House Standing Committee on Housing

Good morning. I'd like to call to order our Housing Committee Hearing for Wednesday, February 18 for our 10AM agenda. It's currently 10:07, and we are in a Conference Room 430 today. We have a relatively short agenda, so we are gonna be flying through this very fast. Some quick housekeeping notes.

We will not have a time limit on testimony today because we have such short agenda. So glad.

If you're on Zoom, please keep yourself muted and your video off. I'll wait and testify. The Zoom chat function will allow you to chat with the technical staff only.

In the event of a network failure, we might have to reschedule the meeting. In that case, an appropriate notice will be posted. Please avoid using any trademarked or copyrighted images. And please refrain from profanity or uncivil behavior. Such behavior may be grounds for removal from the hearing without the ability to rejoin.

And that said, the very first item on the agenda today is HB 1743 relating to the owner builder exemption. This bill repeat—repeals—the leasing restriction and owner builders who obtained an owner builder exemption to act as their own contractor who build or improve residential or farm buildings or structures on properties they own or lease and do not offer the buildings or structures for sale.

Requires an owner or lessee to provide signed written notice that a residential structure offered for lease or sublease was built or approved by an individual who is not a licensed contractor. Vice chair for the testimony.

Subcontractors Association of Hawaii, in opposition, on Zoom.

Yes. Mr. chairman, vice chairman. I'm Tim Lyons with the Subcontractors Association. We stand in opposition to this bill. We understand that there's a housing problem, but we believe that this measure fuels the unlicensed contractor issues, which, right now, is already a multimillion-dollar business in the state of Hawaii.

When we do surveys of our membership, the number one issue they come back with is unlicensed contractors or unfair competition. So, this particular bill, which exempts the lessee—lessee structures—from the contractor's license—the licensing law was created because there were some bad actors, and it protects consumers. There's no provision in here that includes all of the protections afforded to homeowners when they use licensed contractors, such as the requirement for a written contract, the right to repair disclosure, lien rights.

We don't think a subcontractor that works for this owner builder will probably have lien rights at all because that requires the licensed contractor.

So, they could very easily get into a situation without, without that remedy. We noticed that repayment of certain taxes are required. However, it also does not list temporary disability insurance, which is a requirement of the law, does not list prepaid healthcare insurance, which is a requirement of the law subject to eligibility.

And so, there's also no provision and can't be, I guess, for access to the contractor's recovery fund, which is a measure to help out consumers that have been wronged by unlicensed contract, which would include the exempt fees. So, with all of that in combined, we, we think it's not complete.

The statement that is offered, that they know it was built by an unlicensed contractor really is, is rather worthless, with all due respect, only because if the statement made any difference, if they cared about it being a licensed contractor, you wouldn't have a multimillion-dollar business with unlicensed contractor. So, I think, particularly, lessees are not in a good position to know this information. Construction is complicated. Most people do not hire contractors every day.

And when they get into this situation, the lack of experience or knowledge could really work against them. So, based on all of that, we are—we stand opposed to the bill. Thank you.

Thank you. We got Hawaii Realtors in support.

Thank you. We stand on our testimony in support.

Thank you. Contractors Licensing Board, in opposition.

Morning, chair and members of the committee. My name is Carrie Shahan. I'm the Executive Officer for the Contractors License Board. It has not had the opportunity to review this bill this year. They will be reviewing it on Friday at the regularly scheduled meeting.

In the past, we have opposed similar bills for many of the reasons that the subcontractors mentioned. I would note that this bill has been—the owner builder exemption has been narrowed in scope since 1974. We keep narrowing it because of the unscrupulous builders and to allow folks to, to lease out buildings that may or may not have been built by a licensed contractor is a public safety issue, and the board will most likely again oppose this bill this year. Thank you.

I'm here if you have more questions.

Thank you. Housing Hawaii's Future, in support.

We stand on our written testimony in support. Thank you.

Thank you. Grassroot Institute of Hawaii, in support.

Aloha, chair, vice chair, members of the committee. Ted Kefalas with Grassroot Institute, and we are here in support of HB 1743. I know there are some concerns that this bill could be misused to bypass contractor licensing. I, I think protecting public safety absolutely matters, but this bill does not eliminate building permits, inspections, or liability. Those protections remain fully in place.

