Written by: Kevin Murakami (RA)
Thanks to Bill 20, which passed in September of 2015, Honolulu homeowners now have the opportunity to legally build an Accessory Dwelling Unit (ADU) on their residential property as a rental unit. Additionally, The Mayor recently proposed Bill 27 which, if passed, will waive certain permitting fees for a period of time, saving interested homeowners up to $10,000 in fees. So why should homeowners spend the time and money to build an ADU? Here are three reasons why I recommend taking advantage of this opportunity:
- Lower the cost of homeownership. Rental income from an ADU can be used to help with your property expenses including the mortgage, utility bills, property taxes, maintenance and insurance making it more affordable to live in Honolulu.
- Increases property value. Adding an ADU is an improvement to your property. The increased livable area will bring added value to your property. Also, when it comes time to sell your property you can justify your selling price with rental income information in addition to the comparable sales in the area.
- Tax deductions & business expenses. Because an ADU is a permitted use of your property, you can run it as a business and deduct the costs of operating the ADU from the taxable income you receive from the ADU. This could include property management, professional fees, unit repairs, marketing, etc. You might also be able to depreciate the ADU portion of your home as a tax deduction over time. Please consult a tax professional for specific information regarding your individual situation.
If you decide to take advantage of Bill 20 and build an ADU, I definitely recommend working with licensed professionals throughout the process. A Licensed Realtor can help you find the right property which meets the requirements to build an ADU. A Licensed Architect will help you plan & design an aesthetically pleasing ADU while adhering to current building codes and regulations. A Licensed/Bonded Contractor will ensure that your ADU is built with quality to the architect’s plans.
For more information about ADUs see:
ADU Bill 20
Honolulu DPP ADU FAQ
Proposed Bil 27