Property tax rate increases could unintentionally burden renters

May 19, 2026, 5:30 p.m.
Hawai‘i County Council Chambers in Hilo

To: Hawai‘i County Council
Holeka Goro Inaba, Chair
Dennis “Fresh” Onishi, Vice Chair

From: Grassroot Institute of Hawaii
Jonathan Helton, Policy Analyst

RE: FISCAL YEAR 2026-27 REAL PROPERTY TAX RATES

Aloha Chair Inaba, Vice Chair Onishi and other members of the Council,

The Grassroot Institute of Hawaii offers comments on the proposed property tax rates for the next fiscal year.

The proposed rates are a mix of tax reductions for certain classes and increases for others. Grassroot appreciates that the Council is seeking to reduce taxes for certain classes, but we are concerned that the rate increases proposed on other classes could end up making Hawaii County more unaffordable for local residents.

In particular, Grassroot supports the rate reductions proposed for the homeowner and affordable rental classes. Under the Council’s proposal, these classes would see their rates drop from $5.95 to $5.75 per $1,000 in assessed value. Practically, this would reduce the annual tax bills for properties in those classes by between $20 and $30, on average.

However, Grassroot is concerned that the higher rates proposed for the residential tax class could have the unintended consequence of increasing costs for local renters.

As shown in the table below, the residential tier one tax rate would increase from $11.10 to $12.10 per $1,000 in assessed value. For a property assessed at $250,000, that would mean a $250 increase in taxes. Research indicates that property owners often pass along at least a portion of their property taxes to their tenants.^[1]
Table 1 shows the current rates, the proposed rates for fiscal year 2026-27 and a range of rates the Council is expected to consider.

        Table 1. Proposed and current property tax rates

The upcoming fiscal year will be the first year of the long-term rental property tax class, which is intended to reduce the tax burden on long-term rentals.

But only 880 properties across the county will fall under this class in the upcoming year, compared to the more than 37,000 that will fall into the residential class. It is likely that thousands of those properties are being used as long-term rentals, but their owners do not know about the new class, did not apply in time, or encountered bureaucracy that prevented them from qualifying.

Because of this, the Council should avoid imposing higher rates on the residential class, at least until more rental owners are aware of the new class. For the same reason, Grassroot cautions the Council against increasing taxes on the apartment class.

Thank you for the opportunity to testify.

Jonathan Helton
Policy Analyst
Grassroot Institute of Hawaii
1050 Bishop St. #508 | Honolulu, HI 96813 | 808-864-1776 | info@grassrootinstitute.org

[1] David Schwegman and John Yinger, “The Shifting of the Property Tax on Urban Renters: Evidence from New York State’s Homestead Tax Option,” U.S. Census Bureau Center for Economic Studies, December 2020; Bill Wheaton, “Can Landlords really pass on higher property taxes to tenants?” MIT Center for Real Estate, Oct. 5, 2018; and Leah Tsoodle and Tracy Turner, “Property Taxes and Residential Rents,” Journal of Real Estate Economics, February 2008.