Honolulu is finally making some progress in providing property tax relief and putting a dent in the city’s permitting backlog.
On Sunday, Ted Kefalas of the Grassroot Institute of Hawaii outlined for radio host Johnny Miro of the H. Hawaii Media network some of the things the Honolulu City Council has been doing to counter the recent high property assessments — which if left unaddressed would have translated into much higher property taxes.
Kefalas, director of strategic campaigns for the Institute, praised the Council and Mayor Rick Blangiardi for enacting measures such as Bill 14, which gives about 150,000 Oahu homeowners a one-time tax credit of $350.
For longer-term relief, the Council passed a measure, Bill 40, that would increase the homeowner exemption from $100,000 to $120,000, and Bill 37 to expand the eligibility for the low-income tax credit from $60,000 to $80,000.
The Council also approved Resolution 33 to lower the Residential A tax rate on properties valued under $1.5 million, to help both their owners and long-term renters.
Kefalas said the Council is looking at “taking the homeowner exemption even higher” with Bill 34, which would increase the standard home exemption from $120,000 to $250,000 and increase the exemption for homeowners 65 and older from $140,000 to $300,000.
Regarding Oahu’s perennial permitting delays, Kefalas said the Council recently passed Bill 56, which eliminates the requirement for a permit if the value of a renovation project within a 12-month period is under $10,000.
Currently, the Council is considering Bill 6, which would allow building applications to be reviewed by qualified third-party reviewers who could obtain a permit without having to go through the Department of Planning and Permitting.
Kefalas noted that in Chicago, “a lot of architects can self-certify building plans and they receive a permit in 10 days. Wouldn’t it be nice to get a permit in 10 days, Johnny?”
To hear the entire 23-minute conversation, click on the video below. A complete transcript follows.
7-30-23 Ted Kefalas with radio host Johnny Miro on H. Hawaii Media
Johnny Miro: Happy Sunday morning to you. I’m Johnny Miro. It’s time once again for our H. Hawaii Media public access programming on Sundays on our five radio stations here on the island of Oahu: 101.1 FM, 101.5 FM, 97.1 FM, 107.5 FM and 96.7 FM.
And happy to have along another member of the Grassroot Institute of Hawaii. You can catch their work at grassrootinstitute.org. And joining me this morning to discuss another important topic would be Ted Kefalas, the director of strategic campaigns at the Grassroot Institute of Hawaii.
Good morning to you, Ted.
Ted Kefalas: Hey, aloha, Johnny. Thanks for having me today.
Miro: You’re welcome. Homeowners here in Honolulu expressed a lot of outrage earlier this year at the astronomically higher property tax assessments. Now, after a lot of publicity surrounding these increases, Ted, the City Council members decided to pass multiple pieces of legislation to address the issue.
And a few weeks ago, Mayor [Rick] Blangiardi signed those bills into law to give Oahu residents immediate property tax relief. So we’ll delve into that. That’s the topic of today and maybe a few others. So, good morning once again, Ted, and we look forward to delving into this a little bit more.
Kefalas: Yeah, this is an important topic and so I’m glad we can break it down a little bit for some of the listeners today.
Miro: All right. As many people know, property assessments this year went through the roof, which, without any changes by the City Council, meant property owners would be paying much higher property taxes for fiscal 2024.
Can you give a little background about all of that?
Kefalas: Yes. So, as you mentioned, property tax assessments in Honolulu skyrocketed this year and, in turn, that meant that people’s tax bills also went through the roof. And so, what does that really mean?
So, you have the assessment on one hand, which is how much the government estimates that your property is worth, and then you have the tax rate, which City Council passes every year. And so, you have the tax rate multiplied by the assessment, and that’s essentially what makes up your tax bill.
Now, there’s a lot of things that go into assessments, but one of the main reasons assessments have gone up so much is because Hawaii has such a very high demand for housing. ‘
Unfortunately, you know, there’s not a lot of supply to satisfy that demand. And as everybody knows, we’re dealing with a massive housing shortage.
So, going back to the assessment, the county assessors will look at your home, and then they’ll compare your home to others that are similar, whether that’s in terms of things like square footage, number of rooms, that sort of stuff. And using those numbers, they try to find similar homes that have recently sold in the area. And they’ll assign a price to your home based on those comparisons.
With home sales being at such a high level, like I just mentioned, obviously that’s going to impact everyone. Even the people that have been living in their homes for generations and have no plans to sell. And so a lot of people are concerned, like you mentioned, and rightfully so.
