City Council passed the following measures on the following:
Residential A tax rate increase | Homeowner's exemption amount increase | Short-term vacation rental regulations and enforcement
RESIDENTIAL A TAX RATES INCREASE
Honolulu City Council introduced and passed Resolution 19-55, which sets real property taxes for Hotel/Resort and Residential A for fiscal budget year 2019-2020. Residential A Tier 2 (after the first million) tax rate was raised to $10.50 (a $1.50 increase) per $1,000 assessed property value. Residential A tax rate applies to property owners without a home exemption. Property owners will see an increase in their July Honolulu City & County real property tax bill.
HBR opposed the Resolution 19-55 increase to Residential A. The multi-tiered rate primarily offered within the Res A property tax classification offers a break for local working families—both landlords and renters—but increasing those rates will add to their burden and the cost of rental housing.
HBR continues the fight to increase the threshold for Tier 2 from the current $1 million to $2 million and set it at multiples of the median price or to add another tier, which would allow for a graduated property tax rate above $2 million. This will require an ordinance change to the land classification before the end of 2019.
PROPERTY OWNERS RECEIVE TEMPORARY TAX RELIEF
HRB supported Bill 3 which increased the homeowner’s exemption from $80,000 to $100,000 and from $120,000 to $140,000 for homeowners over the age of 65. Homeowners continue to face net increases in their property taxes because of increasing property values, so Bill 3—which passed unanimously even after a veto by Mayor Kirk Caldwell—offers a sensible and essential solution to protecting the dream of homeownership for families on Oahu. For many kama’aina, that dream is sadly slipping by or already out of reach. While purchasing a home is a challenge for most families, keeping that home and remaining in that home continues to be a problem. Bill 3 offers the only real relief in decades.
Within weeks of overriding the Mayor’s veto, City Council introduced Bill 33, which would roll back the increase in the homeowner’s exemption that they just passed. HBR will oppose the bill if it attempts to eliminate a well-deserved tax break for local families.
SHORT-TERM VACATION RENTALS BILL PASS CITY COUNCIL
After years of debate about the challenges with short term vacation rentals including Beds and Breakfasts (BB) and Transient Vacation Units (TVU), City Council unanimously passed Bill 89 and Bill 85 to increase regulations and enforcement of the industry.
Bill 89 would allow an additional 1,715 property owners to rent out individual rooms in their residences, but not the entire home. Although this appears to be an increase in approximately 800 permits, it results in a significant decrease in the total number of short-term rentals on Oahu which is estimated at 10,000. In addition, the bill may have effectively shut down the loophole that allows illegal TVUs to rent for less than 30 days. This particular provision in the bill needs clarification due to conflicting statements made by a council member.
Bill 89 is also a first-time attempt to address enforcement issues by requiring hosting platforms such as VRBO and Expedia to remove listings that do not display a valid nonconforming use certificate on the advertisement. Fines for illegal operations start at $1,000 per day and go up to $10,000 per day for repeat violators. BB owners must have a homeowner’s exemption, are allowed only one property to operate as a BB, cannot be located within 1,000 feet of another BB or TVU, and must have a General Excise Tax and Transient Accommodations Tax license.
Although City Council passed Bill 85, an additional enforcement and penalty bill, Council Chair Ikaika Anderson and Council Member Heidi Tsuneyoshi voted in opposition after a city attorney testified about potential legal conflicts between the bills. Mayor Caldwell has already publicly expressed support for Bill 89 but has remained silent with respect to Bill 85.
HBR supported the increased regulations but highly recommended postponing the implementation date to October 2020. The B&B and TVU industries have operated for 30 years without strict enforcement. To expect property owners to become compliant by August 1, 2019 (the implementation date in the bill), is not only unreasonable, but unfair and unrealistic. Deferring the effective date for all components of the bills to October 2020 would have provided both owners and visitors to Hawaii adequate time to adjust to the new law as well as provided the Department of Planning and Permitting (DPP) enough time to anticipate enforcement. The City Council did not accept the proposed amendment offered by HBR.
Our Role
HBR believes in having housing options for everyone first - whether it’s homeownership or a long-term lease. Oahu is already short on affordable housing for its residents. When business opportunities such as vacation rentals threaten and limit the choices that local families have for a place to call home, we must advocate on their behalf and ensure that policy solutions do no harm.
REALTORS® have a responsibility to act ethically and within the law. We do not support attempts to circumvent legal processes and are committed to educating our members and the community about BB and TVU regulations to ensure they understand the implications of the legislation, should Mayor Caldwell sign it into law.
HBR members are encouraged to attend the HBR Agent Forum on July 12, 2019 specific to BBs and TVUs to learn more about the new law (Bill 89), the impact on communities island wide, and the responsibilities of REALTORS®.
