How property values are set and classified for taxes

(a) Except as provided below, the director of finance shall cause the market value of all taxable real property to be determined and annually assessed by the market data, income and cost approaches to value using appropriate systematic methods suitable for mass valuation of properties for taxation purposes, so selected and applied to obtain, as far as possible, uniform and equalized assessments throughout the County. In making such determination and assessment, the director shall separately value and assess within each class established in accordance with subsection (e) of this section: (1) Buildings. In determining the value of buildings, consideration shall be given to any additions, alterations, remodeling, modifications or other new construction, improvement or repair work undertaken upon or made to existing buildings as the same may result in higher assessable valuation of said buildings. (2) All other real property, exclusive of buildings. Exception. The value of land classified and used for agriculture as determined pursuant to section 19-57, 19-57.1, 19-59, 19-60, or 19-61 shall be the value of such land for such agricultural use without regard to any value that such land might have for other purposes or uses. The director shall update the agricultural use values at least every five years and shall consult with agriculturalists and/or experts in the field when making such determination. The establishment of the agricultural use rate values shall be made in accordance with chapter 91, Hawai‘i Revised Statutes. (3) Real property leased and located within the Waikoloa Workforce Housing project shall be valued under this chapter based on comparison with like properties within the same project. (b) So far as practicable, records shall be compiled and kept which shall show the methods established by or under the authority of the director, for the determination of values. (c) Whenever land has been divided into lots or parcels as provided by law, each such lot or parcel shall be separately assessed. SUPP. 17 (1-2025) 19-26 REAL PROPERTY TAXES § 19-53 (d) When a condominium property regime is declared for a property, each unit shall be classified upon consideration of its actual use into one of the general classes in the same manner as land. (e) Classification of land: (1) Except as otherwise provided in subsection (e)(2) of this section, land shall be classified, upon consideration of its highest and best use, into the following general classes: (A) Residential; (B) Affordable rental housing; (C) Apartment; (D) Hotel and resort; (E) Commercial; (F) Industrial; (G) Agricultural or native forests; (H) Conservation; (I) Homeowner; and (J) Long-term rental. (2) In assigning land to one of the general classes the director of finance shall give major consideration to the districting established by the land use commission pursuant to chapter 205, Hawai‘i Revised Statutes, the districting established by the County in its general plan and zoning ordinance, use classifications established in the general plan of the State, and such other factors which influence highest and best use, except that parcels which are used as the owner’s principal residence shall be classified as “homeowner” without regard to the highest and best use, provided that the director has granted to the owner a home exemption in accordance with sections 19-71 to 19-72. (A) The homeowner class is exclusively reserved for properties which are used as the owner’s principal residence. Uses which shall not qualify as “homeowner” include: (i) Real property which is used for commercial or income-producing purposes, except as exempted under section 19-71(a) or (b). (ii) Real property which is used for residential rental purposes for a term less than six months, except as exempted under section 19-71(a) and affordable rental housing. (iii) Real property which is used for any purpose other than the owner’s principal residence, with the exception of any property valued according to its agricultural use pursuant to sections 19-57, 19-57.1, 19-59, 19-60, or 19-61. (B) The affordable rental housing class is exclusively reserved for properties which meet the eligible requirements for this class and have the annual required application timely filed. Real property which is used for commercial or income-producing purposes shall not qualify as “affordable rental housing,” except: (i) Real property with uses legally permitted as a home occupation in accordance with the zoning code; or 19-27 SUPP. 20 (7-2026) (ii) Real property with agricultural use pursuant to sections 19-57, 19-57.1, 19-59, 19-60, or 19-61. (3) Whenever there is an overlap or contradiction in districting or use classification between the County and the State, zoned districts by the County shall take precedence. (f) In determining the value of buildings, consideration shall be given to any additions, alterations, remodeling, modifications or other new construction, improvement or repair work undertaken upon or made to existing buildings as the same may result in higher assessable valuation of said buildings; provided, however, that the increase in value resulting from any additions, alterations, modifications or other new construction, improvements or repair work to buildings undertaken or made by the owner-occupant thereof pursuant to the requirements of any urban redevelopment, rehabilitation or conservation project under the provisions of part II of chapter 53, Hawai‘i Revised Statutes, shall not increase the assessable valuation of any building for a period of seven years from the date of certification as hereinafter provided. It is further provided that the owner-occupant shall file with the director of finance, in the manner and place which the director may designate, a statement of the details of the improvements certified in the following manner: (1) In the case of additions, alterations, modifications or other new construction, improvements or repair work to a building that are undertaken pursuant to any urban redevelopment, rehabilitation or conservation project as hereinabove mentioned, the statement shall be certified by the mayor or any government official designated by the mayor and approved by the council, that the additions, alterations, modifications, or other new construction, improvement or repair work to the buildings were made and satisfactorily comply with the particular urban redevelopment, rehabilitation or conservation act provision, or (2) In the case of maintenance or repairs to a residential building undertaken pursuant to any health, safety, sanitation or other governmental code provision, the statement shall be certified by the mayor or any governmental official designated by the mayor and approved by the council, that: (A) The building was inspected by them and found to be substandard when the owner-occupant made the claim, and (B) The maintenance or repairs to the buildings were made and satisfactorily