elizabeth Char, a development officer for the Michaels Development Company.

Developers using the bonds are eligible for a 4% tax credit, which can really add up when projects costs tens of millions of dollars.

Char has seen growing interest for affordable housing in the islands, including her company's latest effort: a rental project in Kailua-Kona.

"There were 800 people on our waiting list for 85 units. That just goes to show you the level of need for affordable housing and that level will increase," added Char. 

Hawaii has nearly 5,000 affordable housing units being planned or under development which would be at risk of stalling without private activity bonds financing.

The cuts were such a concern, the head of the state's Housing Finance and Development Corporation went to Washington earlier this month to let lawmakers know how much the reductions would hurt Hawaii.

Affordable housing development could even take a one-two punch from tax reform. Which is expected to drop the corporate tax rate from 35% to 21%, which in turn would lower the need for businesses to buy back tax credits offered by developers.

"If their tax liability is reduced, they don't have as much need for tax credits," stated Char.

Projects would end up being more costly, but developers can't charge more because "affordable" rents are set by the federal government. So developers may instead decide not to build affordable housing in the future.

"Not only does it make the project more expensive, it makes the project virtually impossible to go forward," added Char.

. The measure still needs to pass the U.S. House and Senate, where a vote is expected next week.  
 

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