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The Honolulu City Council has unanimously approved Resolution 33, granting real property tax relief to property owners who own multiple homes and generate rental income from a secondary residence on Oahu. This resolution is expected to lower the city’s real property tax rate for the first million dollars of value of Residential A properties, resulting in a $500 reduction in taxes for this specific taxpayer class. The resolution will be in effect from July 1, 2023, to June 30, 2024.
Under this new measure, the tax rate on a property owner’s second home will decrease from $4.50 per $1,000 of value to $4 per $1,000 of value. Consequently, property owners will only pay $4,000 annually in property taxes, as compared to the current $4,500. The purpose of this tax relief is to support owners of Residential A properties on the island, which typically have a minimum assessed value of $1 million and do not qualify for a home exemption. This adjustment aims to enable property owners to continue renting their properties without having to raise rental prices.
Hawaii is known for having the most expensive rental market in the United States, surpassing states like New York, California, and New Jersey. According to real estate websites such as ApartmentList.com, the average monthly rent for a one-bedroom unit in Hawaii was over $1,700 in 2022. Council Chair Tommy Waters emphasized the necessity of addressing the rising rental costs and providing relief to homeowners who offer much-needed rental housing to local families. He stated that approximately 40% of Honolulu’s residents are renters, and for some, they have been renting the same home for decades.
Waters introduced this resolution to ensure targeted tax relief for residents this year. While the change to the Residential A tax rate is permanent, tax rates for real property are subject to annual changes through resolutions passed by the Council. However, this is the first alteration to the rate since 2019. Waters acknowledged the Council’s obligation to pass a balanced budget that aligns projected tax revenues with expenditures. He added that this specific component of the tax relief package would cover most, if not all, available long-term rental properties.
During the Council meeting, Vice Chair Esther Kia’aina expressed strong support for extending relief to Residential A property owners, particularly those whose property values recently transitioned from Residential to Residential A classification due to significant increases. She highlighted the case of homeowners living in units without homeowners’ exemptions, whose property values now exceed $1 million. If the tax rates remained unchanged, these homeowners would face substantially higher property taxes under the Residential A classification. Kia’aina emphasized that this new legislation would aid landlords, specifically those renting out lower-valued units to local families, by discouraging rent increases.
Waters stated that in addition to this resolution, Mayor Rick Blangiardi’s one-time tax credit of $350 for nearly 152,000 qualifying homeowners would provide significant relief to the community, amounting to $850 in total tax relief. He also shared that the Council intends to continue discussions on property tax overhauls, including through future real property tax subcommittees known as permitted interaction groups (PIGs). The objective is to explore additional relief options for local residents and families while considering whether a comprehensive restructuring of property taxes in Honolulu is warranted.
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