It's also important to note that owner builders are still legally responsible for code compliance and hiring licensed subcontractors when required, and the county still enforce inspections and safety standards. So, what this measure does is it gives property owners reasonable flexibility. There's a lot of local residents that have the skills, the financial incentive, and the personal stake to responsibly manage their own projects, but the current lease restriction limits their ability to rent the homes that they actually build.

So, that, that's why we believe HB 1743 will help expand housing options and respect property rights. I also just wanna note that Hawaii is one of only seven states that restricts these owner builders, and so, we do think the timing is right to pass this. Mahalo for the opportunity to testify, and here for any questions. Thank you.

BIA Hawaii, in support, and one individual in support. Anyone online or person wishing to testify on HB 1743? Seeing none, Chair.

Members, any questions? Quick question for DCCA. Hi. Good morning. Thanks for being here.

Ted mentioned it in his testimony, but I just wanna clarify. So, if you do an owner builder permit, you still need licensed subs, electrician and plumber. Right?

Yes. You also need to hire licensed contractors to do any of the work.

Yeah.

Unfortunately, the unlicensed contractors have convinced many homeowners that that is not what the intent of the bill, and that's where a lot of the unlicensed work comes in. So, they talk to the owner builder and say, "Oh, no, you only need a contractor for electrical and plumbing."

And what if, what if a homeowner does the work themselves, but still subs out the electrical public work to license?

I am new to this position, and I would prefer to ask the board how that works. I, I believe that everything still needs to be licensed contractors, but I need to double check that. I'm...

Thank you. Appreciate it. I guess I'll ask the same question to, Mr. Lyons, if you're still here on Zoom.

Yeah. Still there.

Do you know if a homeowner with an owner builder exemption can do the work on their own and while subbing out the electrical and the plumbing work, which is—as required by law?

Sure. They, they could do the work on their own. The hang up could be, I guess, that, you know, when, when you do the work for your on, as yourself, and it's your house, I think the rationale from the legislature at the time was that if you did it wrong and it fell down, that's your fault. That's your family. But now, you're talking about somebody going into business to lease different properties, multiple properties for that matter.

And using all of that, I think it could be an issue.

Okay, and is there any way that folks are abusing, you know, with the requirement for licensed subcontractors that requires, you know, them to presumably stamp the permits? Is, is there abuse of that where people are using unlicensed subs in some capacity?

Well, a building permit is not required for everything. As an example, to re-roof a house, you do not need a building permit at all. So, the permit may—and to do flooring work, as an example, to do some minor drywall work, would not require permits. So, it—that's not really a safeguard. The issue that we, and I think it was referred to, that we hear all the time is people say, well, I use the licensed contractors.

And, oh, what was the license? And they read off a general excise tax number. They think that that is the license. Again, it's part of it is because they're not familiar with the construction process because they don't do it every day.

But if somebody is getting a building permit, that would require that a licensed plumber and a licensed electrician stamp their plans in some capacity. Is that right?

Yeah. For plumbing and electrical, that would be correct because plumbing and electrical are individually licensed. In other words, not only is the contractor license, but the individual employees also have a license. So, the bill does talk about the fact that you have that that would not be exempt plumbing and electrical. But those are the only two trades that would be and there are many others that perhaps could cause some safety issues.

Okay. Thank you, sir. Appreciate it. Members, further questions? All right.

Seeing none, next item on the agenda is HB 2122 HD1, related to teacher housing. This bill establishes a teacher housing assistance program to provide housing vouchers to certain eligible teachers and appropriates funds out of the Teachers Housing Revolving Fund vice chair for the desk work.

Office of Collective Bargaining in opposition. State Department of Education with comments... unavailable. Chamber of Commerce of Hawaii in support. Housing Hawaii's future in support.

We stand on our testimony in support. Thank you.

Thank you. HGEA, AFC, AFS CME, Local 1528, AFL CIO with comments. Democratic Party of Hawaii Education Caucus in support, and three individuals in support. Anyone online or in person wishing to testify on HB 2122 HD 1?

Members, any questions? Seeing none, next item is HD 1756, relating to the Individual Housing Account Program. This bill updates the individual housing account statute to reflect the current cost of housing down payments more accurately. Vice Chair for testimony.

Department of Taxation with comments.

Taxation stands on its comments.

Thank you.

Tax Foundation of Hawaii with comments on Zoom.

Not present.

Not present. Hawaii Realtor is in support.

