Oahu property tax break part of a statewide trend
The main objection to an owner-occupant rate is a conflicting wish to help renters
Mayor Mufi Hannemann's proposal for a separate property tax rate for Oahu residents who own and live in their homes is already enjoyed by neighbor island residents.
They are part of an arsenal of tax breaks aimed at residents who have seen their property values -- and taxes -- jump dramatically in recent years.
"That's the biggest concern -- that if the taxes are too high, I've got to sell -- and so the homeowner classification lets the owner-occupant get the best tax benefit," said Wesley Takai, Hawaii County Real Property Tax administrator.
"I think the focus for the county of Maui over the last several administrations has been to identify specific property classes in which we target property tax relief to county residents, and that's the value of this homeowner class," said Maui Finance Director Kalbert Young. "I believe the residents on Maui are appreciative of the tax benefit."
A separate tax classification enables county officials to set a lower tax rate for owner-occupants. On the neighbor islands, homeowners who live in their homes enjoy the lowest rate. And neighbor island tax officials say that is just one of the tools they employ to help their residents:
» Maui County now has a hefty $300,000 exemption on property value and the lowest tax rate in the state, $2.50 per $1,000 in value for owner-occupants.
» The Big Island limits property assessment increases to 3 percent each year.
» Kauai caps property tax increases at 2 percent annually.
» Additional tax assistance is available for lower-income homeowners.
And there is growing sentiment that more needs to be done to help renters who do not make enough to buy a home, but also have seen their rents soar along with property values.
"Renters are the people who are really getting hurt, and they are the lowest on the income ladder," said Tony Fisher, vice chairman of the citizen group Committee for More Equitable Taxation, which will again push for a Proposition 13-like approach on Maui to cap climbing assessments, an idea that could also help renters.
The potentially adverse impact that a homeowner classification could have on renters is the main reason the Honolulu City Council failed last year to approve Hannemann's homeowner classification.
Currently, Honolulu's tax rate of $3.59 per $1,000 in valuation for residential properties is the same for single-family homes and apartments whether or not they are occupied by their owners. That rate was reduced by 16 cents last year.
Some councilmembers feared that lowering the tax rate for owner-occupants would shift the tax burden to residential properties inhabited by renters.
In trying to address Council concerns, Hannemann expects to propose tax breaks aimed at rental properties.
Yet, some argue that there is no guarantee the tax break given to landlords will trickle down to renters.
"I also believe that renters can be helped in a different way," Hannemann told reporters this past week. "I think we're going back to the drawing board with our people to come up with some real creative ideas to help renters, and I would expect the Council to try to do the same, because last year, that was one of the major hang-ups with this homeowner classification. I think we all realize we've got to help property owners and certainly renters in that regard."
Kauai Deputy Finance Director Belma Baris said Kauai currently has a program called the Long Term Affordable Rental Relief Program, aimed at keeping rents affordable by giving landlords a tax break if they keep their rents at certain levels.
The Big Island also allows homeowners who live in their homes to rent out rooms without losing the low homeowner rate, Takai said.
Honolulu Council Budget Chairman Todd Apo said he is looking forward to seeing the mayor's proposals, but he needs to be convinced that the goals of the homeowner classification cannot be accomplished some other way.
"Protect people who live in their homes, and help those who need the most help," he said.
Apo said there would be a move this year at the Council to raise the homeowner exemption, currently $80,000 for most homeowners and $120,000 for those 65 and older.
Apo said he was still drafting a bill that would shift the tax burden from residential property owners, who have assumed more of the tax burden in recent years due to higher residential property values. He will also be looking to reduce taxes through savings in the budget.
"It may not necessarily be cuts. It may be controlling the growth of expenditures," Apo said. "We're going to focus on what the surplus amounts to, funded and unfilled positions, expenses. I think there are ways without downsizing or making cuts."
Helping renters might not be an easy task, he said.
"We clearly have concerns on rentals. I haven't heard a lot of support for rent control, but maybe looking for the dedication so that the property stays within the rental market," Apo said. "It's a much more difficult situation to figure out."