Hawaii 2022 Regular Session

Hawaii Senate Bill SR71 Compare Versions

Only one version of the bill is available at this time.

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1	1	THE SENATE S.R. NO. 71 THIRTY-FIRST LEGISLATURE, 2022 STATE OF HAWAII SENATE RESOLUTION URGING THE HAWAII HOUSING FINANCE AND DEVELOPMENT CORPORATION TO COMBAT HOSTILE AND HARMFUL ACTIONS BY PROFIT-DRIVEN INVESTORS AND AGGREGATORS participating in the state's low-income housing tax credit program.
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3	3	THE SENATE S.R. NO. 71
4	4	THIRTY-FIRST LEGISLATURE, 2022
5	5	STATE OF HAWAII
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7	7	THE SENATE
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9	9	S.R. NO.
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11	11	71
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13	13	THIRTY-FIRST LEGISLATURE, 2022
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17	17	STATE OF HAWAII
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29	29	SENATE RESOLUTION
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35	35	URGING THE HAWAII HOUSING FINANCE AND DEVELOPMENT CORPORATION TO COMBAT HOSTILE AND HARMFUL ACTIONS BY PROFIT-DRIVEN INVESTORS AND AGGREGATORS participating in the state's low-income housing tax credit program.
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43	43	WHEREAS, many nonproﬁt housing development organizations in the State and throughout the nation have a mission to keep housing affordable in perpetuity; and WHEREAS, creating affordable housing and keeping housing permanently affordable will help address the 50,000 housing unit shortage in the State; and WHEREAS, in the case of Low-Income Housing Tax Credit (LIHTC) Program projects, nonprofit developers apply for these tax credits from the State and then sell the tax credits to banks or other institutions with high tax liabilities, with proceeds from the sale of the LIHTC tax credits funding the construction or renovation of buildings; and WHEREAS, an investor who purchases LIHTC tax credits maintains some ownership in the project during a fifteen-year compliance period in which the investor receives the tax beneﬁts; and WHEREAS, a nonprofit developer may exercise the right of first refusal to purchase the entire project at the end of the fifteenyear compliance period from the investor at a minimal cost to maintain permanent affordability; and WHEREAS, however, predatory investors seeking to make a profit sell LIHTC properties at market rate after the compliance period ends, after taking advantage of the tax credit benefits received during this same period; and WHEREAS, predatory investors have been manipulating the LIHTC Program for personal profit by devising methods to hold on to the LIHTC affordable housing beyond the fifteenth year and then selling the property at market rate, thereby blocking a nonproﬁt organization's right of first refusal; and WHEREAS, by blocking the right of first refusal, predatory investors attempt to extract more profit out of affordable housing development, which is beyond what the LIHTC Program was designed to offer; and WHEREAS, predatory actors are often not the original investor partners, but rather are predatory agents called aggregators who buy up ownership interest in LIHTC projects from original investors with the expectation that they will be able to block property transfer to nonprofits at year fifteen and then sell the buildings at market rate; and WHEREAS, aggregators use a variety of tactics to block the right of first refusal of nonprofit organizations by disputing different aspects of the property transfer in lengthy and expensive court battles; and WHEREAS, disputes over project transfers drain the resources of nonprofit organizations, as resource-strapped nonproﬁt organizations do not have the capacity to fight these legal battles; and WHEREAS, protecting the right of first refusal of nonprofit organizations participating in the LIHTC Program is of critical importance, especially amid the housing and homelessness crises in the State; and WHEREAS, to maintain the integrity and intent of the LIHTC Program, which was established to help finance the development or substantial rehabilitation of affordable rental housing, it is imperative to end the predatory practice of aggregators that undermine the goals of LIHTC, take advantage of the investor interests they already hold in LIHTC projects, and systematically challenge nonprofit organizations' project transfer rights under the LIHTC Program; now, therefore, BE IT RESOLVED by the Senate of the Thirty-first Legislature of the State of Hawaii, Regular Session of 2022, that the Hawaii Housing Finance and Development Corporation is urged to combat hostile and harmful actions by profit-driven investors and aggregators participating in the State's Low-Income Housing Tax Credit Program; and BE IT FURTHER RESOLVED that the Hawaii Housing Finance and Development Corporation is urged to combat these actions by amending the 2023/2024 Qualiﬁed Application Plan for the LIHTC Program to qualify and confirm the ability of nonprofit developers to exercise their contracted right of ﬁrst refusal or purchase options; and BE IT FURTHER RESOLVED that the Hawaii Housing Finance and Development Corporation is also urged to amend LIHTC regulatory agreements to eliminate processes and tactics that prevent nonprofit organizations from exercising their right of first refusal; and BE IT FURTHER RESOLVED that Hawaii's congressional delegation is requested to work on federal legislation that strengthens the right of first refusal in LIHTC projects and addresses predatory corporations that profiteer off existing affordable LIHTC housing that was developed using public resources; and BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to each member of Hawaii's congressional delegation and Executive Director of the Hawaii Housing Finance and Development Corporation. OFFERED BY: _____________________________ Report Title: Low-Income Housing Tax Credit; HHFDC; Qualified Application Plan; Right of First Refusal
