Mayor Mufi Hannemann's latest effort to establish a separate “;homeowner”; class tax rate for residents who live in their properties took a step forward yesterday, but still faces an uphill battle in the City Council.

Among the key opponents of the measure is City Council Chairman Todd Apo, who argues that it could lead to fewer available rental properties and, in turn, higher rent.

“;Fewer people are going to invest in those (rental) properties because they have a higher tax burden,”; Apo said. “;The long-term effect of that is going to be a lower supply, and therefore, a push up in rental prices.”;

He said the separate homeowner class amounted to mere “;political niceness.”;

“;It sounds great to your homeowners that are voters,”; he said. “;When you have this homeowner classification—your voters—their rates never go up and everything else gets borne by the residential (rental) properties.”;

City Budget Director Rix Maurer III said the homeowner classification is aimed at separating tax rates for owner-occupants versus non-resident owners such as speculators, investors and vacation home owners.

The neighbor islands have had the separate class since at least 1994.

Maurer said the city does not expect rental rates to increase, but the administration is prepared to work on legislation to provide renters with a tax credit if they do.

Apo said the city already has ways to give owner-occupants a break, such as the homeowner's tax exemption and a property tax credit for true homeowners.

“;That's worked for us for years,”; he said.

The proposal, Bill 51, passed out of the Budget Committee by a 3-2 vote, with Apo and Councilman Charles Djou voting in opposition. It faces two more votes by the full Council before going to the mayor for consideration.

A similar proposal by Hannemann failed in 2006.

Budget Chairman Nestor Garcia said he wanted to advance Bill 51 to keep discussion alive and hopefully receive more feedback from the general public.