These Historic Oʻahu Homes Pay Practically No Property Tax

At the base of Diamond Head Crater, the 4,000-square-foot oceanfront Cloward Residence is a stunning relic from 1932. 

Named after its original owners, prominent Hawaiʻi neurosurgeon Dr. Ralph B. Cloward and his wife, the property was the setting for elegant gatherings during the 1950s and 1960s where guests could enjoy the sea views framed by the palm trees on the manicured lawn. 

Based on its $16.2 million value today, its current owner, a Denver-based company, would expect to pay an annual tax bill of $57,000. 

What they actually pay: $300. 

The home is one of 470 residential properties on Oʻahu that claim a historic tax designation that slashes tax bills for property owners. More properties than ever are claiming this tax cut, and a Civil Beat review shows many of those enjoying its benefits are among the island’s wealthiest. 

The county enables these property owners to exempt up to 100% of their home value from property taxes because of the historic significance of their homes.

The program was established in 2011 to keep more of Honolulu’s historic architecture from demolition and redevelopment. As a community benefit, the public is supposed to be able to enjoy at least visual access to these properties, although that access can vary widely, according to a Civil Beat survey.

County lawmakers, including Honolulu City Council members Esther Kiaʻāina and Radiant Cordero, say the county’s tax breaks, including this one, deserve a more critical look. 

“I think we need to be fair in providing exemptions while everybody else is paying fair market value,” Kiaʻāina said Tuesday. 

Bulwark Against Developers

Home and commercial business owners who apply to the Honolulu Real Property Assessment Division and have their home assessed by the State Historic Preservation Division may qualify for the historic designation. 

The result is that instead of paying thousands of dollars in property taxes, the owners pay a flat $300.

A review of the city’s most recent list of historic properties shows the exemption has frozen the tax bills of some island homeowners at an extraordinarily low level even as the values of these properties, including many high-end homes, have increased.

Of the 470 residential properties registered with the program, three-quarters are valued higher than the island’s average single family home price of $1.47 million. The average value of a home in the program is $2.6 million. 

Seventy properties in the program pay more than the $300 annual fee to account for modern additions to the buildings that aren’t designated as historic. There are 22 historic commercial buildings that pay a reduced property tax bill calculated on 50% of their valuation. 

Robert Fox, the owner of designated historic home and superfan of the historic tax exemption, said the program is a critical incentive for property owners to keep their historic homes intact.  

“You know it's like riding a horse,” he said. “You can use a stick if you want to, but mostly you use a carrot.”

Fox, who has painstakingly renovated a three-bedroom cottage dating from 1943 on University Avenue, said the $300 flat fee is the kind of generous benefit required to counteract the deep pockets and appetites of developers. 

“There are some greedy ass bastards that come to the islands,” he said, “and all they want to do is clear cut everything.” 

But the exemption itself doesn’t guarantee preservation of a residence, with owners free to sell or otherwise dispose  of a property when the designation comes up for renewal every 10 years. 

And there are some other quirks in the program. The city apparently allows owners to claim the full residential historic property tax exemption while also using the property as a legal transient vacation rental.

One example is John Walker House, a Craftsman Bungalow built in 1934 on Mokulua Drive in Kailua.

An ad for the rental property says it was one of the first homes to “take advantage of Lanikai’s heavenly reef-protected waters,” where the “enchanting environment transports you back to an era of graceful living.”

It is valued at $5.6 million. But under the historic designation it received in 2017, the taxable value is $0.

The historic designation allowed the owner, Walker House LLC, which has a tax address based in Massachusetts, to receive a refund of $29,000 in property taxes in 2016. The LLC has paid $300 per year ever since.  

The property began operating as a permitted transient vacation rental in 2024, renting for $2,600 a night. 

The operation is fully compliant from the perspective of the City and County of Honolulu, city budget director Andy Kawano said. 

The program has seen increased participation in the last eight years with 128 new properties added to it. In all, the city forfeits $8.1 million a year in lost revenue, Kawano said. 

That puts a strain on city resources, Kawano said. It leaves less money to work with when funding city obligations, like new collective bargaining agreements that will increase pay for city employees in the next four years. 

