In twelve days, Hawai'i County mails the first property tax installment under a rate structure that didn't exist a year ago. If you own a two-bedroom unit at a building like Kona Reef or Kanaloa at Kona and you've been renting it to the same tenant since last fall, the bill landing on August 20 could reflect a brand-new tax class built specifically for you. It could also reflect the old, much higher rate, because you never filed the paperwork that tells the county your condo isn't a vacation rental anymore.
That gap between what's possible and what actually shows up in the mailbox is the real story behind Hawai'i County's new Long-Term Rental classification, which took effect with the fiscal year that began July 1, 2026. The rate itself is good news. The adoption of it is where things get interesting.
Three classes, one condo, three different bills
Hawai'i County taxes real property based on how it's used, not just what it's worth. For the 2026-27 fiscal year, a condo owner in North Kona could land in any of several classes depending on occupancy and paperwork on file with the Real Property Tax Division.
| Classification | Rate per $1,000 of net taxable value | Typical North Kona owner |
|---|---|---|
| Homeowner (owner-occupied, exemption filed) | $5.75 | Primary resident, 200+ days a year |
| Affordable Rental | $5.75 | Units in a qualifying affordable housing program |
| Long-Term Rental (new for 2026-27) | $7.75 | Same tenant, 180+ days, under $2M net taxable value |
| Residential, Non-Owner-Occupied, under $2M | $11.10 | Second home, vacant investment unit, or STVR |
| Residential, Non-Owner-Occupied, $2M to $4M | $14.50 | Higher-value second home or investment condo |
| Residential, Non-Owner-Occupied, over $4M | $17.00 | Ultra-luxury investment property, new tier for 2026 |
The spread is the point. A condo owner who moves from the general Residential Non-Owner-Occupied class into the new Long-Term Rental class isn't shaving a little off the bill. On a unit with a net taxable value of $500,000, that shift is worth something in the neighborhood of $1,675 a year. For an oceanfront two-bedroom, the swing is larger.
What makes this different from every other Hawai'i tax conversation is that the new middle tier didn't exist before this fiscal year. The county created it on purpose, to give owners of second homes and vacation rentals a reason to put a local, long-term tenant in the unit instead of leaving it empty between guest bookings or listing it on a nightly platform.
Why hardly anyone has the middle rate yet
Here's where the story turns. According to testimony the Grassroot Institute of Hawaii submitted to the county council ahead of the May 19, 2026 rate hearing, only about 880 properties across the entire county were positioned to fall into the new Long-Term Rental class for the coming year, compared with more than 37,000 properties in the ordinary residential class. The institute's own read on that gap is that thousands of properties are likely already being rented long-term, but their owners either don't know the class exists, missed the filing window, or assumed a lease alone was enough.
A tax class only works if someone claims it.
That line matters because Hawai'i's property tax system has never been automatic. Filing for the Homeowner exemption has always required paperwork, and the new Long-Term Rental class follows the same logic. Nobody at closing hands you this classification. You have to know it's there, and you have to ask for it every year.
For a North Kona condo market built heavily around 1970s-to-1990s complexes that permit short-term vacation rentals, that awareness gap is worth taking seriously. Buildings like Casa De Emdeko, Sea Village, Kona By The Sea, Kona Bali Kai, and Kanaloa at Kona sit inside resort or vacation zoning that predates the county's stricter STVR rules, which means a meaningful share of North Kona's condo inventory is legally set up to run either as nightly rentals or as long-term leases. The tax code now rewards one of those choices more than the other, and most owners haven't adjusted their filing to match.
The $2 million ceiling nobody mentions at closing
The Long-Term Rental class isn't available to every condo, regardless of how the unit is actually used. The classification caps out at a net taxable value of $2 million. Above that line, even a unit leased to the same tenant for more than 180 days falls back into the standard Residential Non-Owner-Occupied class, at $11.10, $14.50, or $17.00 depending on where the value lands.
That ceiling is worth watching closely in North Kona, because this is one of the few Big Island submarkets where condo prices routinely stretch toward it. As of mid-2026, Kailua-Kona condo prices run from roughly $375,000 for an entry-level unit up to $3.5 million or more for direct-oceanfront penthouses at buildings such as Kona By The Sea and Kanaloa at Kona, with the year-to-date median sitting near $570,000, down about 12 percent year over year. Net taxable value typically runs below what a unit would actually sell for, so a $2 million assessed threshold doesn't map neatly onto a $2 million sale price. Still, an owner considering long-term leasing an oceanfront penthouse needs to run the assessed value against that cap before assuming the new class applies.
What actually disqualifies you after you file
Filing for the Long-Term Rental class isn't the end of the process. The county built enforcement teeth into it. To keep the classification, every unit on the parcel has to be leased to the same tenant for longer than 180 days, and the county allows a documented window of up to twelve months of vacancy if a unit is genuinely between long-term tenants or under renovation. Advertise the same unit as a nightly or weekly stay anywhere in that window, and the county can strip the classification retroactively and add a 10 percent penalty on top of the back taxes.
That detail should concern any owner who's tried to keep a unit flexible, running it as a long-term rental for most of the year while picking up short stays during slow stretches. Under this framework, that flexibility is exactly what disqualifies the unit. The classification asks for a single, documented use, not a hybrid one.
The December 31 date that decides your July bill
Hawai'i County's Real Property Tax Division runs on a filing calendar that most owners only think about once, usually the year they buy. Applications filed between July 1 and December 31 take effect the following July 1, which means anything filed after this year's window closes won't change a bill until the 2027-28 fiscal year even if the underlying lease has been in place for years.
For a North Kona owner sitting on a condo they've quietly rented long-term since converting it out of STVR use, that means the clock that matters most this year isn't the August 20 payment due date. It's the filing deadline that determines whether next July's bill reflects $7.75 per thousand or $11.10 and up.
Frequently asked questions
Can I keep my unit's STVR permit on file and still claim the Long-Term Rental tax class? No. The classification requires the same tenant for more than 180 days, and marketing or listing the unit for short-term stays during that period can trigger a retroactive reclassification and penalty, regardless of what the building's zoning otherwise allows.
Is the Long-Term Rental class the same thing as the Homeowner exemption? No. The Homeowner exemption and rate apply to a primary residence you occupy yourself for more than 200 days a year. The Long-Term Rental class applies to a unit you own but rent out, as long as it's leased to one tenant for more than 180 days and stays under the $2 million net taxable value cap.
What if my tenant moves out partway through the year? The county allows up to twelve months of documented vacancy while a unit is actively being marketed for another long-term tenant or is under renovation, without automatically losing the classification. Keep records of the listing and the lease history in case the county asks.
If you're weighing whether a North Kona condo makes more sense as a long-term lease or a vacation rental under this new math, that's exactly the kind of question worth working through before you file anything with the county, not after. Kona Pacific Realty works North Kona's condo inventory closely enough to help you think through the numbers on a specific building and unit. Get your free home valuation or connect with your Kailua-Kona agent to talk through what your unit's classification actually looks like before the next filing window closes.
