With all of the attention that’s been given to affordable rentals on this island over the last several years, one area that’s been sorely neglected is the influence of real property taxes on rents. Having worked for the County of Hawaii Real Property Tax Office for 22 years as a real property appraiser (retired now) I benefit from a unique experience and perspective.
Of course, most people realize rents on this island have escalated tremendously in recent years. While there are a number of reasons for this including the lack of inventory and almost no new construction at the affordable level. Additionally, the onslaught of vacation rentals have tremendously drained the rental supply for local residents.
We cannot ignore the impact of the escalating real property taxes on rents. Oftentimes, as real property taxes rise the landlords will pass this increase onto the tenants in the form of increased rents. There is a land class identified as affordable rental housing which has been in existence in this county for about 10 years. The property will enjoy the benefits similar to the homeowner class. The owners have to apply for it annually. However, the qualifying rental rate is such that generally only slumlords will qualify.
The current tax rate for the residential class and the apartment class in this county is much higher than that of the other islands. Additionally, Hawaii County taxes long-term rentals and vacation rentals at the same real property tax rate. The deadline for the County Council to set the tax rates for the coming tax year is June 20. Unless the county administration is advocating an increase in the rate, this deadline will come and go with almost no notice. If the council proposes a change in the rate it must be published in two newspapers. If the council takes no action the rate remains the same as the previous year.
Two components make up the tax amount, the assessed valuation and the tax rate. Since values and assessments are rising most owners will see another increase on their next bill. The Hawaii County Council could take the initiative and adjust the rate downward. Such action could provide relief for a wide range if owners and tenants on this island.
John Totten is a resident of Kailua-Kona.