Hawaii County Council Approves New Tax for Luxury Homes

The Hawaii County Council approved a new measure aimed at luxury homes valued over $4 million, voting 5-1 in favor of Bill 128 on March 15, 2024. This legislation introduces a third-tier property tax classification specifically for high-end residential properties, although the exact tax rate remains undetermined and will be discussed during upcoming county budget meetings.

The anticipated tax rate for this new classification is expected to exceed the current tier-two residential rate of $13.60 per $1,000 of property value, which applies to homes valued between $2 million and $4 million. The tier-one rate, for properties valued below $2 million, stands at $11.10 per $1,000. Council Chair Holeka Inaba was the only member to oppose the bill, while several council members were absent during the vote.

The initiative was first introduced to the council’s Finance Committee by Council members Jenn Kagiwada and James Hustace last month, where it garnered a supportive vote of 7-1. Kagiwada expressed that the tax measure provides the county with greater flexibility in addressing local tax strategies, particularly benefiting residents by potentially shifting the tax burden away from local homeowners.

Hustace reinforced this sentiment, indicating that the new tax classification would enhance the county’s revenue sources, which are essential for funding significant future expenses. The tax will specifically target vacant properties, luxury vacation rentals, investment homes, and additional residences owned by non-residents, thereby exempting owner-occupied homes and affordable rental properties.

The measure is expected to affect 842 parcels, primarily located in West Hawaii, with an estimated combined value of $5.3 billion. Currently, applying the tier-two rate to these luxury properties generates over $13 million in annual revenue. The bill stipulates that funds raised through both tier-two and tier-three tax rates will be designated for county initiatives focused on affordable housing and homelessness relief programs.

Following the council’s approval, Bill 128 will now be sent to Mayor Kimo Alameda for consideration. Alameda has prioritized addressing homelessness and rising housing costs as key issues in his administration. In his recent State of the County address, he highlighted the urgent need for affordable housing solutions, noting that several hundred residents in Hawaii County are currently homeless, with the majority lacking shelter.

While no public testimony was given before the vote on Wednesday, community member Cory Harden previously spoke in favor of the tax increase during the Finance Committee meeting, emphasizing its potential to fund critical infrastructure. She stated, “If the county has adequate money in its coffers, it can afford to do all those things that make a community a place where people want to buy a house or land worth over $4 million, even if they’re not going to live there.”

As discussions regarding the new tax rate unfold, the implications for Hawaii County’s housing market and community funding will become clearer, shaping future developments in the region.