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Committee advances bill to preserve homeowner tax benefits for owners who rent long term
Summary
The Hawaii County Committee on Finance voted to recommend first‑reading passage of Bill 174, which would clarify that owner‑occupied properties with long‑term residential rentals (six months or longer) can retain homeowner tax classification; supporters said the change removes confusion in how the Real Property Tax Office has been interpreting the code.
The Committee on Finance voted July 23 to forward Bill 174 to the County Council with a favorable recommendation, aiming to clarify and preserve homeowner tax benefits for owner‑occupied properties that include long‑term rentals.
Supporters said the bill would formalize an interpretation many homeowners have relied on and extend the homeowner tax classification to owner‑occupied properties that rent rooms or accessory dwelling units (ADUs/Ohanas) on a long‑term basis. A committee member sponsoring the measure said it “lets homeowners keep their lowest tax rate, their 3% cap on annual real property tax rate and their homeowner's exemption when renting long term on their primary property.”
Two residents testified in favor. Noreen Louise, who spoke from Hilo, described a multi‑generation, 10‑acre family parcel with two long‑term rentals and said the Real Property Tax Office notified her that those rentals made her ineligible for the homeowner tax rate. "We are being hit from all angles and hope that the council will reconsider the ruling on long term rentals," she said. Kyra Bronson, a District 7 homeowner, said she had previously received the homeowner classification while renting part of her home and that inconsistent interpretations by tax‑office staff between 2019 and 2023 led to a denial; she said corporation counsel later agreed the code allowed long‑term renting while retaining the homeowner rate.
Lisa Muir, Real Property Tax administrator, told the committee that the bill’s change (removing the word "exclusively" from one subsection) was intended to avoid conflicting language in the code and to permit long‑term rentals while retaining the principal‑residence requirement. Muir said there are currently 62 parcels enrolled both in the homeowner exemption and the affordable rental program and that county staff cannot say, without further review, how many taxpayers might shift classifications if the bill becomes law. She also noted enforcement practicalities—often a neighbor complaint or an owner’s application triggers review.
Corporation Counsel Elizabeth Strand said she needed additional time to vet precise phrasing to avoid unintended openings in the code but agreed the homeowner principal‑residence test remains a restrictive one and that the bill is intended to permit specific owner‑occupied long‑term rentals without broadly expanding eligibility.
The committee had a motion on the floor to recommend first reading; Member Kogiwada moved and Member Galimba seconded. The clerk recorded nine members in favor and the motion carried. The committee asked staff to return with any suggested clarifying language or rule drafting needed to implement the council’s intent.
What's next: Bill 174 was forwarded to the full County Council for first reading; staff were asked to work with corporation counsel to clarify language and enforcement ramifications before subsequent readings.
