The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Honolulu County Council on July 7, 2023.
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To: Honolulu City and County Council
Councilmember Tommy Waters, Chair
Councilmember Esther Kiaʻāina, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: Bill 40 (2022), CD1 — RELATING TO REAL PROPERTY TAXATION
Comments Only
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer its comments on Bill 40 (2022), CD1, which would increase Honolulu’s property tax home exemption by $20,000.
This increase would apply to the standard home exemption, which currently is $100,000. Councilmember Esther Kiaʻāina has proposed an amendment which would increase the home exemption for individuals 65 years of age and older from $140,000 to $160,000.[1]
Under this bill, a primary residence worth $1 million would be taxed at only $880,000 of its value, instead of $900,000. The cost to the county would be about $10 million in fiscal 2025.[2]
Honolulu’s standard home exemption was last increased in 2019. Since then, property values in the county have skyrocketed. In January 2019, the median sales price of a single-family home was $767,500. Four years later, it was $970,000 — an increase of more than 26%.[3] Increasing the homeowner exemption by $20,000 would not fully offset that increase, but it would be close.
Consider that Kauai and Maui counties both offer home exemptions much higher than Honolulu’s — $160,000 and $300,000, respectively.[4] In fact, Maui increased its exemption from $200,000 to $300,000 starting in fiscal 2024. Both counties’ exemptions are both closer in line with offsetting the higher property assessments Hawaii has been experiencing in recent years.
Across the country, such “homestead exemptions” are common practice. They are intended to protect homeowners who live in their homes from drastic increases in their property taxes. We commend the Council for seeking to increase it to protect Honolulu’s homeowners.
Looking forward, we would suggest the Council take a closer look at other property tax issues, such as:
>> Inflation and increasing property values: The Institute appreciates the proposed property tax relief contained in Bill 40, but we believe that such relief should also be indexed to changes in property values in the future so the Council does not have to spend time and effort passing such an ordinance every year to keep up with inflation or the constantly increasing property assessments. We recommend the Council examine the “Boston model,” which provides homeowners a flat dollar figure exemption that changes each year in response to changes in the average value of homeowner properties.[5]
>> Transparency: Bill 3 (2022) and Bill 22 (2023) would both provide the general public greater transparency into the real property tax system and make the system more accountable. Bill 3 would give property owners greater information on their annual assessment notices, while Bill 22 would enact a modified “Truth in Taxation” requirement, which would mandate the city Budget and Fiscal Services Department to conduct public hearings whenever property values in a particular council district increase by a predetermined amount.
>> Relief for long-term rentals: Many Oahu residents were concerned this year that increasing assessments could result in the higher property taxes being passed along to renters. The Council should consider exempting long-term rental properties from the Residential A class to prevent this situation. The Council could also consider creating a new class simply for rental properties.
Thank you for the opportunity to testify.
Sincerely,
Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] “Relating to Real Property Tax Exemptions,” Bill 2 (2019), Ordinance 19-7.
[2] Casey Harlow, “Kūpuna could receive a large property tax break under proposed Honolulu bill,” Hawaii Public Radio, April 5, 2023.
[3] “Statewide Housing Statistics,” Title Guarantee Hawaii, January 2019; “Statewide Housing Statistics,” Title Guarantee Hawaii, January 2023.
[4] 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.
[5] “Kauai homeowner exemption not keeping up with assessed values,” Grassroot Institute of Hawaii, June 28, 2023.
