It feels like State and Federal Legislators don’t have a Clue about what real-life Americans Face Every Day

By Sydney Sullivan

The Hawaii legislature in 2018 started off wanting to make it a “Felony” if you rented a room in your home short term without the required licensing. Most folks are all for the necessary permit and, of course, paying the taxes. But making a vacation rental violation a felony – well, that went a bit too far.

Sometimes it feels like state and federal legislators don’t have a clue about what real-life Americans face every day. Legislators have always had a paycheck, even during the 2008 meltdown. While many folks were losing their homes, banks offered sweet refinance and payoff deals to legislators all over the country. Average homeowners couldn’t get a refinance or modification from 2008 through 2012 because the banks told them to miss 3 payments to qualify for HAMP and then denied homeowners the opportunity to reinstate their loan – because they were unknowingly in DEFAULT. But during this same time legislators were given special consideration. If you doubt it – look up the housing records. Where did that elected official’s mortgage debt go or what was that new mortgage for – a refinance, maybe?

While there have been over 17 MILLION foreclosures, there’s also another 17-20 MILLION short-sales forcing people out of their homes. Behind that, just one paycheck away from poverty there are another 25 MILLION families – many of which are government employees. Multiply those numbers by 2.5 members per household and this crisis affects about 150 MILLION Americans, their friends, families, neighborhoods, and businesses.

Isn’t it amazing no politician has the guts to address this?

The reason (or one of them) lies with the pension and retirement fund deficits that plague our country because these leaders allowed pension fund investments to be lost in UNREGULATED DERIVATIVES. Why are they still UNREGULATED?

“This massive financial bubble is a ticking time bomb, and when it finally goes off, it is going to wipe out virtually every pension fund in the United States.” ~Michael Snyder, blog quoted by David B. Collum, a professor of Chemistry and Chemical Biology at Cornell University in his 2017 Year In Review – Markets fiddle while Rome burns.

Collum continues in a Pensions section:

“When are serious problems supposed to start, and what will they look like? Jim Bianco says “slowly and then suddenly.” Some would argue “now.” The Dallas Police and Firemen Pension Fund is experiencing a run on the bank. They are suing a real estate fund who slimed them out of more than $300 million and are said to be looking at $1 billion in “clawbacks” from those who got out early trying to avoid the pain. The Teamsters Central States and the United Mineworkers of America plans are failing. The New York Teamsters have spent their last penny of pension reserves. The Pension Benefit Guaranty Corporation has paid out nearly $6 billion in benefits to participants of failed pension plans (albeit at less than 50 cents on the dollar), increasing its deficit to $76 billion. CalPERS intends to cut payouts owing to low returns and inadequate contributions (during a boom, I remind you).

Looks like those self-directed IRAs aren’t working out so well either. Two-thirds of Americans don’t contribute anything to retirement. Only 4 percent of those earning below $50,000 a year maxes out their 401(k)s at the current limits. They are so screwed, but I get it: they are struggling to pay their bills. However, only 32 percent of the $100,000+ crowd maxes out the contribution. When the top 10 percent of the younger boomers have two multiples of their annual salary stashed away, you’ve got a problem. If they retired today, how long would their money last? That’s not a trick question: two years according to my math. Half the boomers have no money set aside for retirement. A survey shows that a significant majority of boomers are finding their adult children to be a financial hardship.

Boomers had money invested in real estate – their homes! However, their appraisals were inflated, the underwriting guidelines were relaxed and the bond ratings and LIBOR rates were rigged. None of those issues were the fault of the homeowner.

The blame lies with the banks and GSEs. Homeowners were scammed by a fake HAMP modification program and lost their homes (life investments) anyway.

Jobs are scarce. Baby boomers were ready to retire in 2008 and now are working at Walmart to put food on the table. How do you reorganize your life at 62? It’s not easy.

Legislators across the country cannot imagine the trauma the 2008 crash has caused (and still is). Hearing other people’s stories is not the same as living with the disease. And after say, four years – legislators become comfortable with their continuous paycheck and all the benefits and side deals they can muster up. Another good reason for Term Limits.

Getting back to the theme of the post. 

Baby Boomers and their Millennial and Generation X’ers children are struggling to survive. Numerous articles have been written on the children who have returned home. Television shows like the New Roseanne are trying to expose these issues. Limiting income and earning ability of citizen taxpayers by making it too difficult to work legally from home or rent out rooms is, at the very least, immoral and unethical reasoning.