Homeowners on fixed incomes are threatened with higher tax bills that might actually break their budget. You look at renters that could face higher rents as their landlord’s taxes go up. So these tax increases — and it’s not really tax increases, but it’s the assessment increases — these are really going to impact everyone.
And that’s why we wrote a report examining all the different ways that the Council can provide relief to taxpayers. And you can actually read that report [“How Hawaii’s county lawmakers can provide tax relief to offset higher property assessments”] for free on our website at, Johnny, I know you mentioned it earlier, but it’s grassrootinstitute.org.
And, you know, the good news is that the Honolulu Council members have taken up some of those suggestions and they’ve passed a few bills that’ll help out some of our local residents.
Miro: And so what exactly did they do to address these recent sky-high assessments, Ted?
Kefalas: So, if you recall, Mayor Blangiardi already proposed Bill 14, which would issue a one-time $300 tax credit to around 150,000 Oahu homeowners.
And we actually worked with [Honolulu City Council] Chair Tommy Waters and Vice Chair Esther Kia`āina. I want to give them a shout-out because we worked with them to increase the amount to $350.
Mayor Blangiardi already signed this bill about a month ago. And it’s a great starting point. You know, this credit is great, because it goes into effect this upcoming tax year. And so it would immediately reduce the tax bill for people who own and live in their homes. People have actually probably seen that $350 tax credit reflected on their most recent property tax bills.
But one really important thing to remember, Johnny, is it’s only a one-time tax credit. And I’m not a fortune teller by any means, but it’s probably a good bet that assessments will either stay at this level or they could possibly increase even more.
So, you know, keeping that in mind, the Council members have been hard at work trying to pass a few other bills that will result in more long-term relief, hopefully.
For example, they recently passed a bill that would increase the homeowner exemption. So previously it was at $100,000 and now it’s $120,000.
They also passed a bill to expand the eligibility for the low-income tax credit. So the eligibility threshold for that used to be $60,000; now it’s $80,000, which we know $80,000 still is not a very high salary here in Hawaii.
And so all of these things are really encouraging, but it is crucial for City Council to continue examining this issue because it isn’t going to be completely going away tomorrow.
Miro: If I recall, correct me if I’m wrong, didn’t you folks at Grassroot seek a higher amount instead of this $300 or $350? Weren’t you looking at, like, $1,000?
Kefalas: We were actually, we were pushing for Council to go to $380.
Miro: $380, OK.
Kafaas: And we were really hoping that we could get to that $380 number because that would have offset a lot of the higher tax assessments this year. Unfortunately, due to some of the funding that Council prioritized in the budget, we got to $350, which is still much better than $300.
And again, we’re hoping that we can look at more permanent tax relief in the coming weeks and months ahead.
Miro: I don’t know where I got a thousand, but hey, the more the merrier to the homeowners, but nonetheless, $380.
Kefalas: Hey, we would have loved a thousand.
Miro: No kidding. So how does the homeowner exemption work exactly? Do people have to apply to it, or is it just some, you know, automatically applied to your bill?
Kefalas: Yeah, so each county has a homeowner exemption. How that works is that there’s a set dollar figure. As I mentioned on Oahu, they just raised that from $100,000 to $120,000.
So if you own and occupy your home and you file for this exemption — you do have to file for it — the county government will take $120,000 off the assessed value of your home.
And so that means if your home was assessed at, let’s say, a million dollars for easy math, it would end up being taxed as if it were worth $880,000. So that’s a benefit that exists for all local homeowners, people that are currently living in their homes full-time.
And we’re glad that the Council took action, because Honolulu’s home exemption was last increased in 2019. And it doesn’t seem like that long ago, but since then, we’ve seen property values just go through the roof. In January 2019, for example, the median sales price of a home was around $767,000; four years later, it’s now at a million dollars plus.
So, you know, increasing this homeowner exemption by $20,000 doesn’t necessarily offset that increase, but it does help.
I do want to note, though, that this increase to the homeowner exemption begins next year, so you won’t see it on this year’s tax bill, like the $350 tax credit that we just mentioned.
It’s also important, like I said, you do have to apply for this exemption, and I believe you can do that online. I think the website is realpropertyhonolulu.com. If you already have an exemption, you shouldn’t need to reapply, it should just be a one-time deal.
Miro: Ted Kefalas, director of strategic campaigns at the Grassroot Institute of Hawaii.
And let’s see, how about that low-income tax credit? How can someone qualify for that?
Kefalas: Yeah. So the credit really — let me just go into some detail about what the low-income tax credit is. What it does is, it caps the homeowner’s tax bill at no more than 3% of their qualifying income as long as they qualify for that.
So in order to qualify for the tax credit, you have to have a home exemption, like we mentioned earlier. You cannot own any other property anywhere.