Thank you. We send out our testimonies.

Thank you.

Mortgage Bankers Association of Hawaii in support. Housing Hawaii's Future in support.

Hi. Chair, vice chair, members of the committee. Good morning. I just wanna build on Housing Hawai‘i’s Future written testimony in support of both House Bill 1756. And then, the comments that I'm gonna make on House Bill 1756 are similar to the comments that I'll make on House Bill 1837, so I hope it's okay that I talk about both here.

It's not every day that you discover, or at least that we discover that there's a program in HRS that's existed for over 40 years that has not been updated for over 40 years that is designed to help residents save up to make down payments on homes. The biggest barrier a young person faces when they decide that they wanna try and purchase a home off the bat is the down payment.

The cost of a home in Hawaii is very high, and just saving up to make that down payment is a tremendous barrier unto itself. We would like to see the IHA program adapted to meet the current needs of young residents here in Hawaii. Today, we have the lowest rate of homeownership among young adults, people under the age of 35 in the entire country.

We wanna give young adults more tools so that they can purchase homes not only for themselves, but for their families. We know that a lot of young adults who could stand to utilize this program, they wouldn't just be utilizing this program for themselves. They'd probably be utilizing this program for multigenerational households.

So for that reason, we support House Bill 1756, and we'd actually like to entertain the idea of using the numbers in House Bill 1756 if you choose to move one of these measures using the figures in House Bill 1756 and putting them into the next bill on this agenda. Both bills are effectively the same.

The only difference is that House Bill 1756 has figures which are tethered to current day home prices. Right now or I'll just one last anecdote. 1982, when this program was created, the median cost of a single family home on Oahu was less than $200,000. The figures that are presently in this, which are presently in statute are reflective of those figures. So we'd like to see them adjusted for inflation. Thank you very much.

Thank you.

Office of Hawaiian Affairs in support on Zoom.

Hello, Chair Evslin, Chair Miyake, and members of the committee. Kamaile Puluole-Mitchell testified on behalf of the Office of Hawaiian Affairs. We're in support of HB 1756. We believe one of the biggest barriers, like Housing Hawaii's Future had mentioned is, to home ownership in Hawaii is saving enough for a down payment. And this individual housing accounts are proven to be a good tool for families to overcome those challenges.

Currently the IHA contribution limits were set decades ago and no longer reflect today's housing prices. So this bill updates those limits and maintains the strong safeguards needed to ensure that the funds are used for our first time owner occupied housing in Hawaii.

And it also, one thing I like to point out is it also, allows for greater tax reductions, which can help families maintain eligibility for other income based programs as they work toward this home ownership and build assets.

Overall, the IHA promotes economic, self sufficiency, asset building, and housing stability for native Hawaiians and local residents. And then for these reasons, OHA supports HB 1756. Mahalo nui.

Thank you. We also received eight individuals in support and one testimony with comments.

Anyone online or in person wishing to testify on HB 1756?

Seeing none.

Members, any questions? I have a question for Jotex. Hi. Good morning. Do you by chance have a fiscal impact?

Or a couple of things. No. Okay. Thank you. Thanks.

Members, any further questions? Seeing none next item on the agenda is HB 1837 relating to the individual housing account program. This bill does essentially the same thing as the last bill. Vice chair for the testimony.

Department of Taxation with comments.

We stand on our comments.

Thank you. Tax Foundation of Hawaii with comments. Not present. Not present. Hawaii Realtor is in support.

Thank you, Chair. We stand on our testimony in support.

Thank you.

Mortgage Bankers Association of Hawaii in support. Housing Hawaii's Future in support.

We stand on our testimony in support. Thank you.

Thank you. Office of Hawaiian Affairs in support.

Aloha. We stand on our written testimony in support.

Thank you. We received one individual testimony in support and one with comments. Anyone online or in person wishing to testify on HB 1837?

Seeing none, chair.

Members, any questions? All right, seeing none. Next item is HB 1729 related to taxation. This disallows the home mortgage interest deduction for second homes under state income tax law. Vice Chair for the testimonies.

Department of Taxation with comments. Thank you. Tax Foundation of Hawaii with comments. Not present. Hawaii Realtors in opposition?

Is that on our testimony? Thank you.

Thank you. Housing Hawaii's Future in support?

Please stand on our testimony in support. Thank you.

