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The Honolulu Advertiser
Posted on: Thursday, May 11, 2006

Spike in rents prompts mayor to push tax cuts

By Kevin Dayton
Advertiser Big Island Bureau

HILO, Hawai'i Alarmed at the recent spike in rents and the shrinking pool of affordable rentals, Big Island Mayor Harry Kim is proposing a cut in property tax rates for landlords and tax incentives for affordable rentals.

The administration's budget proposal for fiscal year 2007 estimates that soaring real estate values would boost property tax collections from about $149 million this year to $207 million next year at current tax rates. His rate cuts would pare those revenues to about $182 million.

That is still a record-breaking tax take, and the administration plans to spend the extra money on new hires, a $4 million "rainy day" budget reserve fund and $3 million in land acquisitions for public access and preservation.

Kim wants the Hawai'i County Council to reduce tax rates for most types of property owners, with most of the steepest reductions of 11 percent to 18 percent aimed at the apartment, residential and agricultural classifications that cover rental properties.

No rate reduction is planned for owner-occupants because tax relief was approved for them last year, according to Kim's budget message.

The mayor said about 1,800 people drive two hours each way to work in West Hawai'i, many of them because they can't find affordable housing in the Kona area. Rents also are increasing rapidly in the traditionally affordable Hilo and Puna rental markets.

"You don't need to be hit by a two-by-four to know there is a housing crisis here," Kim said. "It's as obvious as reading the classified ads, or as obvious as talking to anyone in the housing agency."

County Finance Director William Takaba said the administration is drafting a proposal that would allow landlords with affordable rentals to be taxed on those rentals at the lowest rate, currently reserved for owner-occupants.

"Rents are going up overall, but we don't want property taxes to be the reason why increases are made to rents," Takaba said.

Jan Mahuna, owner of Jan Mahuna Realty, applauded the tax relief proposals. Mahuna manages about 100 rental units in Hilo and Puna, and said the primary cost increase for landlords in recent years has been rising property taxes.

Landlords will naturally try to pass that expense on to their tenants if they can, Mahuna said.

"It is the right time to cut property taxes on rental properties," she said.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com.