The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Honolulu City Council Committee on Budget on Oct. 14, 2025.
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Oct. 14, 2025, 9 a.m.
Honolulu Hale
To: Honolulu City Council Committee on Budget
Val Okimoto, Chair
Scott Nishimoto, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: Bill 63 (2025) — RELATING TO PROPERTY TAXATION
Aloha Chair Okimoto, Vice Chair Nishimoto and other members of the Committee,
The Grassroot Institute of Hawaii offers comments on — and two amendments to — Bill 63 (2025), which would amend eligibility for the city’s property tax dedication for low-income rental properties.
Currently, owners of affordable rentals that would be taxed at the Residential A tax rate can dedicate their properties to affordable rental use for five years and see them taxed at the Residential property tax rate.
The difference between these tax rates is significant. In fiscal 2025, a duplex valued at $1.8 million would face a tax bill of $13,120 if taxed at the Residential A rate and a bill of $6,300 if taxed at the Residential rate.[1]
Bill 63 (2025) would expand allowable rental rates from what is considered affordable for those making 80% of the area median income to what is considered affordable for those making 100% of the area median income.
It would also change owner and tenant eligibility for the dedication and create rules for what happens when properties are sold or transferred during the five-year dedication period.
Grassroot would like to see the purchase price threshold be abolished, and suggests that the Council adjust some of the rules for what tax penalties are imposed when properties are sold during the five-year dedication period.
The current dedication ordinance states that properties are eligible only if they were purchased for less than $1 million and are now in the Residential A class. Bill 63 (2025) would delete the $1 million figure and tie the value to whatever the Residential A threshold is. Pending the approval of Bill 34 (2024), this threshold will increase to $1.3 million.
However, Grassroot sees no reason why someone who buys a higher-valued property should be prevented from dedicating it as an affordable rental.
The city has an acute shortage of properties affordable to those making 100% or less of the area median income. The 2024 Hawaii Housing Planning Study estimated that Oahu alone needs more than 20,000 new units affordable to those making less than 120% of the area median income, with a need of close to 9,000 units affordable to those making between 60% and 120% of AMI.[2]
Thus, Grassroot requests the Committee remove the purchase price threshold entirely.
Grassroot would also urge the Committee to revise the language relating to rollback taxes when properties are sold or transferred during the five-year dedication period.
Currently, Bill 63 (2025) has language that allows for an exemption from rollback taxes when owners die and their heirs agree to continue using the properties as affordable rentals. The heirs would have 30 days after the death of the owners to file this paperwork.
A 30-day deadline could present problems when there are multiple heirs who must be contacted and must agree to continuing the property’s dedication. The proposed following language could cover such unforeseen circumstances:
The dedication will continue if the new owner petitions the director for a continuation of the dedication within 30 days after the transfer of title; provided that the director may extend this deadline at the request of one or more of the new owners for due cause for a period not to exceed 180 days.
Grassroot’s two proposed amendments — removing the purchase price limitation and adding language to update the rollback provision — would improve the program for anyone wanting to participate.
Grassroot would welcome further dialogue about how to make Hawaii housing more affordable for everyone.
Thank you for the opportunity to testify.
Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] “Real Property Tax Rates for Tax Year July 1, 2024 to June 30, 2025,” City and County of Honolulu, accessed July 3, 2025.
[2] “Hawaii Housing Planning Study 2024,” prepared by SMS Research and Marketing Services, Inc., FSR Consulting LLC and Ward Research, Inc. for the Hawaii Department of Business, Economic Development and Tourism, Table 39A, p. 123.
