The 91直播 County Council will hold a public hearing Tuesday to consider raising property tax rates for nonresidents and those with second homes in an effort to close the gap on an estimated $15 million budget shortfall.
Proposed rate hikes for the next fiscal year would predominantly affect non-owner-occupied homes, with the largest increase levied on properties worth $2 million and above — known as the “tier two” residential tax rate. This rate would rise from $13.60 to $15.00 per $1,000 of taxable value.
The “tier one” residential tax rate, which applies to properties worth less than $2 million, would increase from $11.10 to $12.10 per $1,000 of taxable value.
Additionally, the upcoming fiscal year will be the first to see a new “tier three” residential tax rate implemented, which applies to high-value second homes and investment properties worth more than $4 million.
This “luxury” rate was established with the council’s passage of Bill 128 on March 4 with a 5-1 vote in favor. It’s proposed to be set at $17.00 per $1,000 of taxable value. Revenue generated from this novel tier will be directed toward local affordable housing and homelessness programs.
At the same time, many residents will see a slight reduction in their property taxes. Under the new proposed rates, the vast majority of owner-occupied homes and affordable rental housing will receive a $0.20 (or just over 3%) reduction in tax rates, falling from $5.95 to $5.75 per $1,000 of taxable value. This is a deliberate carve-out for 91直播 Island locals, whom county officials have conceded are caught in the midst of a spiraling cost of living and housing affordability crisis.
“That’s our people,” council Chair Holeka Inaba told the Tribune-Herald. “They are residents of our county, and that’s their primary residence, so (we are) making sure that we are trying to take care of our local working-class families who actually own property and trying to offset inflation (and) cost of living. We know that our ohana on this island are struggling, so with these proposed rates there might not be a reduction in the actual tax bill, but it counters a potential increase to the tax bill.”
This slight reduction in the tax rate for these properties might not translate into a lower tax bill, as Inaba suggested, because under the county’s “homeowner exemption” the value of owner-occupied homes can increase by a maximum of 3% per year — called an “assessment cap.”
Paired with this roughly 3% decrease in their tax rate will mean many resident taxpayers will end up breaking even. According to the county’s Real Property Tax Division, nearly 39,000 owner-occupied homes on the island are granted this exemption, making up approximately 27% of all parcels and representing the vast majority of “primary residential owner-occupants.”
This targeted approach to taxation has enjoyed the support of Mayor Kimo Alameda, who ran his 2024 campaign on a platform of affordable housing, among other issues.
“I definitely don’t think we should put those tax increases on the everyday resident, right?” Alameda said. “I think the County Council is looking at placing that burden on nonresident owners, particularly those with higher value properties.”
Alameda said the county is “looking at an approximately $15 million shortfall that doesn’t look like it’s going to get better” in the coming year.
“Wastewater, operational costs, the increase in our contract negotiations with the unions, basic inflation — I mean, you name it, it’s coming from all kinds of angles,” he said when asked what’s behind the shortfall.
Making nonresidents foot more of this bill, he said, is an equitable option to ensure that ends meet.
“Finding new revenue streams to balance the budget next year is going to be critical,” he said. “And, you know, targeting the nonresident owner, I mean, it could definitely raise revenue, shift some of the tax burden toward owners who do not live here, but they still rely on our services, right? They use our roads, our emergency response. I think it’s fair.”
The mayor added that policies like this can help reduce the number of unoccupied luxury homes on the island by making their ownership costlier.
“I think by doing that you accomplish not just a revenue stream that doesn’t put the burden on the local resident,” he said, “but you incentivize these huge homes that are vacant most of the year. It’s kind of what my platform was when I ran for the mayorship — that’s what I was hoping: We take care of the locals.”
Tax rates for other property types like Hotel and Resort, Commercial, Industrial and Agricultural are slated to remain the same, which the mayor explained is a way to avoid price increases.
“I know we don’t want to increase the rates for businesses, because then they pass that on to the consumer,” Alameda said.
When asked why the 91直播owner and Affordable Rental Housing property classes would see a tax reduction while the rates for other types remained the same, Inaba said it boils down to a property’s income generating potential.
“While other properties don’t have an assessment cap, some of those like Industrial, Commercial, Hotel and Resort, they are also money-making properties,” he said. “You’re allowed to do commercial activities on those types of properties. Whereas in these that we are reducing, it specifically doesn’t allow for any type of commercial activity with the exception of agriculture.”
Email Stefan Verbano at stefan.verbano@hawaiitribune-herald.com.