comply with the particular code provision. SUPP. 17 (1-2025) 19-28 REAL PROPERTY TAXES § 19-53 (g) Limitation on homeowner assessment. (1) For properties in the homeowner class, the assessed value of the property shall not increase more than three percent per tax year until the parcel is sold or any portion thereof sold by way of conveyance which is subject to conveyance tax under terms of chapter 247, Hawai‘i Revised Statutes, at which time the property will be assessed at market value. (2) Notwithstanding anything to the contrary, the assessed value of a property in the homeowner class shall not increase more than three percent per tax year from the most recent assessed value under a nondedicated agricultural use assessment or agricultural dedication, provided that: (A) The property receives a homeowner exemption in the amount no less than that which a taxpayer sixty-five years of age or over is entitled under section 19-71(d); (B) The property was assessed according to its agricultural use value for no less than ten tax years within the fifteen tax years immediately preceding the first tax year that the property satisfies the requirement set forth in subparagraph (A); and (C) A petition to be considered for the provisions of this paragraph is received by the director in a format prescribed by the director, in the case of a property that, prior to February 11, 2026, ceased to be assessed according to its agricultural use. (3) In addition to the three percent limit of this subsection, any improvements undertaken on the property within the tax year shall be assessed at market value. (4) All parcels entering this class shall have the assessed value as of January 1 of the following year and be subject to the above provisions. (h) Eligibility for affordable rental housing class. (1) Real property utilized for residential rental purposes shall be eligible for classification as affordable rental housing, provided that all rental units situated thereon are either rented at affordable rental rates or are certified by the office of housing and community development as section 8 rental units with an initial lease term of one year. (2) Affordable rental housing properties shall not be excluded by the owner’s principal residence also being on the property. (3) For properties in the affordable rental housing class as of January 1, 2008, the assessed value of the property shall not increase more than three percent per tax year until the parcel is sold or any portion thereof sold by way of conveyance which is subject to conveyance tax under terms of chapter 247, Hawai‘i Revised Statutes, at which time the property will be assessed at market value. In addition to the three percent limit of this subsection, any improvements undertaken on the property within the tax year shall be assessed at market value. All parcels entering this class after January 1, 2008, shall have the assessed value as of January 1 of the following year and be subject to the above provisions. 19-29 SUPP. 20 (7-2026) (i) Application for the affordable rental housing class. (1) No affordable rental housing classification shall be granted unless the claimant shall annually have filed with the department of finance, on or before December 31 preceding the tax year for which such classification is claimed, a claim for such classification in such form as shall be prescribed by the department and shall include but not be limited to rental agreements signed by the renter or excise tax returns. (2) No affordable rental housing classification shall be granted unless and until a Hawai‘i County real property tax assessor evaluates the property and establishes its current market value. (3) The landowner shall submit a certification of rental rates affirming that the rental rates charged to all renters on that parcel shall be at the affordable rental rate and that rate will be maintained for the calendar year. (j) Breach of affordable rental housing class. (1) Rental of any unit during the calendar year at a rate higher than the affordable rental rate shall breach the classification. (2) Any conveyance of the parcel or portion of the parcel subject to conveyance tax under terms of chapter 247, Hawai‘i Revised Statutes, shall breach the classification. (3) Upon breach of the classification, the tax assessment shall be cancelled retroactive to the date of the classification, but for not more than the current year, and all difference in the amount of taxes that were paid and those that would have been due from the assessment in the higher classification shall be payable with a ten percent penalty. (k) Eligibility for long-term rental class. (1) Real property occupied under a signed lease for six consecutive months or more to the same tenant(s) shall be eligible. (2) Except for the owner’s principal residence, all dwelling units on long-term rental properties must be leased. (3) No property in the residential class with a net taxable real property value of $2,000,000 or more shall be eligible for the long-term rental classification. (4) The long-term rental class is exclusively reserved for properties that meet the eligibility requirements for this class and have the annual required application timely filed. Real property that is used for commercial or income-producing purposes shall not qualify as “long-term rental,” except: (A) Real property with uses legally permitted as a home occupation in accordance with the zoning code; or (B) Real property with agricultural use pursuant to sections 19-57, 19-57.1, 19-59, 19-60, or 19-61. (l) Application for long-term rental class. No long-term rental classification shall be granted unless the claimant shall annually have filed with the department of finance a claim for such classification in such form as shall be prescribed by the department. The claim shall include, but not be limited to, a signed lease or excise tax returns, or both. Claims shall be accepted from January 1 through December 31 for the next applicable tax year. SUPP. 20 (7-2026) 19-30 REAL PROPERTY TAXES § 19-53 (m) Breach of long-term rental class. (1) Failure of the property owner to maintain a lease for at least six consecutive months to the same tenant(s) shall breach the classification. (2) Any use of the property for vacation rental use shall breach the classification. (3) Any conveyance of the property or portion of the property subject to conveyance tax under chapter 247, Hawai‘i Revised Statutes, as amended, shall breach the classification. (4) Upon breach of the classification as stated in this subsection, the tax assessment shall be cancelled retroactive to the date of the classification, but for not more than the current year, and all difference in the amount of taxes that were paid and those that would have been due from the assessment in the higher classification shall be payable with a ten percent penalty. 19-30.1 SUPP. 20 (7-2026) This page intentionally left blank. SUPP. 20 (7-2026) 19-30.2 REAL PROPERTY TAXES § 19-53.1