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Bill would protect exemption for long-term rental owners

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Hawaii County Finance Committee on June 18, 2024.
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June 18, 2024, 1 p.m.
Hawai‘i County Building

To: Hawai‘i County Finance Committee
      Matt Kaneali’i-Kleinfelder, Chair
      Cindy Evans, Vice-Chair

From: Grassroot Institute of Hawaii
           Jonathan Helton, Policy Researcher

RE: BILL 174 — RELATING TO 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 support for Bill 174, draft 1, which would modify eligibility for the county’s homeowner property tax exemption by allowing homeowners to rent out portions of their property without having to enroll in the affordable rental class.

Right now, homeowners renting backyard cottages or portions of their homes are technically ineligible for the county’s homeowner exemption unless they are participating in the affordable rental tax class, which entails renting at affordable rates as defined by the county code.

The homeowner exemption reduces the taxable value of owner-occupied homes by between $50,000 and $150,000 dollars. It also enrolls the owners in a program that prevents their assessed values from increasing by more than 3% each year, and gives them the lowest tax rate in the county, which for fiscal 2025 is $5.95 per $1,000 of assessed value.[1]

We are unaware of homeowners losing their exemptions on the grounds that they were renting a portion of their property, but island homeowners should not have to worry that this could happen to them.

If it were to happen, the effect would be to double or triple their tax bills, amounting to thousands of dollars, since they would lose their assessment caps and more than likely move into the county’s residential tax class, which carries rates of $11.10 per $1,000 of assessed value for the first $2 million of the property’s value, and a rate of $13.60 on any portion of the property valued above $2 million.

We thank the Council for hearing this straightforward measure — which, by the way, would complement Bill 104, draft 5, also being considered by the Council. That bill would establish a long-term rental property tax class that could make it more attractive for property owners to provide long-term rentals.

Thank you for the opportunity to testify.

Jonathan Helton
Policy Researcher
Grassroot Institute of Hawaii
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[1]Hawaii County Council follows through on proposal to cut homeowner taxes,” Grassroot Institute of Hawaii, June 9, 2024.

 

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