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Council passes first reading on affordable-rental tax change amid east–west equity concerns
Summary
On first reading the council approved Bill 39 (draft 2) to change the affordable rental housing property tax eligibility to an AMI‑based standard (proposed 80% AMI) and add Section 8 landlords; members debated potential uneven impacts across ZIP codes, revenue risks and how to balance West Hawaii participation with East Hawaii market effects.
The Hawaii County Council passed Bill 39 draft 2 on first reading May 7, moving the countyaffordable rental housing real property tax classification away from the existing payment-standard mechanism toward HUD area‑median‑income (AMI) thresholds (the bill would tie eligibility to AMI levels such as an 80% AMI standard) and explicitly incorporate Section 8 landlords into the program.
Supporters said the move would simplify administration and make the program more usable for landlords in higher‑cost parts of the island, potentially boosting participation in West Hawaii where rental participation and Section 8 uptake have lagged. "Detaching the payment standard and moving to AMI will make certification and administration more stable," Housing Administrator Kehau Costa told the council, noting HUD AMI releases arrive earlier and provide a consistent benchmark.
Opponents and questioners warned that a single, county‑wide AMI threshold could unevenly expand eligibility in areas where market rents are lower—effectively delivering tax benefits to landlords already charging market rents in parts of East Hawaii. Real Property Tax Administrator Lisa Meara presented department data: the program currently covers 2,541 dwelling units total; roughly 246 units (about 9.6%) are in West Hawaii; and only about 4.3% of parcels in the countyaffordable program are charging the existing maximum allowed rent. Meara also noted that 7.2% of parcels sit within $100 of the current cap, and 88.5% are not close to the cap.
Council members suggested a range of technical responses, including: a study to create geographic groupings (East/West or coarse clusters) rather than 31 ZIP-code rates; rulemaking to allow OHCD some flexibility; or a blended or dual standard for different subareas. Housing Administrator Costa said the policy goal is to incentivize landlords in West Hawaii to participate in affordable or Section 8 programs and to reduce administrative churn caused by annual payment-standard shifts.
After extended discussion, council adopted Bill 39 on first reading with a roll call vote of 8 ayes, 1 no (Councilmember Kaguawata opposed). The measure will return for later readings where members indicated they may propose amendments to address geographic equity and revenue questions.
Next steps: committee work and possible amendments to consider geographic splits or a study to recommend an administrable methodology for differing subarea standards.