Thank you. We received one individual testimony in support. Anyone online or in person wishing to testify on HB 1729? Seeing none. Sure.

Members, any questions? A question for Housing Hawaii's Future? Yeah. So, the - it's interesting that the previous bills are essentially subsidizing demand at some capacity by giving people, you know, increased tax deductions for purchasing a home.

The mortgage interest deduction, this bill contemplates removing the mortgage interest deduction on second homes. Since you guys supported the first one and supported this one, could you just quickly sort of walk me through the rationale of why we should be... why from a housing perspective it is of worth limiting the mortgage interest deduction on second homes, while subsidizing maybe, you know, primary homes?

Yeah. I mean, our big worry here is stability for residents. We wanna be providing as much opportunity as possible to residents to purchase, their first home, their primary home. And right now, there's a lot of barriers facing those residents who wanna enter the market.

Folks who might have equity in a primary home if they already own a home and they're then able to purchase a secondary home, they definitely have a lot more resources than a lot of the folks who are trying to enter the housing market and purchase their first home.

So, frankly, we're just trying to level the playing field and provide those folks trying to purchase their first home with less competition, if you will.

Thank you. I appreciate it. Members, further questions? Seeing none, the last item on the agenda is HB 259, relating to real estate. This bill prohibits real estate brokers from marketing the sale of residential real estate to a limited or exclusive group of prospective buyers or brokers with limited exception.

Okay.

Considers the practice a violation of the fair practices acting grounds for discipline. Vice chair for this one.

DCCA Office of Consumer Protection with comments on Zoom.

Good morning. The Office of Consumer Protection will stand on its comments on this bill. We've offered an amendment also hoping to clarify the enforcement mechanism if the government is going to bring a civil enforcement action.

Thank you. Hawaii Realtors in support.

It's in our testimony.

Thank you. DCCA Hawaii Real Estate Commission in support.

We received seven individual testimonies in support. Anyone online or in person wishing to testify on HB 2559?

Seeing none.

Members, any questions?

I have a question for the realtors.

Good morning.

Could you walk us through why somebody might want to do a private listing?

So there are definitely certain situations where a private listing may be warranted, especially for situations of health and safety. For instance, a domestic violence situation after a recent divorce, so on and so forth. Our members have come across situations here and there where it may be warranted.

Also, sometimes celebrities or, you know, folk who don't really want people requesting a tour of their property with no intent to actually buy. So there are situations where it could be warranted.

But we do like to see a balance with of course, making sure people are adhering to fair housing, transparency, and support. So there's definitely a balance there.

Okay. And this bill, as you read it, though, would prohibit everybody, including those, you know, maybe domestic violence situations that are going through bad forces from listing privately. Right?

Yeah.

Members, further questions?

Alright, seeing none, brief recess.

Reconvening our House Housing Committee hearing for decision making. Uh, the first item on the agenda is HB 1743, relating to the owner builder exemption. I am recommending that we move this out with an HD1 with a defective date. Um I just want to note, I hear the concerns the subcontractors and from the DCCA.

Reconvening our Housing Committee Hearing for decision making. The first item on the agenda is HB 1743 relating to the owner builder exemption. I rec, I'm recommend that we move this out with an HD1 with a defective date. I just wanna note, I hear the concerns from the subcontractors and from the DCCA.

I, as a quick story, permitted a rental unit in my own home using an owner builder exemption. It was the first time that I knew that there was this prohibition on leasing for one year. There was an existing legally, I mean, existing illegal dwelling unit in my home. I wanted to make that legal. I hired a licensed contractor.

I hired licensed subs, as you have to do for this type of thing. But it was such a small amount of work to bring this thing up to code that it was easier just to get the owner builder permit. And then find out at the end of the process that I have to sign, saying I'm not gonna rent this thing for a year. It has bugged me ever since.

Since, I've become a champion for this, I've heard numerous other stories about people who are either doing this work on their own or very small jobs where they're hard to find a licensed contractor.

So, they do it on their own, and then having to sign these affidavits. And I think in a world where we have just this like dire shortage of housing in Hawaii, and we have this thicket of regulations, which has made it so hard in so many different ways. This is really small fry, but it's representative, I think, of the larger problem here. So, you know, I am hoping that we can end up maybe one day passing this into law.

But, for today, we'll be moving out as an HD 1.

Members, any questions, comments, or concerns? Yes.