And the combined income of everybody on the title of the home cannot exceed $80,000. That limit used to be $60,000; Council increased it to $80,000. And so, if we take a look at somebody making $80,000 a year, that essentially means that their tax bill can’t exceed $2,400 or that 3%.
You know, we’ve supported increasing this eligibility for a while to support some of these lower-income homeowners. This is what is known across the country as, they call it a circuit breaker. Unfortunately, in Honolulu, this circuit breaker for the lower-income household has not kept up with inflation and the changes in income.
With the last increase back in 2014, they increased it from $50,000 to $60,000. So a lot of times, you know, you’ll hear this term “AMI,” or area median income, that gets thrown around with these kinds of discussions. And area median income is used to show kind of a specific area’s incomes, and it’s calculated on an annual basis by the federal government, by the Department of Housing and Urban Development, HUD.
In 2014, 80% of AMI was about $51,000. Flash-forward now to 2022, actually last year, that number is $83,000. So we’re glad that Council took steps to bring that income threshold more in line with the 80% of AMI to today.
Interestingly enough though, a lot of people don’t know that they qualify for this tax credit. So last year there were only about 3,200 homeowners that received it. So if you think you may qualify, make sure to apply because it’s a huge benefit.
Miro: A lot of numbers coming your way via Ted Kefalas from Grassroot Institute of Hawaii. You can always go there and read more at their website. We’ll give that to you throughout the broadcast.
Ted, was there any tax relief for people that might not qualify for the homeowner exemption or the low-income tax credit?
Kefalas: Yeah, so Council actually lowered the Residential A tax rate on properties that are less than $1.5 million. And Residential A homes are non-owner-occupied properties worth at least a million dollars.
Council created that kind of Residential A classification back in 2014, and they set it to a tier in 2018 so that anything over a million dollars is taxed at a certain higher rate.
And I think, initially, the idea for Residential A was to tax, you know, some of these vacation rentals, multimillion dollar mansions, at a higher rate than local residences. And, you know, that makes sense, but as we know, a million dollars sounds like a lot, but in today’s market, it’s really just an average home.
So, you know, many of these Residential A homes tend to actually be long-term rental properties. In 2018, when they created the tier, the median home price wasn’t a million dollars. But here we are now, where it is.
So there are a lot of people that might have a second home. They rent out to local families, and now that second home is valued over a million dollars.
People that don’t have a homeowner exemption, they’re going to get stuck in the Residential A class. And that’s going to mean exponentially higher tax bills.
And, you know, if your landlord is getting a massive increase in their property tax bill, that’s probably going to trickle down into your rent because they’re going to have to make up that money somehow.
So, as I mentioned before, we’re glad that Council played with the rates to lower the tax burden on properties that are valued at less than $1.5 million. But going forward, after this year, I know Council is looking at a few different bills that would increase that tier so it’s no longer a million dollars — maybe it’s 1.3, [1.]4 or [1.]5 — and hopefully Council can settle on a number soon, so that we can avoid, you know, taxing all of these homes that are just the average home, and they’re a local rental property, and they’re getting taxed at a significantly higher rate than a typical residential property.
Miro: Can I ask you, as a landlord, are they seeing that already, or is that a next-year item also for people who are renting through a landlord, as far as the potential increase in rent due to the increase?
Kefalas: So a lot of the landlords probably saw it on their most recent tax bill, to be quite honest, and, you know, it may not be felt immediately by renters, because some folks have year-long leases, let’s say. But when it comes time for the renewal, I would not be surprised to see certain rents go up in price, just to make up for that increased tax bill.
Miro: OK. Do you expect to see any more tax-relief bills come up in the future?
Kefalas: Yeah. You know what? I talked about increasing the homeowner exemption earlier. But Council is actually looking at taking it another step forward, and Bill 34 is up. It would increase the standard home exemption from, it’s now $120,000, as I mentioned; they want to increase that to $250,000, and it would increase the exemption for homeowners 65 and older — the kupuna — from $140,000 to $300,000.
You have to consider Kauai and Maui counties both offer home exemptions that are much higher than Honolulu. So Kauai is at $160,000 and Maui is currently at $300,000. In fact, Maui just increased their exemption from $200,000 to $300,000 this past year.
So both of those counties’ exemptions are actually closer in line with offsetting some of the more recent property assessment increases that we’ve seen in recent years.
But that being said, you know, we understand you have to start somewhere. So we do commend the Council for at least taking the small steps to increase this exemption and give some relief to Honolulu homeowners. We’re hoping that they can again take it another step forward.
