Mayor Mufi Hannemann wants to revive a year-old proposal to give homeowner-occupants a tax break, and says his Neighbor Island counterparts have convinced him that the tax structure could work on O'ahu.

Hannemann met with the mayors of Kaua'i, Maui and the Big Island on Wednesday to discuss property taxes and other issues. The three counties already have special tax classifications for homeowners who live in their properties.

But critics worry that instituting an owner-occupant break on O'ahu would translate into higher taxes for landlords, which would likely be passed on to renters. They also say homeowner-occupants in multimillion-dollar homes would disproportionately benefit from the classification.

"For example, if we decide all of the owner-occupants are going to get a 5 percent break, then someone who's paying $500 (in property taxes) is going to save $25, where someone who's paying $5,000 is going to save $250," said Todd Apo, incoming chairman of the City Council Budget Committee.

Ann Kobayashi, who will vacate the Budget Committee chair in the new year, says the council had significant doubts last year that a homeowner-occupant break would do more good than harm. "It's kind of a touchy thing," she said.

"We want to make sure the renter benefits."

Hannemann said yesterday the homeowner-occupant tax break is about dissuading property speculators and helping working families make ends meet.

"You can't look at this as a means of solving the affordable-housing crisis," Hannemann said, adding that other incentives could be passed to help renters.

O'ahu homeowners who live in their properties appear mixed about the proposal. Some applaud it, while others fear its effects on renters.

"I think it should be fair for everybody," said Norman Duncan, who lives in a Waikiki condominium and also rents out an apartment at the Waikiki Banyan.

Duncan said the real issue is property assessments are much too high.

His 533-square-foot condo was assessed at $362,300 and he plans to appeal. "It's way out of whack," said Duncan, who has lived in the Islands since 1999.

Robert Lanborn, a 70-year-old Nu'uanu resident, agreed that a new classification for homeowner-occupants would appease only a portion of the population.

"If you happen to own the property, great," said Lanborn, who owns a two-bedroom apartment on Kuakini Street. "But there are a lot of other people who just can't afford the rents. You can well understand why people are moving away."

Tom Fragas, a 77-year-old Kailua resident, said a tax break for homeowners who live in their properties could be a step in the right direction.

"The property taxes have gone up considerably," said Fragas, who lives on a fixed income. "Somewhere along the line, there needs to be a balance."

About 60 percent of all homes in the Islands are owner-occupied, while renters fill about 40 percent of all occupied units, according to 2005 Census figures.

The state's percentage of owner-occupied homes is among the lowest in the nation, with Hawai'i ranking 48th, just above California and New York, at 58 percent and 55 percent, respectively.

The highest percentage of owner-occupied homes is in Minnesota, where more than three-fourths of homeowners live in their properties.

Lowell Kalapa, executive director of the Tax Foundation of Hawai'i, said a tax break for homeowner-occupants only would almost certainly mean higher property taxes for not only landlords, but businesses.

Those taxes would eventually trickle down to consumers, he said.

"The mayor is doing the politically popular thing, but if you don't cut your spending, it has to come from somebody else," Kalapa said.

Hannemann said yesterday he has not yet run any numbers for a homeowner-occupant tax break, and so could not say how much more those in other tax classifications would have to pay to make up the difference.

He did say Big Island Mayor Harry Kim, Kaua'i Mayor Bryan Baptiste and outgoing Maui Mayor Alan Arakawa convinced him that a homeowner-occupant tax break could succeed on O'ahu, despite past opposition from the City Council.

Kim said yesterday the Big Island has long had a significantly lower property tax rate for homeowners who live in their properties. "I think there was an attitude here that homeowners and senior citizens must be protected," Kim said.

The homeowner-occupant tax rate on Maui is $2.50 per $1,000 of taxable property — half the rate for other improved residential properties.

Arakawa said the county has been able to give homeowner-occupants a big tax break with a little creativity, including raising taxes for time-share units. No other county has a classification solely for time-shares.

"We don't want to tax anyone out of their homes," Arakawa said.

Reach Mary Vorsino at mvorsino@honoluluadvertiser.com.