HomeMy WebLinkAboutCOM 0600.041 2022-2024 P/Fc
oil! ((xi
CAMM.on
r (s-, 1050 Bishop St. #50
l 11 Honolulu, F-1I 96812;
808-864-1776
tI (pre. ois info`tJrassrootinstitutP,orcl.
- ' Removing harriers to Hawaii's prosperity
June 18, 2024, 1 p.m.
Hawai'i County Building a 1
To: Hawaii County Finance Committee
Matt Kaneali'i-Kleinfelder, Chair
Cindy Evans,Vice-Chair72
r-t
From:Grassroot Institute of Hawaii
Jonathan Helton, Policy Researcher 4 -.
RE: BILL 104— RELATING TO THE CREATION OF A LONG-TERM RENTAL CLASS FOR REAL PROPERTY TAXES
Aloha Chair Kaneali'i-Kleinfelder,Vice-Chair Evans and other Committee members,
The Grassroot Institute of Hawaii would like to offer its comments on — and a proposed amendment to — Bill
104, draft 5, which would create a new real property tax class specifically for long-term rental properties that
do not currently fall into the "affordable rental housing" class.
To qualify for the new class, a property would have to be leased for at least six consecutive months and
occupied for at least 12 months by the same tenants.
Properties moving into the new class would presumably move out of the existing residential class — provided
no property in the residential class valued at$2 million or more would be eligible to move, according to the
bill.
Finally, the bill would set the rate of the long-term rental class at 130%of the rate of the homeowner class for
the first year of its existence.At current rates,this would entail a tax levy of$7.74 per$1,000 in assessed value
for the new class.
We appreciate the intent of the bill. Using the property tax to incentivize property owners to rent long-term is
a good goal that could help with the county's housing shortage. For example, an $800,000 property moving
from the residential class to the long-term rental class could save about$2,700 a year.
1050 Bishop St.#508 i Honolulu,HI 96813 l 808-864-1776 I info@grassrootinstituRgr' N ,
Ref.To: �G
1 Ref. Date JUN 8 2024
We would caution the Council, however, against increasing tax rates on other classes to pay for whatever
revenue loss could come about as a result of this bill — especially in the near term.
A higher tax rate on the residential class, for example, could unintentionally penalize long-term rental owners
who did not know about the new class or who did not file for it because of special lease circumstances that
could make compliance difficult.
As to our suggested amendment,we urge the Council to update the bill to make mixed-use buildings eligible
for the new exemption.Anyone leasing a unit in a building with commercial uses in Hilo or Kailua-Kona would
not be able to benefit from this new exemption.
This is an approach that has been replicated elsewhere. Maui County's code states: "If a portion of the
premises is used for commercial purposes, such portion of the premises will not be entitled to an exemption,
but will be entitled to an exemption with respect to the portion thereof used exclusively as a long-term
rental."'
The Council could easily designate this language as part 5(C) of Section 4 of this bill.
Further, if the Council advances this measure,we suggest that it pass Bill 174 concurrently.That bill would
protect homeowners who rent a room or a backyard cottage at market rates from losing their homeowner
exemptions as a result.
Under Bill 104, homeowners who rent portions of their properties long-term would face higher taxes if they
applied for the long-term rental class, which would clearly run counter Bill 174's goal of encouraging long-term
rentals. So to minimize confusion, please consider passing the bills at the same time.
Thank you for the opportunity to testify.
Jonathan Helton
Policy Researcher
Grassroot Institute of Hawaii
1 Maui County Code,3.48.466-Long-term rentals—standards for valuation accessed Dec. 14,2023.
1050 Bishop St.#508 1 Honolulu,HI 96813 1808-864-1776 I info@grassrootinstitute.org
2