Overview:
Palau lawmakers are debating a proposal to dedicate 2% of unrestricted local government revenue to housing programs as more than 300 people wait for low-interest housing loans. While supporters say the funding is needed to address the housing crisis, senators are raising concerns about long-term costs, tax exemptions and accountability.
By Eoghan Olkeriil Ngirudelsang
NGERULMUD, Palau — “Although this bill is not perfect, let’s not deviate from its intent and the need to find additional funding for Palau housing,” Sen. Tabelual said Tuesday, as lawmakers debated a proposal to dedicate 2% of unrestricted local government revenue to housing programs.
Senate Bill No. 12-87 would require the National Treasury, beginning at the end of fiscal year 2027, to deposit 2% of unrestricted local revenue collections into a dedicated Palau Housing Authority Housing Development Fund.
The proposal aims to expand funding for affordable housing and assistance for residents who cannot afford to build, buy or repair their homes. However, senators raised questions about the long-term cost of the allocation, the amount of money the authority could manage and provisions involving tax exemptions for imported building materials.
The bill identifies nine areas eligible for funding: construction of affordable housing; low-interest loans to rehabilitate existing homes; housing assistance for low-income families; assistance for elderly residents and people with disabilities; site development and utility infrastructure for housing projects; disaster recovery housing; climate-resilient housing; and administration of housing programs.
Sen. Tellames said more than 300 people are on the Palau Housing Authority’s waiting list for low-interest loans to build or rehabilitate their homes.
Sen. Melairei said the authority has a long list of people seeking assistance but continues to provide little or no help to many of them. He described the proposal as “a good start,” while acknowledging that some provisions could be improved.
Tabelual said the measure should remain focused on finding additional funding for people in urgent need of housing, even if lawmakers still need to refine its provisions.
Sen. Kuartei said he supports the bill’s intent but questioned whether the proposed 2% allocation should be capped. He said the amount could become substantial over time as the economy grows.
Debate over import tax exemption
Another point of debate involved the authority’s ability to import construction materials without paying import taxes.
The bill cites a 2023 legal opinion by Attorney General Ernestine Rengiil and a subsequent opinion from Senate legal counsel stating that the Palau Housing Authority is exempt from import taxes on building materials for housing projects. The opinions also indicate that the authority should use the exemption to help bring affordable housing materials into Palau.
Some senators questioned whether the exemption creates a loophole in the law that should be corrected.
Sen. Whipps argued that the authority does not have the capacity to import or store construction materials and should focus on providing funding for housing projects instead.
The debate highlighted questions about how Palau can expand housing assistance while ensuring that public funds and existing tax exemptions are used effectively.
Annual reporting requirements
The bill would also require the Palau Housing Authority to submit a comprehensive report on the fund’s use by Jan. 31 each year.
The report would cover 11 categories of information, including the number of elderly residents and people with disabilities receiving assistance, the number and types of housing loans issued, and the interest rates charged.
During the session, Melairei requested that the authority submit the report quarterly instead of annually to align with reporting timelines used by other government agencies.
Senate Bill No. 12-87 passed its first reading Tuesday. Lawmakers will continue considering how to provide additional housing support while addressing concerns about the proposed revenue allocation, accountability requirements and the authority’s role in delivering housing assistance.
