Extend property tax break to owner-occupied homes on Hawaii island ag land

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Hawaii County Council on March 7, 2023.

March 7, 2023
10:30 a.m.
Hawaii County Building

To: Committee on Finance
      Councilmember Matt Kaneali’i-Kleinfelder, Chair
      Councilmember Cindy Evans, Vice Chair

From: Grassroot Institute of Hawaii
           Jonathan Helton, Policy Researcher


Comments Only

Dear Chair and Committee Members:

The Grassroot Institute of Hawaii would like to offer its comments on Bill 28, which would allow owner-occupied homes on parcels in the “agricultural or native forests” class to qualify for the homeowner tax class.

It also would allow affordable long-term rentals on agricultural land to be taxed as if they fell under the “affordable rental housing” class.

This measure is a welcome one, since Hawaii County saw its real property tax revenue increase by more than $72 million — more than 19% — between fiscal years 2022 and 2023.[1]

With increased property assessments combined with inflation taking a toll on many Hawaii County property owners, this bill would allow more Hawaii island residents to qualify for the county’s homeowner tax class, which entails a lower rate and an assessment cap — a mechanism that protects homeowners from dramatic swings in property assessments. Expanding eligibility for the assessment cap would be a good step toward providing Hawaii County residents relief from rising property taxes.

Since Hawaii County has a large number of housing units on parcels designated as agricultural or native forests, this measure creates fairness among owner-occupied households. No longer would someone living on land classed as agricultural be ineligible for the protections the homeowners tax class brings with it.

As the committee looks at further changes to the real property tax system, it is worth noting that Honolulu, Kauai and Maui all offer home exemptions much higher than Hawaii’s — $100,000, $160,000 and $300,000, respectively.[2]

Even though Hawaii County’s real estate prices are usually lower than in other parts of the state, the upcoming assessments might show that there is room to increase the homeowner exemption above $50,000.[3] Should this occur, county residents would be the direct beneficiaries.

Finally, allowing affordable rentals on agricultural-classed land to be taxed as affordable rental housing should lower rates on these properties. In fiscal year 2023, the agricultural class paid a $9.35 per $1,000 rate, while affordable rental housing paid $6.15 per $1,000.[4]

As we explain in a forthcoming report on property tax relief, Hawaii’s four counties can provide assistance to homeowners, renters and business owners in many ways, from rate cuts to exemptions to tax credits.

A rate cut is the most straightforward way to provide tax relief, as it avoids the hassle of making property owners and county employees do extra paperwork; however, increasing the eligibility for the homeowner tax class — as Bill 28 does — is also a way to provide tax relief.

We appreciate that the committee has taken up this timely matter and look forward to continuing dialogue on how to lower the burden of the property tax for Hawaii’s homeowners.

Thank you for the opportunity to testify.


Jonathan Helton
Policy Researcher
Grassroot Institute of Hawaii

[1]County of Hawaii Real Property Tax Valuation for Fiscal Year 2021-2022,” Real Property Assessment Division, Department of Budget and Fiscal Services, City and County of Honolulu; and “County of Hawaii Real Property Tax Valuation for Tax Year 2022-2023,” Real Property Assessment Division, Department of Budget and Fiscal Services, City and County of Honolulu, August 2022.

[2]Home Exemption and Other Common Tax Relief Programs,” Real Property Assessment Division, Department of Budget and Fiscal Services, Honolulu City and County, accessed March 2, 2023; Kauai County Code, Article 11. Exemptions, Sec. 5A-11.4 Homes; and Maui County Code of Ordinances, Chapter 3.48, Article IX. 3.48.450 – Homes—standards for valuation, accessed Feb. 23, 2023.

[3]  “Important Information on County of Hawaii Real Property Tax,” Hawaii County, updated January 2023.

[4] Real Property Tax Rates for Tax Year July 1, 2022 to June 30, 2023,” Real Property Assessment Division, Department of Budget and Fiscal Services, City and County of Honolulu. Aug. 2022.

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