Hawaii County raises taxes on luxury homes, second properties

A Hilo homeowner with $500,000 in taxable value would pay about $2,875 a year under Hawaii County’s new rate, down from about $2,975. A Puna long-term rental with $650,000 in taxable value would owe about $5,037.50. A Kona second home valued at $2.5 million would face about $37,500, and a $5 million luxury property would land at $85,000. Those are the kinds of pocketbook shifts Hawaii County lawmakers bet will help close a $15 million budget gap without leaning as hard on owner-occupants and affordable rentals.

The County Council backed Resolution 574-26 with eight yes votes and one member absent, setting the homeowner and affordable-rental rate at $5.75 per $1,000 of taxable value, down from $5.95. It also fixed the tier-two rate for homes valued between $2 million and $4 million at $15 per $1,000 and created a new tier-three class for property worth more than $4 million at $17 per $1,000. A new long-term rental category was set at $7.75 per $1,000, a move meant to encourage second-home owners to put properties into the island’s rental market.

The resolution was introduced by Council Chair Holeka Inaba and applies to the fiscal year ending June 30, 2027. County figures in the resolution show $10.254 billion in net taxable tier-one residential value, $2.244 billion in tier-two value and $5.559 billion in tier-three value. Officials said the new rates should generate about $17 million in added revenue, enough to cover the shortfall.

The vote followed a public hearing May 20, where roughly a half-dozen speakers supported the change, including Heather Hedenschau, principal real estate broker at Big Island Brokers. Mayor Kimo Alameda also backed the package, saying it would help protect local families while addressing rising county costs and wastewater obligations. The county said debt-service costs are expected to keep climbing over the next decade because of wastewater-system upgrades required by the U.S. Environmental Protection Agency.

The politics were not quiet. Hilo Councilwoman Jenn Kagiwada had filed an alternative version of the resolution that would have also raised the tier-one rate on most nonowner-occupied properties worth less than $2 million, a broader tax move that would have brought in more money. The council instead chose the narrower approach, extending relief to owner-occupants and long-term rentals while shifting more of the burden onto nonresidents and owners of high-value second homes. The luxury-home tier itself grew out of Bill 128, which passed March 4 by a 5-1 vote and affected 842 parcels, mostly in West Hawaii, with a combined estimated value of $5.3 billion.