Kawano said that “these property owners are not struggling financially, many of them are well-to-do” and most claim a full exemption.

The total assessed value of those Honolulu homes is $1.3 billion, and the total exemption is $1.2 billion. 

Kawano said the City Council might consider setting limits on the amount of property value that could be considered exempt rather than the full valuation for properties. 

“There is abuse in the system,” Kiaʻāina said.

It would be fairly easy to disallow designated historic houses that claim the property tax exemption from operating as a TVU, she said.

But Kiaʻāina says that a council permitted interaction group would be a better vehicle for assessing all of the county’s property tax exemptions, and there is a desire within the council to do that. 

Tax Benefits Come With Obligations

In exchange for the tax break, the historic homes are supposed to provide a benefit to the community. 

The vision of the program, according to a description by the Historic Hawaiʻi Foundation, is “the city benefits by having its history retained and made available for all to find enjoyment, information and education about the community and its history.”

To retain the designation and tax exemption, for a period of 10 years the property owner has to maintain the property in average or better condition, display an informational plaque and provide the public with visual access only to the property — either from the street or by allowing access one day per month. 

But that doesn’t always happen.

A 2013 audit found “many violations of and non-compliance with historical residential property dedication requirements,” and the city was losing revenue because of inaccurate record keeping. 

The audit found property assessment division staff weren’t conducting enough inspections to ensure owners were complying with those conditions.  

Some of the same issues remained in 2019 when there was a follow-up audit, but there was general consensus that the program was on a better track. 

A refresh of the ordinance that went into effect two years ago removed the ability of owners to opt out of the program in under 10 years if they wanted to drastically modify the house or demolish it. New owners of historically registered properties have to conform to the program requirements.  

But a survey of properties selected at random by Civil Beat reporters this month show there are some obstacles to public access.

Some homes were difficult to get to, or lacked information on the alternative viewing access that owners are supposed to make available on the second Saturday of the month between 9 a.m. and 4 p.m.

Five of the 18 properties selected and visited at random were not visible from the street, but all of them displayed the required historic plaque. 

Near the Tantalus Summit, two adjacent historic properties on Poloke Place cannot be seen from the road. Overgrown palm trees block most of the view to one estate, while the automatic modern white entrance to the car garage is clearly visible on the other. Their plaques, however, are prominent. 

The former Walker Estate at 2616 Pali Highway – now owned by an affiliate of a Taiwanese Buddhist organization – is visible on one Saturday of the month, according to the information posted on a sign on the property fence near the plaque. 

A reporter who attempted to visit the 30 properties of the La Pietra Townhouse complex in Diamond Head, built in 1971, was stopped by a security guard stationed at the gateway to the fenced community. The guard was not aware of the historic designation of the buildings there and referred the reporter to the owners. 

Other homes were clearly marked with a plaque and in average or better condition. 

Kawano said compliance is an ongoing process and that the city issues between two to six non-compliance letters per year, although there had been none issued in the current tax year. 

Those letters give the property owner a 60-day grace period to correct any issues. Since 2018, the department has never resorted to using the penalties available under the ordinance that include revoking the exemption and collecting the property taxes forgone with 12% interest, 

But with the program now 15 years old, even supporters of the goals of the program, including Kiaʻāina, say it needs to be overhauled. 

“It’s good to have exemptions,” she said, “but at the same time we’re always looking to assess programs to ensure that they’re working, and we can maximize the revenues we can generate.”

The effectiveness of the program is something that the Oʻahu Historic Preservation Commission could also take up, commission chair Katie Stephens said. 

To her knowledge there has not been a review of whether the program has enabled more of Honolulu’s historic properties to be preserved.  

Stephens, who has been in the role since December, said aside from the tax exemption, a refresh of the program could consider other benefits that would encourage owners to make upgrades to the home so that they better conform to the defining characteristics that make them historic. The city could encouraged restoration projects or the removal of late additions that detract from a home's historic integrity.

Stephens said that from a preservation point of view, there can be value in allowing more accessibility and use of such buildings for commercial purposes, because there’s “clearly an incentive for them to be maintained in good condition.”

CORRECTION: A previous version of this story misstated Radiant Cordero's committee assignment.