The Diamond Head Tax Line Moves in 2027. Who Ends Up Covering the Difference?

Starting with the tax year that begins July 1, 2027, Honolulu will redraw its Residential A property tax class. The threshold rises from $1 million to $1.3 million, and a new third tier starts at $3.5 million. Most coverage calls this relief for modest homes that rising values pulled into the class. For those homes, it is relief. The ordinance sets the brackets and leaves the rates for later, though. The city's own assessment division has noted that a smaller group of owners may end up making up the revenue the class loses. On Diamond Head, that smaller group is mostly the estates.

The timing matters for anyone buying a non-owner-occupied home here this fall or winter. The assessed value that will apply to the 2027–28 tax year is set as of October 1, 2026, and the notices arrive December 15. The rate per $1,000 won't be known until the City Council sets it by June 15, 2027. A buyer who closes in between commits to the purchase knowing one of those two numbers but not the other.

Eight Months Between the Value and the Rate

The Real Property Assessment Division published its calendar for the 2027 assessment year in a September 15, 2026 presentation. As of mid-October, three of the dates have already passed.

The appeal window closes about five months before the rates exist. An owner who gets a December notice can contest the value. By the time the Council decides what that value will cost, the window has already closed.

Why a Higher Threshold Does Not Mean a Lower Bill at the Top

Ordinance 25-44 started as Bill 34 (2024). Councilmember Esther Kiaʻāina introduced it in May 2024, and it passed third reading on October 1, 2025. In the Council record from June 2024, Kiaʻāina said the $1.3 million bands responded to concerns from Residential A owners in her district. At the September 2025 hearing, Councilmember Andria Tupola said rising values had swept modest multigenerational homes into a class built for something else.

The ordinance defines the brackets but sets no future dollar rates. Honolulu sets those every year through the budget. The assessment division addressed what follows from that in its September 2026 presentation, which reads in part:

"More than 51% of the current Res A population has an assessed value below $1.3 million. It will be interesting to see what the tax rates will be for Res A if the administration and/or city council desires next year's Res A revenue to be revenue-neutral, or to raise the same amount without the threshold increase. Less than half of the remaining Res A population will need to offset the loss of Res A parcels due to the threshold increase."

Revenue neutrality is a choice, not a requirement. The Council could accept less revenue from the class. Even so, the city's own framing describes the math plainly. If the class has to produce the same total, fewer parcels produce it. Those remaining parcels are, by definition, the higher-value ones without a home exemption. The new Tier 3 above $3.5 million gives the Council a separate rate it can set for exactly that slice. The record we reviewed does not explain why $3.5 million was chosen. We found no projected Tier 3 rate in any document as of September 2026.

The class's tax base is already growing faster than the general residential base. In the city's certified rolls, gross Residential A valuation rose from $48.653 billion for FY2026 to $49.901 billion for FY2027, about 2.6%. Gross Residential valuation rose about 0.9% over the same period.

Where Diamond Head Sits Against the New Lines

In September 2026, Honolulu Board of REALTORS figures put the Diamond Head region's single-family median at $1,478,000, down 4.6% from a year earlier, on 36 closed sales. The Star-Advertiser reported an Oʻahu-wide median of $1,110,000 for the same month. The region covers 26 neighborhoods, from Kapahulu and Kaimukī to Kahala. Its median home sits just above the new $1.3 million threshold. The homes along Diamond Head Road and the slopes above it sit well past $3.5 million.

A non-exempt house or condo assessed around $1.2 million leaves Residential A entirely. One near the regional median stays in the class, but most of its value falls in Tier 1. A non-exempt estate has value above $3.5 million taxed at whatever Tier 3 rate the Council sets.

The illustration below uses only the current FY2027 rates. Residential is $3.50 per $1,000. Residential A is $4.00 per $1,000 on the first $1 million and $11.40 above that. These rates were unchanged from FY2026. The examples show how the class line works today. They do not forecast 2027–28 bills.

The exempt figures subtract the current $120,000 home exemption before applying $3.50 per $1,000. On the $4 million home, the gap is $24,620 a year at today's rates. From July 2027, $3.5 million of that home's value will fall in Tier 1 and Tier 2, and the remaining $500,000 will fall in Tier 3. The size of the gap after that depends on three rates the Council has not set.

The Exemption Is the Line That Decides the Class

For an improved single-family parcel or condo unit at or above the threshold, and in qualifying residential zoning or dedicated for residential use, the deciding fact between Residential and Residential A is whether it carries a home exemption. The amended code keeps that structure and changes only the dollar threshold to $1.3 million. Vacant land zoned R-3.5 through R-20 is the exception. It enters Residential A on value alone. That matters for anyone holding a buildable lot on the hillside.

The exemption applies only to a home the owner occupies as a principal residence. Any property used as a second home, held for later use, or not occupied by its owner as a primary home goes without it, whoever the owner is. The exemption amounts themselves are also changing. They are $120,000, or $160,000 for an owner 65 or older, for FY2027. They rise to $140,000 and $180,000 for tax years beginning July 1, 2027, under Ordinances 25-43 and 25-42. The filing deadline that feeds the 2027–28 roll was September 30, 2026. Whether a parcel is classified with or without an exemption for that year has largely been settled already.

The Council Has Turned Down One Tool and Kept This One

Honolulu has also considered a direct tax on empty homes. Bill 46 (2024) was postponed by a 7–2 vote in December 2024 and filed without enactment on August 1, 2026, under the two-year rule for pending bills. According to Honolulu Civil Beat, the Charter Commission voted 8–5 on putting the question on the November 2026 ballot, one vote short of the nine it needed.

Interest in taxing high-value homes has not gone away. In March 2026, Hawaiʻi Public Radio reported that city officials discussed empty-homes taxation and higher taxes on high-value homes among possible revenue ideas. The report described those as discussions, not adopted measures. With the empty-homes tax filed, the annual rate-setting for Residential A is the tool still in active use. Ordinance 25-44 gives it a new top bracket, and the first rate for that bracket will be set in June 2027.

FAQ

Does Ordinance 25-44 change anything for the current tax year? No. The FY2027 rates and the $1 million threshold apply through June 30, 2027. The new tiers begin with the tax year starting July 1, 2027.

Will the December 2026 assessment notice show the new tax? It will show the assessed value as of October 1, 2026. The Council sets the rates later, by June 15, 2027.

Did the ordinance change anything else? Yes. It also raises the Transient Vacation class's first two tiers to a $900,000 break and adds a third tier above $2 million.

If you are weighing a non-owner-occupied purchase or a hold on Diamond Head before the June 2027 rate decision, The CHOI Group can model the carrying cost against your property's December assessment and walk you through how the new tiers apply to it. Request a confidential home valuation to start that conversation.

This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.