Creation of real property tax exemption proposed as incentive for affordable rentals

The Maui County Council gave initial approval Wednesday to Bill 168, which is aimed at creating a new real property tax exemption for homes rented at no more than 70% of their fair market value.

The fair market rent would be set by the US Department of Housing and Urban Development, beginning with the tax year starting July 1, 2027. According to a report filed by the Council’s Special Committee on Real Property Tax Reform, chaired by Council Chair Alice Lee.

According to the Department of Finance, there are 4,173 parcels in the long-term rental program, and the estimated annual cost of the proposed property tax exemption would be $1.2 million if all the property owners took advantage of the new exemption.

For landlords charging no more than 70% of fair market rent, the property would be completely exempt from real property taxes if the property’s value is no more than $500,000. For higher-value properties, the amount of the exemption would be $100,000.

In other action Wednesday, council members passed Bills 177 and 178, amending the Maui County fiscal 2026 budget and authorizing Mayor Richard Bissen to enter into intergovernmental agreements for loans from the state of Hawaiʻi’s Water Pollution Control Revolving Fund.

The loans would provide $22,409,000 for the Department of Environmental Management to upgrade the returned activated sludge dewatering system at the Lahaina Wastewater Reclamation Facility. The state loan would bring total project funding up to $34.3 million.

The Council also passed Bill 3 on first reading. The measure amends the fiscal 2026 budget, increasing funding for the Department of Housing’s interim financing and buy-back revolving fund by $2 million.

According to a letter from Budget Director Lesley Milner, the money is insurance proceeds from the Komohana Hale Apartments damaged in the August 2023 Lahaina wildfires. The money will be used for pre-development costs, including project design, planning and site work to rebuild the apartment complex.