In addition to increasing the homeowner exemption, they’re also looking at creating a bunch of new different tax classes that may be able to tailor relief to specific people, like long-term renters. There’s also a bill — I know a lot of people are familiar with California’s Proposition 13, Prop 13, — that restricts assessment increases of more than 2%.
So Honolulu has a bill that’s being proposed right now — it’s Bill 42 — that would set that at about 8%, which is much higher than the 2[%], but we’ll see how that plays out as Council hears the bill.
Miro: When did that Prop 13 get passed — do you remember — in California?
Kefalas: I’m not sure.
Miro: It just sounds like it might have been a while ago. It doesn’t sound that recent, but I know it made a big impact,
Kefalas: Yeah. I just looked it up. It’s 1978.
Miro: Yeah, that turned a lot of people in a different direction, politically. I’ll put it to you that way.
Kefalas: Yeah, absolutely.
Miro: Before you go, I know that permitting, the Department of Planning and Permitting, and the permitting process has been at the top of people’s minds. Is the Honolulu City Council working to address some of the lengthy delays people have been experiencing?
Kefalas: Yeah, so as many people are aware, the current permitting backlog is around 200 days. Last month, actually, Council voted unanimously to pass Bill 56, which would make it easier to do renovations on your home and wouldn’t require a permit for projects that are less than $10,000.
This is a really good way to at least start streamlining the permitting process by taking some people out of line. And so I want to commend Councilmember Andria Tupola for championing that bill.
You know, we were hopeful that Council would raise the threshold amount, because $10,000 is, to be honest, not that much when you’re doing renovation.
And it’s really just an arbitrary figure that unjustifiably raises the time and cost to complete a simple home repair. You know, if your renovation is just $1 [over the threshold] — if it’s $10,001 — you have to wait in line for a permit.
But, again, you know, this is a start. You know, these are baby steps and we’re looking forward to hopefully taking a giant leap in the future.
But there’s another bill that’s up — Bill 6 — would allow building applications to be reviewed by qualified third-party reviewers. And so what that means is, essentially, engineers, architects, other qualified people that are designated by DPP can vouch that their plans are in compliance with all building codes and regulations, and it essentially helps people get a permit without going through DPP.
And again, it’s about pulling people out of the permitting line right now. So, these examiners would be licensed in Hawaii, you know, they would do similar reviews to DPP staff. And Honolulu already uses third-party reviewers to help people get through part of the permitting process.
So, really, this is just sort of an expansion of that, and for any people that are worried about certain safety precautions, you know, what I would say is, “We don’t have to reinvent the wheel.”
Self-certification has worked in other cities. For example, you look at Phoenix. They’ve had self-certification for years. And the city still controls the process. They send inspectors out to make sure everything is up to snuff.
New York City has used self-certification for decades. You know, what they do is they essentially randomly audit about 20% of these plans to make sure that they are how they say they are, and they’re not giving false statements.
Chicago is another one where a lot of architects can self-certify building plans and they receive a permit in 10 days. Now, I mean, wouldn’t it be nice to get a permit in 10 days, Johnny?
Miro: Yeah. [laughter] Bigger cities than ours by leaps and bounds, and they seem to have a much quicker process.
Ted Kefalas is director of strategic campaigns at the Grassroot Institute of Hawaii.
Ted, anything else to add? A lot of information has been put forth to simplify it to the best of your ability, but anything else you’d like to add?
Kefalas: Yeah, I just want to encourage everybody listening to get involved. If an issue is important to you, it’s crucial that you make your voice heard.
You know, we talked a lot about property taxes today, and it’s amazing to me to hear the outcry from the community about their increased bills. But then when it comes time for a Council hearing, I’m usually one of the only people there.
So now, I know people have busy schedules, and there’s other ways to get involved though. You can write an email to your Councilmember. You can give their office a quick phone call. You would really be surprised at how important your voice is in these types of fights.
I know it can be tough, too, to keep up with everything going on, so I would encourage everybody to visit our website — it’s grassrootinstitute.org — and subscribe to our email list. Every week we send out a rundown of some of the most important things going on in Hawaii. You’ll also hear from our president, Keli‘i Akina, about some of the things at the top of his mind.
You know, I think it’s a great source of information and I would encourage everyone to subscribe. Again, our website is grassrootinstitute.org.
Miro: And more and more people in the media in Honolulu are utilizing your resources over there. You can really tell that. Ted, appreciate the time. As usual, a lot of great information has come forth and we hope to be speaking soon again. Enjoy the rest of your Sunday and thanks for chiming in.
Kefalas: Yeah, thank you, Johnny. Aloha.