Hawai‘i County Council Advances Bill 128 to Tax Second Homes Over $4M

The Hawai‘i County Council moved Bill 128 out of the Finance Committee and toward a full council vote, advancing a proposal to create a third residential tax tier aimed at second homes valued at more than $4 million. Sponsors Jennifer Kagiwada and James Hustace say the change would give the county new tools as it wrestles with budget choices ahead of the next fiscal cycle.

The Finance Committee voted 7-1 to send Bill 128 to the full council, with Council Member Holeka Inaba casting the sole dissenting vote and Council Member Matthew Kaneali‘i-Kleinfelder absent. Council Member Jennifer Kagiwada, who introduced the bill with James Hustace, said, “This ability to have a third tier of homes that are valued over $4 million will give us some flexibility when we’re looking at some hard choices that we have going forward.”

County Real Property Tax administrator Lisa Miura provided an initial estimate of the measure’s scope: 842 parcels, primarily in West Hawai‘i, with a combined assessed value of about $5.3 billion. The proposed tier is targeted at second homes and explicitly excludes affordable rentals and long-term rentals; Hawaiilife noted that owner-occupied primary residences would not fall into the new class, saying, “If you live full time in the luxury property, it will not fall in the new property tax class, no matter how luxurious.”

How much revenue the new tier might produce remains unresolved. Big Island Now reported that the new rate has not been set and that “it’s unknown how much the new tax code could generate from these properties because it also is unknown what the new rate would be. New tax rates are not determined until the new budget discussions.” The council must set rates as part of the county’s budget process, which dovetails with mayoral deadlines: the mayor must deliver a balanced budget proposal by March 1 and a final proposal by May 5. The council can then raise or lower tax rates and make amendments before returning the budget to the mayor.

Observers and advocates offered contrasting reactions. The Grassroot Institute of Hawaii warned the classification could burden renters and landlords, arguing that “This discrimination against rental properties is not found anywhere else in the state. Kauai and Maui both offer separate classifications and relatively lower rates for long-term rentals, while Hawaii county offers a lower rate for affordable rentals.” Proponents say the tier would target nonresident luxury holdings without penalizing full-time Hawai‘i residents.

Background context includes a 2022 code change that created a Tier 2 residential rate for high-value properties; reporting across outlets records conflicting figures for those current rates. Big Island Now reported Tier 2 at $11.60 per $1,000 with a step to $13.60 beyond the first $500,000 over $2 million and a homeowner rate of $5.95 per $1,000. Hawaiitribune-herald and Hawaiilife reported different numbers, citing $11.10 and $13.60 structures and a homeowner rate near $6.15 per $1,000. Those discrepancies underscore the importance of reviewing the county’s official rate table before modeling revenue impacts.

Bill 128 now heads to the full council as budget deliberations approach. Residents who want to follow or participate in council hearings can submit written testimony to counciltestimony@hawaiicounty.gov, or register for oral testimony by emailing jean.muramoto@hawaiicounty.gov or calling 961-8255 by the stated deadlines for individual hearings. For Big Island communities, the measure signals a potential reshaping of who pays more in property taxes and when those revenues will be debated during the county’s spring budget cycle.