Yeah. I'm sorry. I'm tardy. But fed looked through this over the weekend. I'm gonna be a WR on this one.

Okay. Thank you. Members, further questions, comments, concerns? Seeing none, Vice Chair for the vote.

Voting on HB 1743, the recommendation is to pass with amendments. Chair and Vice Chair vote aye. Representative Cochran with reservations. [Roll Call].

The recommendation is adopted.

Next on the agenda is HB 2122 HD1 related to teacher housing. I recommend that we move this bill as is. Members, questions, comments, or concerns?

Seeing none, vice chair for the vote.

Voting on HB 2122 HD1, the recommendation is to pass as is with noting every member present. Any reservations?

Any no votes?

Seeing none. Chair, the recommendations are valid.

Thank you. Next item is HB 1756, relating to the Individual Housing Account Program. I recommend that we move this out as an HD 1 with tech amendments as necessary. And I will blank out the deduction and contribution amounts and detect the date.

And I wanna note in the, in the purpose section of the bill what was brought up in testimony median housing costs have risen by more than 5x since these deduction and contribution limits went into place, yet they haven't changed over all that time.

Members any questions, comments or concerns?

Seeing none, vice chair for the vote.

Voting on HB 1756. The recommendation is to pass with amendments. Any reservations?

Any no votes.

The recommendation is adopted.

Thank you. Next time agenda is HB 1837. The Individual Housing Account Program. The previous bill was nearly identical bill, so we'll be deferring this bill.

Next on the agenda is HB 1729 relating to Taxation.

I recommend that we move this out with an HD 1 with a defective date. Members, any questions, comments or concerns?

Yes.

Chair?

This one, I, yeah, I understand what it's doing. So, the second mortgage, second home mortgage, non deductible, but your your main home: is it, like, paid for in full? Is it still the second home? You know what I mean? I'm just trying to figure out - so you have a home.

There's a second home you inherited or something to that effect. Not some offshore investing thing. But, you know, local family inherited something. Now, there's something that happened.

Now you gotta do a mortgage on that place. This will prevent you from having write-offs. I mean

Yes. Unless and, you know, there's probably a better question directed to DOTAX. I think I can answer the best of my abilities right now. Yeah. But, but, yes, unless they were to declare that as their primary residence, the the hold of the mortgage, they wouldn't write off it.

I can't yeah. Interested. Yeah.

Got it. Okay.

I know people in a really bad situation.

And that's my understanding. And maybe, you know, Finance could get clarity from DOTAX on that in a few other data. I also wanna note, I got a revenue estimate from DOTAX via email of $10 million per year that this would save in further conversations with DOTAX. It appears that maybe that's might not be accurate. So, my hope is that DOTAX, if possible, could come up with a revenue estimate by the time this goes to Finance to see what the savings are overlooking this.

Members, further questions, comments, or concerns? Seeing none, Vice Chair for the vote.

Voting on HB 1729, the recommendation is to pass with amendments. Any reservations? Reservations for Representative Muraoka. Oh, and Representative Poppin. Thank you. Any no vote? Reservations for Representative Pierick.

The recommendation is adopted.

Thank you. Next item agenda is HB 259 related to real estate.

Noting what was brought up in testimony from the realtors. I think that they're, I think this bill is trying to do an important thing. I think there's a growing trend of private listings, which are can be detrimental, especially if somebody doesn't isn't aware that their home is not being listed.

You know, publicly that said, I do think that there is value in ensuring that some people for some reason, you know, can have the ability to list their homes privately, because it sounds like there are certainly cases that warrant that.

So instead of an outright prohibition on private listings, I recommend I move this out with an HD 1 with simply a disclosure requirement for private listings to ensure that a seller is aware that the realtor is listed there property privately.

And also that, we'll be deleting Subsection B on page one. And that commitments as necessary. And a defected date.

Members, any questions, comments or concerns?

Seeing none, Vice chair the vote.

Voting on HB 2559. The recommendation is to pass with amendments. Any reservations?

Any no votes?

Recommendation is adapted.

Awesome. Thank you. It's our last hearing until after crossover. Thank you guys for being amazing committee members.

Thank you. The public for being amazing public advocates. And, thank you obviously to the staff. I do love your incredible work and all of my staff and Vice chair Miyake coming back here. We will see you guys in a few weeks.

This hearing is now adjourned.