The disclosure form always looks the same. Somewhere on page three of a Kula listing packet, a single checkbox tells you everything and nothing: Wastewater System: Cesspool. Most buyers do the same thing in that moment. They picture a five-figure number, subtract it from their offer, and move on. That number, the one both sides are quietly negotiating around, was set by a law that expired in 2020, according to the Hawai'i Department of Health. Hawai'i has since rewritten the terms twice, most recently this July.
That gap between the assumed cost and the real one is worth more attention than the sale price itself.
The math still in circulation is five years stale
Hawai'i has been managing its cesspool problem in public view since 2015, when Act 120 banned new cesspool construction statewide and paired the ban with a temporary income tax credit, up to $10,000 per qualified cesspool, for owners who converted to septic or connected to sewer. That credit ran through tax year 2020 and then closed. Two years later, in 2017, Act 125 set the deadline everyone in Hawai'i real estate now knows by heart: every remaining cesspool in the state must be upgraded, converted, or closed by January 1, 2050.
What happened in between those two dates and today is the part that hasn't filtered into how Kula properties get priced. From 2020 until this year's financing change, the mandatory deadline had no financial help attached to it. The old $10,000 credit no longer applies; the financing options described below are different.
What actually changed this year
In July 2026, Governor Josh Green signed HB 1618 into law as Act 204, broadening the financing tools available through the state's Green Infrastructure Authority specifically for homeowners converting or upgrading cesspools. That's a financing change, not a tax credit, but it matters for the same reason: it lowers the barrier to converting before the deadline forces the issue, rather than waiting until contractor demand tightens as 2050 approaches.
Separately, a companion pair of bills introduced this year, HB2079 and SB2525, would reinstate the income tax credit that lapsed in 2020, adjusted upward and structured by system type. As introduced, the credit would equal 35 percent of qualified conversion expenses, capped by the type of system installed, and would apply to taxable years beginning after December 31, 2026. That means if it becomes law, the earliest tax year it touches is 2027.
Here's what that credit structure would mean in dollars, using the cost ranges cited in the same legislative findings:
| Conversion type | Typical project cost | Proposed credit cap (35%) | Net cost if the credit passes |
|---|---|---|---|
| Upgrade to septic tank system | $20,000 to $40,000 | up to $14,000 | $13,000 to $26,000 |
| Upgrade to aerobic treatment unit | $20,000 to $50,000 | up to $17,500 | $13,000 to $32,500 |
| Connect to sewer system | roughly $80,000 | up to $28,000 | as low as $52,000 |
Nobody should bank on a credit that hasn't cleared the legislature. But a buyer who negotiates a price reduction today based on the full, uncredited cost of conversion is pricing in a scenario the state is actively trying to change. A seller who assumes no help exists is doing the same thing from the other side.
Why this shows up in Kula more than almost anywhere else on Maui
Cesspools aren't spread evenly across the island. Maui County has more than 12,000 of them, and they're concentrated Upcountry and in Hana, the two areas where county sewer lines simply don't reach. Kula sits at the center of that concentration. If you're touring homes above Kula Highway or out toward Waiakoa, you are statistically more likely to encounter a cesspool than in almost any coastal Maui neighborhood.
Regulators have been paying close attention to Kula specifically. The Department of Health issued guidance in November 2024 addressing cesspool use for existing homes in Kula, a level of area-specific attention that most Maui neighborhoods never receive from the state wastewater program. Whatever else that guidance signals, it confirms that Kula's older wastewater infrastructure is on the state's radar in a way that shapes how closely a lender or appraiser might scrutinize a given property today.
What verification looks like before you're under contract
A seller disclosure telling you a property has a cesspool is a starting point, not a conclusion. Verifying the system requires physically confirming it, which usually means locating the tank, either by uncovering an accessible lid or by running a camera through a cleanout or toilet line if the lid can't be found. A septic system needs to be pumped before it can be properly inspected, which adds both time and cost to the process.
None of this happens same day. Pulling a permit for a new septic system typically takes around four weeks, longer if the property sits in a special management area or near a well, where permitting can stretch to four to six months. If you're working a standard Hawai'i escrow timeline, this inspection needs to start in the first days of your due diligence period, not the last week before contingencies are removed.
The number worth negotiating in a Kula cesspool transaction isn't the sale price. It's who accounts for a law that changed this July.
The negotiating point that actually matters
Two buyers can look at the identical Kula listing with a cesspool and land on very different offers, depending on which set of facts they're using. One assumes the old, expired $10,000 credit still exists and underestimates the real cost. Another assumes no help exists at all, discounts the full $50,000, and overpays for the discount by ignoring the financing tools that became available in July. Neither number reflects what actually changed this year.
The more useful conversation, whether you're buying or selling, is about timing. If the pending tax credit passes and takes effect for tax year 2027, converting in early 2027 instead of late 2026 could be worth thousands of dollars, depending on system type. That's a real, quantifiable reason to structure a closing date, a seller credit, or a post-closing repair agreement around the legislative calendar rather than around habit.
A few questions that come up often
Does a cesspool affect my ability to get financing on a Kula property? Some lenders are already factoring cesspool status into underwriting, and appraisers have started adjusting valuations when a comparable property nearby has already converted and the subject property hasn't. This varies by lender, so it's worth asking early rather than discovering it during underwriting.
If a property already has septic, is this something I can ignore? Septic systems aren't subject to the 2050 mandate, since that deadline targets cesspools specifically. A septic system still needs normal maintenance, and its own inspection during due diligence, but it doesn't carry the same regulatory deadline.
I'm not planning any renovation. Do I need to think about this at all? The 2050 statewide deadline still applies. It's worth knowing your property's classification even if you have no immediate plans to build.
Kula rewards buyers who look past the surface of a listing, and a wastewater system is as much a part of that as the view or the acreage. If you're weighing a Kula property with a cesspool, or a Kula sale where this question is likely to come up, I can help you distinguish current law from older assumptions. Kela Fernandez works Upcountry Maui transactions closely enough to know when a regulatory shift changes the math mid-negotiation. Schedule a personal consultation and let's look at the specific property together.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
