The Honolulu City Council Budget Committee advanced a bill Tuesday to try and make an unused affordable housing program more attractive to landlords.
Currently, landlords who dedicate their properties as affordable rentals for those making up to 80% of the annual median income for at least five years can receive a lower residential property tax rate.
However, in the last 10 years that the law has been in effect, no landlord has utilized the incentive, likely because the savings are not enough to offset the profit of renting at market rate.
Councilmember Esther Kiaʻāina introduced the measure that would bump the allowed annual median income for renters up to 100%.
“So I felt that … by trying to increase the AMI, we might get some takers,” she said. “Not only would it help the homeowner, but it would also increase our inventory for rentals for local families.”
The program limits the amount the landlord could charge based on maximum rents for an income threshold set by the Honolulu Department of Planning and Permitting.
For example, the maximum a landlord could charge for a 100% AMI one-bedroom apartment is $2,850 a month, including utilities. However, the bill does not require the renter to actually make 100% of the annual median income, Department of Budget and Fiscal Services Director Andy Kawano explained.
“The renter can make any income. The guidelines at 100% AMI limit the rent to be charged to the renter,” he said.
The cost savings for landlords can be significant, depending on the property’s value.
Property taxes in Honolulu work on a tiered system. The lower, residential tax rate is $3.50 per $1,000 of assessed value. That’s for those who live and own their property — owner-occupants.
For landlords, the first $1.3 million of assessed value is taxed at $4 per $1,000. Any value above $1.3 million is taxed at $11.40 per $1,000.
Those who participate in the five-year affordable dedication program will get the lower $3.50 tax rate.
Although Kawano supported the measure, he advised that adjustments lowering property tax revenue, which is the main funding source for the city, should be watched carefully.
The measure passed out of the budget committee and will next be heard by the full council.
