Council Reverses Course on Higher Taxes for Ohana Housing
Forget about it.
That’s essentially what the Honolulu City Council said last week when it voted to repeal a separate tax rate meant to hit mainland and foreign property owners harder than locals.
The subject captured headlines this spring as then-Mayor Mufi Hannemann and the council looked for ways to make up a budget deficit.
The council voted 7-1 to return to a single residential tax rate for all property owners, with Donovan Dela Cruz opposed and Ikaika Anderson abstaining.
Mayor Peter Carlisle now has until Oct. 28 to decide what do to with , an “ordinance to replace ‘homeowner’ and ‘non-homeowner’ real property tax classifications with the ‘residential’ real property tax classification.”
The separate category for non-homeowners was created in 2009, with the passage of . Hannemann it was a way to distinguish between those who actually live in their homes and those typically from the mainland who use homes for speculation or as vacation properties. The three other Hawaii counties have the same category.
If Carlisle goes along with the council, he’ll be giving up $9 million in revenue. A spokesman for Carlisle said he hasn’t reached an opinion.
The problem with the classification, Council Chair Todd Apo told Civil Beat, was that instead of only targeting the intended mainland investors, the new rate instead burdened local residents who live in “ohana” style housing.
Often in Hawaii, owners who have more than one property on their land lease space to relatives. But the “non-homeowner” classification deemed that if even one building was being used as a rental (as is often the case with multi-family properties), the entire parcel of land would fall into the “non-homeowner” category.
The tax rate for a “non-homeowner” was increased in June to $3.58 per $1,000 of assessed value, 16 cents higher than the “homeowner” rate of $3.42.
In May, Civil Beat reported that there were some 5,300 properties in the county occupied by homeowners that would fall into this “non-homeowner” classification.
According to Apo, the burden on “ohana” housing was too much to justify maintaining the classification rates.
“I don’t think anybody believed it was a good tool,” said Apo. “It wasn’t used well and so it was better to go back and take it away and, you know, have a fair way of taxing residential property.”
Apo told Civil Beat that targeting mainland investors and vacation homeowners was “not what that tool did because it also included all the rental properties which are residential.”
So, the council voted to repeal, merging the “homeowner” and “non-homeowner” classifications into the single category, “residential.”
Councilman Nestor Garcia acknowledged that his vote will result in Honolulu having a hole in its budget.
Apo says he doesn’t know how the city will make up the lost money and that much will depend on how Carlisle plans on managing the finances of Honolulu.
“The mayor is coming in and talking about making a lot of cuts so we’re going to have to see what those are,” Apo said.
The “non-homeowner” rate will still apply for this fiscal year but, pending Carlisle’s decision, will be removed from the 2012 fiscal year budget.
