New property tax class would incentivize long-term rentals

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Hawaii County Committee on Finance on Dec. 5, 2023.

Dec. 5, 2023
9:30 a.m.

To: Matt Kaneali’i-Kleinfelder, Chair
Cindy Evans, Vice-Chair
Hawaii County Council, Committee on Finance

From: Jonathan Helton
Policy Researcher, Grassroot Institute of Hawaii

Comments on Bill 104

Aloha Chair Kaneali’i-Kleinfelder, Vice-Chair Evans and Committee members,

Thank you for considering Bill 104, which would create a new real property tax classification specifically for long-term rental properties that do not currently fall into the “Affordable rental housing” classification. These properties would presumably move out of the existing residential class into this new class.

As the Grassroot Institute of Hawaii pointed out in its April 2023 policy brief “How Hawaii’s county lawmakers can provide tax relief to offset higher property assessments,” renters and landlords also should receive property tax relief.[1]

The report stated: “Many lower- and middle-income individuals and families are not directly responsible for paying property taxes because they do not own homes. However, they often foot the bill for property tax increases in the form of higher rent.”[2]

As is the practice of Maui County, this proposed new tax class would provide long-term rentals their own classification, tax rates and a $200,000 exemption that operates similar to a homeowner’s exemption.

Creating a new tax class with the goal of incentivizing long-term rentals is a good strategy to address rental affordability — presuming, of course, that the tax rates set for this class are kept at a low level. However, any positive results from this change would be undermined if it were accompanied by tax hikes for other groups. Therefore, we would encourage the Council to not increase tax rates on other property classes to pay for the tax break afforded by this new class.

Thank you for the opportunity to testify.

Jonathan Helton
Policy researcher
Grassroot Institute of Hawaii

[1] Jonathan Helton, “How Hawaii’s county lawmakers can provide tax relief to offset higher property assessments,” Grassroot Institute of Hawaii, April 2023, p. 12.
[2] Ibid, p. 12.

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