Council approves mixed-use property tax rate

LIHU‘E — To incentivize mixed-use developments, the Kaua‘i County Council has passed a bill establishing a new tax rate along with a special exemption for residential and long-term affordable units on commercial properties.

Bill No. 2795 was introduced in July by Councilmembers Mason Chock and Luke Evslin, and passed Wednesday unanimously among the members, amending the county’s real property tax code.

The bill allows commercial properties a $100,000 exemption for each residential unit in a mixed-use building and a $150,000 exemption for long-term affordable units.

The property would remain in the commercial tax bracket, which is currently taxed at $8.10 per $1,000 of assessed value.

The exemptions apply to the assessed value of the complex, with a maximum reduction of 25% for residential units and a 35% reduction for long-term, affordable rentals.

The maximum reduction is based on the difference between the residential tax rate of $6.05 and the commercialized home-use rate of $5.05 per $1,000 of assessed valuation.

The bill was worked on in partnership with the county Department of Finance and its Real Property Assessment Division.

Evslin said this bill reverses “existing inequity” in the property tax code.

“Residential units in commercial buildings are charged at commercial property tax rates, which acts as a disincentive for mixed-use construction and a contributing factor why we have no residential units in commercial buildings,” he said. “This certainly eliminates that inequity, and provides an extra incentive of being affordable.”

Chock said the bill is a “no-brainer” that incentivizes mixed-use development.

“It’s the first step, and I think there are other incentives that we can work toward to increase form-based code and some of what we talked about in our General Plan,” Chock said.

Councilmember Felicia Cowden said she was hopeful this rate will push developers toward converting vacant commercial properties and add on affordable-housing units, “especially some of these older places in historic parts of town where there’s clearly been a unit above and commercial space below.”

“I think this is a good step toward making it a little bit more feasible to utilize the properties for housing combined with commercial, or just housing without the burden of commercial (tax),” she said.

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Sabrina Bodon, public safety and government reporter, can be reached at 245-0441 or sbodon@thegardenisland.com.

1 Comments
  1. Dt September 13, 2020 6:46 am Reply

    Ideally, the county real property tax software would be updated to allow multi zones in a single property. Then each zone can be taxed at a unique rate. The county has created the situation and now should fix it properly. Creating exemptions is a bandaid on a real problem. The county taxes things in their favor (the highest tax rate to which the property is used) instead of at the property owners.

    This means that previous to this exemption a person could make a three or four story building with a 500sq foot commercial usage on the first floor with residential on floors 2-3. The commercial tax rate is applied to all floors. When I inquired about this the county said there was no way to separate out this the different uses within a single property. This is 2020, get with the program.

    Many commercial owners have a residential efficiency that they live in at the back or above their store. They are being taken advantage of. Now the county only wants to play fair if it is affordable. This will then force very small rental units with sub par quality to maximize the exemption rate. There are lots of shows on YouTube that demonstrate this in Manhattan. Where a one bedroom apartment is 150 safest and rents for $1000 a month. Commercial owners will flip this exemption back to take advantage of the county.

    Fix the software. Fix the sub-classifications of a single property. Do it right Kauai.


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