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45	45	WHEREAS, many nonproﬁt housing development organizations in the State and throughout the nation have a mission to keep housing affordable in perpetuity; and
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49	49	WHEREAS, creating affordable housing and keeping housing permanently affordable will help address the 50,000 housing unit shortage in the State; and
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53	53	WHEREAS, in the case of Low-Income Housing Tax Credit (LIHTC) Program projects, nonprofit developers apply for these tax credits from the State and then sell the tax credits to banks or other institutions with high tax liabilities, with proceeds from the sale of the LIHTC tax credits funding the construction or renovation of buildings; and
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57	57	WHEREAS, an investor who purchases LIHTC tax credits maintains some ownership in the project during a fifteen-year compliance period in which the investor receives the tax beneﬁts; and
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61	61	WHEREAS, a nonprofit developer may exercise the right of first refusal to purchase the entire project at the end of the fifteenyear compliance period from the investor at a minimal cost to maintain permanent affordability; and
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65	65	WHEREAS, however, predatory investors seeking to make a profit sell LIHTC properties at market rate after the compliance period ends, after taking advantage of the tax credit benefits received during this same period; and
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69	69	WHEREAS, predatory investors have been manipulating the LIHTC Program for personal profit by devising methods to hold on to the LIHTC affordable housing beyond the fifteenth year and then selling the property at market rate, thereby blocking a nonproﬁt organization's right of first refusal; and
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73	73	WHEREAS, by blocking the right of first refusal, predatory investors attempt to extract more profit out of affordable housing development, which is beyond what the LIHTC Program was designed to offer; and
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77	77	WHEREAS, predatory actors are often not the original investor partners, but rather are predatory agents called aggregators who buy up ownership interest in LIHTC projects from original investors with the expectation that they will be able to block property transfer to nonprofits at year fifteen and then sell the buildings at market rate; and
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81	81	WHEREAS, aggregators use a variety of tactics to block the right of first refusal of nonprofit organizations by disputing different aspects of the property transfer in lengthy and expensive court battles; and
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85	85	WHEREAS, disputes over project transfers drain the resources of nonprofit organizations, as resource-strapped nonproﬁt organizations do not have the capacity to fight these legal battles; and
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89	89	WHEREAS, protecting the right of first refusal of nonprofit organizations participating in the LIHTC Program is of critical importance, especially amid the housing and homelessness crises in the State; and
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93	93	WHEREAS, to maintain the integrity and intent of the LIHTC Program, which was established to help finance the development or substantial rehabilitation of affordable rental housing, it is imperative to end the predatory practice of aggregators that undermine the goals of LIHTC, take advantage of the investor interests they already hold in LIHTC projects, and systematically challenge nonprofit organizations' project transfer rights under the LIHTC Program; now, therefore,
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97	97	BE IT RESOLVED by the Senate of the Thirty-first Legislature of the State of Hawaii, Regular Session of 2022, that the Hawaii Housing Finance and Development Corporation is urged to combat hostile and harmful actions by profit-driven investors and aggregators participating in the State's Low-Income Housing Tax Credit Program; and
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101	101	BE IT FURTHER RESOLVED that the Hawaii Housing Finance and Development Corporation is urged to combat these actions by amending the 2023/2024 Qualiﬁed Application Plan for the LIHTC Program to qualify and confirm the ability of nonprofit developers to exercise their contracted right of ﬁrst refusal or purchase options; and
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105	105	BE IT FURTHER RESOLVED that the Hawaii Housing Finance and Development Corporation is also urged to amend LIHTC regulatory agreements to eliminate processes and tactics that prevent nonprofit organizations from exercising their right of first refusal; and
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109	109	BE IT FURTHER RESOLVED that Hawaii's congressional delegation is requested to work on federal legislation that strengthens the right of first refusal in LIHTC projects and addresses predatory corporations that profiteer off existing affordable LIHTC housing that was developed using public resources; and
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113	113	BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to each member of Hawaii's congressional delegation and Executive Director of the Hawaii Housing Finance and Development Corporation.
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121	121	OFFERED BY: _____________________________
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125	125	OFFERED BY:
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127	127	_____________________________
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133	133	Report Title:
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135	135	Low-Income Housing Tax Credit; HHFDC; Qualified Application Plan; Right of First Refusal