HONOLULU (HawaiiNewsNow) - Hawaii has the lowest property tax rates in the country, and the Honolulu City Council is aiming to keep them that way for the upcoming fiscal year.
On the surface, that sounds good to homeowners. But could Hawaii's low property taxes actually be a bad thing?
That's what social service providers are arguing. Here's why: "Our low property taxes result in more non-residents investing in real estate, driving up prices for people who live here," said Gavin Thornton, co-director of the Hawaii Appleseed Center for Law and Economic Justice.
Roughly one fourth of all housing in the islands is owned by people who don't live here.
"That is a quarter of the housing pie that is missing for a community that's starving for affordable housing," Thornton said.
A 2015 analysis by the Tax Foundation, a Washington, D.C.-based tax policy thinktank, concluded that Hawaii's average effective property tax rate on owner-occupied housing was .28 percent, the lowest in the nation. Rounding out the bottom three were Alabama (.43 percent) and Louisiana (.51 percent).
New Jersey, by comparison, had the highest effective tax rate -- at 2.38 percent.
Service providers point out that low taxes not only make Hawaii's market more attractive to outsiders, they mean less revenue for county governments.
On Tuesday, the Honolulu City Council was locked in a budget session that for lasted hours, with department heads all asking for money. Not raising rates, onlookers say, means less money going back into the community.
"For a $1 million home here, the annual property tax is around $3,200. For a $1 million home in New Jersey, it's about $24,000," Thornton said.
But how to raise taxes without putting financial stress on local property owners?
A bill moving through the state Legislature is calling for a study to find the answer to that question.
Thornton says carefully crafted legislation is the key. The central question: "How can we increase property taxes for the non-residents, the folks that don't live here, to help discourage some of the investment from the mainland that's taking up the housing stock?"