The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Honolulu City Council Committee on Budget on Nov. 18, 2025.
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Nov. 18, 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 Bill 63 (2025), CD1, 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 be 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 appreciates that the CD1 amendment removed the purchase price threshold and adjusted the rules surrounding how rollback taxes apply to dedicated property when the property is sold or transferred in the event of the owner’s death.
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. But this rule prevents owners who bought properties purchased for more than $1 million from receiving a tax break for using them as affordable rentals.
And 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]
Likewise, some language in the first draft of Bill 63 (2025) would have complicated the sale or transfer of dedicated property by requiring that the owner of the property pay rollback taxes equal to the amount they saved as a result of enrolling their property in the dedication program.
Now, the CD1 draft of the bill specifies that rollback taxes would apply only to the two years prior to when the property is transferred, and there would be no rollback taxes when the new owner agrees to continue using the property as a dedicated affordable rental.
Grassroot thanks the Committee for making these amendments and 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.
