Re: Federal Expenditures

Jerry Okamura wrote:
"Islander" <nospam@xxxxxxxxxxx> wrote in message news:Xcadne32O685d5TZRVn-jQ@xxxxxxxxxxxxxxxxx

Jerry Okamura wrote:


We are experiencing an example of this locally and I believe that your islands are as well. We are experiencing an influx of wealthy people who are driving up the price of real estate to the point that even middle income families cannot afford to purchase a home. There are no longer any homes available for less than $200K and the median price of a home is now $475K. Real estate prices have doubled in just 3 years. The result is that we are having difficulty filling critical skill jobs needed to support the basic island infrastructure. These same people scream bloody murder at any hint of increasing taxes so that we can pay sufficiently high salaries to attract and retain the workers that we need. Unlike most communities commuting from less expensive areas is not possible. We know that we are losing our younger families--there are fewer here today than 15 years ago while the overall population has grown by 50%. Here, the gap is enormous. Average salaries are $26K/yr while over 1/4 of total family income is in just 1.9% of our population. We live in a wonderful place, but as the population ages we are beginning to see problems emerging. Lowering taxes won't solve the problem and in our case would make it worse.


Okay, let me try to tackle the basis of your argument. Homes become unaffordable when the spread between the price of that home and the wealth of the average Joe becomes too wide. There is relatively nothing you can do that could effectively lower the cost of a home, because the biggest cost element is the land... other than perhaps free up more land. That of course won't work either because no landowner is going to put up their land for sale for less than they can get on the open market. I suppose one argument that could be made is if the government bought the land, and sold it for far less than they bought the land for... The cost of building the home itself, has not changed substantially over time. So, what can we do about those basic facts. Well, since you cannot do a whole lot about the cost part of the equation, the only part that you can do something about is the wealth of the individuals, so they can afford to buy that home. It does not help the individual to be able to buy that home, when the government takes a good chunk of what they earn to spend on their pet projects. As I understand it, the government takes about 40 cents of every dollar that a person earns away from them. I am sure, that if the government did not take such a big chunk of a persons earnings, more people would be able to afford to buy that home. As for your comment that people are screaming bloddy murder at any hint of increasing increasing taxes so we can pay higher salaries, that does not make any sense at all. As for your comment that we are losing our young families, that is what happens when we have a society puts a very high price on raising a family. When people think the risk outweigh the advantages, then they will tend not to want to take the risk. I do not know what island you are talking about, but if you are talking about Hawaii, income is relatively low here in Hawaii, because our main industry is tourism. A good number of the jobs that are needed to feed that industry are not going to be the high paying jobs...they will mostly be the lower paying jobs...

There are basically three approaches that have had some success in solving the problem, community land trusts (now over 200 in the USA),


I found a web site that describes what a community land trust is, since I had never heard of it before. The part that caught my attention was the part that said, "Community land trusts typically acquire and hold land, but sell off any residential or commercial buildings which are on the land." That is basically what the large land owners in Hawaii did, they never sold the land, they leased that land, but you owned the building the land was on. That whole idea which does help, has been widely unpopular in Hawaii. The reason is very simple, people want to own the land, because when you own the land, no one can change the rules on you.

Land trusts are not new, but community land trusts have gained in popularity over the last 20 years. In our case, a 198 year lease is granted to the homeowner and that lease is assumable by the purchaser if the property is sold. Coupling this with indexing assures that the home is affordable to someone in a similar job in perpetuity. This is basically better than renting since the homeowner accumulates equity by paying off the mortgage and his investment is protected against inflation. It is not attractive to homeowners who want to speculate on real estate, but that is the compromise.


sweat equity approaches such as that used by Habitat for Humanity,


I can see nothing wrong with what Habitat for Hunaity does, but they are not going to put a dent into the housing problem...

They actually do a pretty good job, but sweat equity often is not enough to make a difference -- at most 40% of the cost of the structure.

and

workforce housing approaches that have emerged in the last few years. All work by removing some element of the cost, either by donation of time or money, by taxing in some fashion to subsidize housing, or by financing by local businesses or public services to assure housing for their employees. When the gap becomes too large, a combination of approaches are needed and in our case public support in the form of a tax is now unavoidable. In addition, the most successful programs index resale prices (gasp) to assure that the community investment is protected against the rapid inflation of real estate prices.


What you have listed is not going to solve the problem, it won't even put a significant dent into the problem

I think you are wrong, but time will tell. The alternative is not acceptable.

The typical arguments are that reducing taxes or increasing salaries will solve the problem. They don't once the gap becomes too large. For us, the problem is most severe for skilled workers in the service sector. This sector is approximately 9% of our workforce and is essential to maintain the infrastructure. Most of their salaries cannot be increased without increasing taxes. Lowering taxes makes the problem worse. Across the whole workforce, in order to raise salaries high enough to make a difference the cost of nearly everything increases and everyone suffers, most especially seniors living on fixed income.


You mean the governemt service sector don't you? So, the ones who are impacted the most are those people who work for the government, is that your argument?


No. Many of them are employees of the government, but some work for organizations that rely on government contracts or grants to support their work. You probably consider that to be the same thing. The service sector typically relies more on specialized skills than private businesses here, but even they are beginning to have a problem attracting and retaining a workforce. Try to find a plumber or electrician, for example. One might think that supply and demand would solve the problem in the private sector at least, but it is not. Some of the very wealthy are providing homes for people who provide them with services or fly service technicians in when needed. Makes for very expensive service calls!
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