Like it or not, Legislators tend to protect corporations over constituents. One of the real reasons behind all the vacation rental and Air B&B drama stems from the hotels and resort associations that lobby legislators to limit home run businesses. The long and hard fact about guest service businesses is that people who want vacation rentals and bed & breakfast inns are not likely to stay at a hotel or resort for obvious reasons. A typical comment:Let’s think about this logically. Not every visitor wants a vacation rental experience and they’d rather have the luxury of a fine hotel. On the other hand, there are tourists that want a cozier, more personal environment. Sometimes visitors want both. But in the long run, nearly EVERY state needs tourism (since they’ve almost all blown their state pension funds on UNREGULATED DERIVATIVES). Don’t legislators want our visitors to be happy? Don’t they want their constituents to generate enough money to make a living? Do they care?

It’s not vacation rentals that cause hotels and resorts to go bankrupt. More likely it is the over-leverage corporate Wall Street deal that laid a shakey foundation or the over-inflated local tax structure. In most cases, the advertising opportunities and rating values are viewed and rated on a level platform. As a booking guest, you can choose from hotels, resorts, and vacation rentals on the same booking site – and you can rate them as well. A large resort might have a 7.4 score and a small vacation rental might have a 9.2 score out of a possible 10. The value is in the eyes of the beholder.

Kristina Anderson, a hero from Kona, Hawaii, addressed the Hawaii legislature in her testimony against the originally proposed felony bill HB 2605, SD1:

“I rent out a modest room in my house, which has helped my small family stay in our home, pay my mortgage and expenses and crawl out of and fight off foreclosure during the recession and my divorce, which happened  simultaneously. I have the required licenses and collect and remit TAT/GE taxes, which have amounted to several thousand paid into the state coffers over the years. It’s just one income stream I have as a single mom with two children attending UH Hilo. The other two jobs are writing and teaching. Even still, it’s barely enough to make ends meet. My mortgage reset last year to a higher rate and this year will go to an even higher rate. At the age of 59, I’m getting very concerned because all my costs are going up. But my income has not. In fact, it has been steadily declining. In short, I RELY on this short term rental income. If it were banned, I would need to consider selling and moving off island after more than 26 years as a working, taxpaying resident of Hawaii.

Short term renting offers a way for me, as a person nearing retirement age, to get by in a place where it’s unimaginably difficult to make a living (I have a college degree and professional skills) and afford to own a property. Also, this year, we faced both a property tax hike and a gas pump hike by the Kim administration. A rise in GE tax is being proposed here as we speak. More cost of living increases, yet it’s now being proposed to ban our ability to rent our properties out short term?”

Not everyone wants to share their home with visitors, even though a leading Hawaii newspaper exaggerated that 1 out of 7 homes on Maui had a vacation rental. #FakeNews. The alleged facts were countered – as it was an obviously bogus report. Any political candidate on that bandwagon needs to go door-to-door and take their own poll.

Vacation rentals do NOT take affordable rental properties off the market. Anderson succinctly addresses this issue in her testimony and further adds:

” Also I believe the entire nation has a housing crisis not because of a few vacation rentals but because, from 2009 until the present, more than 15 million homeowners  nationwide lost their homes to a foreclosure crisis that still persists. These former owners are now renters flooding the market and competing with regular renters for housing. There are thousands of people in Hawaii who lost their homes to foreclosure and are now renters. And this is why we have a housing crisis in our state and elsewhere. Not because someone rents on Airbnb or VRBO!

So while it may “appear” that Airbnb rentals competes with affordable housing, correlation does not equal causation. (Just because the rooster crowing is associated with the sun rising does not mean he caused it to happen.)

Stated another way, if the state and county banned every short term rental on the island today, you would STILL have a housing crisis.” (emphasis added)

How do you reach Legislators that have become numb to the real world? Many people feel Term Limits (limiting the time elected officials can serve – just like the President and Governors) would help pump in new thoughts and experiences and pump out complacency.

Its doubtful Legislators will ever legislate limited terms as it would affect their gravy train. But the more decisions negatively impacting the average citizen could eventually find the “will” of the people ousting elected officials every four years – just on general principles.

Thank you, Kristina Anderson, for speaking up, not just for homeowners in Hawaii, but for all Americans faced with heavy-handed local and state legislation.

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