Some of the most valuable residential properties on Hawai‘i Island could face higher property taxes under a new proposal before the Hawai‘i County Council. Supporters say the measure is designed to generate millions of dollars annually for housing and homelessness programs without increasing taxes on full-time residents.
Councilmembers Jenn Kagiwada and James Hustace introduced Bill 128, which would expand the county’s current two-tier residential tax system into three tiers based on property value and owner-occupant exemptions.
Under the proposal, residential properties with a net taxable value under $2 million would remain in Tier One. Properties valued between $2 million and $4 million that do not qualify for an exemption would fall into Tier Two, while residential properties valued above $4 million without a home exemption would be placed in a new Tier Three.
For example, a home valued at $5 million and not occupied by the owner would fall into Tier Three and be subject to the higher rate once the council sets the 2026 tax rates, while an owner’s primary residence would remain in Tier One regardless of value.
In Hawai‘i County, homeowners who live on their property full‑time and claim a home exemption remain in Tier One for tax purposes, even if their home is assessed at more than $4 million.
County officials say the higher tiers are primarily aimed at investment properties and other non-owner-occupied residences, while primary homeowners and long-term or deed-restricted affordable rental properties would generally remain outside the higher rate structure.
The measure applies only to residential properties. Hotels and other commercial classifications are not included, although residential properties located in resort areas would still be subject to the tiered system.
The County Council will determine the specific tax rates for each tier during the 2026 budget process. For properties up to $2 million, the current tax rate is $11.10 for every $1,000 of net taxable value while the tax rate for properties valued at $2 million or more is $13.60 per $1,000. Homeowners who live in their homes and qualify for the owner‑occupied exemption pay a lower rate of $5.95 per $1,000.
Officials estimate the revised structure could generate at least $9 million each year. The bill also requires that no less than $9 million collected annually from the higher tiers be directed toward county-sponsored housing and homelessness programs, unless amended by a future ordinance.
The bill is set for its first reading at 9 a.m. on Wednesday, Feb. 18 at the West Hawai‘i Civic Center in Kailua-Kona, and it has already sparked disagreement among council members.
Council Chair Holeka Inaba opposes creating a new tier.
“I think it’s better to just increase the Tier Two rate that already exists,” Inaba told Aloha State Daily. “Adding a new tier might make future tax decisions more confusing for both taxpayers and the council.”
Hustace said the measure would make the tax structure more equitable and bring Hawai‘i Island more in line with other counties that already use multiple residential tiers. He added that recent revenue adjustments tied to long-term affordable rentals have affected projections, and the proposal is intended to help stabilize funding.
“The goal is to create fairness for homeowners and investors while supporting the community with a more balanced tax structure,” Hustace told ASD.
Kagiwada said the intent is to protect residents who live on the island year-round.
“We want to support people who live here full-time,” she said. “Bringing in revenue from outside investors helps our community.”
Some of the island’s luxury residential communities include Kūkiʻo Golf and Beach Club on the Kona–Kohala coast; Hōkūli‘a, a private, low‑density residential community in Kealakekua; and Kohanaiki, a private club and residential community on the Kona coast. A luxury estate in Kohanaiki sold for $23 million late last year.
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