Hawaii Legislature approves conveyance tax reform for affordable housing funding

Hawaii's House Bill 1410 aims to tackle the pressing housing crisis by restructuring the conveyance tax system to generate additional revenue for affordable housing and infrastructure. Introduced on February 28, 2025, the bill responds to findings from the Hawaii transit-oriented development strategic plan, which highlights a critical lack of infrastructure to support affordable housing near transit hubs.

The bill proposes a shift to a marginal tax rate system, applying higher rates only to property values exceeding specific thresholds. This includes raising the tax on non-owner-occupied homes valued over $2 million and slightly increasing the rate on owner-occupied homes valued over $6 million. The adjustments are expected to increase conveyance tax revenue by approximately 30%, generating an estimated $35 million annually. A portion of this revenue will be allocated to permanent supportive housing and infrastructure in transit-oriented development zones, addressing the needs of vulnerable populations, including those with special needs, veterans, and the chronically homeless.

Notably, the bill seeks to alleviate the financial burden on affordable multifamily housing by adjusting the tax structure to reflect value on a per-unit basis. This change aims to prevent high conveyance taxes from being passed on to renters, which could exacerbate the housing affordability crisis.

Debate surrounding the bill has focused on its potential impact on high-value property owners and the implications for the housing market. Critics argue that increasing taxes on higher-value properties could deter investment, while supporters emphasize the necessity of funding for essential housing projects and infrastructure improvements.

The establishment of a Supportive Housing Special Fund is another significant aspect of the bill, designed to finance the development and maintenance of affordable housing and supportive services for individuals and families with special needs. This fund aims to provide a more stable financial foundation for non-profit providers and local governments, reducing reliance on uncertain legislative appropriations.

As Hawaii grapples with soaring housing prices and a growing homeless population, House Bill 1410 represents a critical step toward creating a more equitable housing landscape. If passed, the bill could reshape the state's approach to housing finance, ensuring that resources are directed toward those who need them most while fostering sustainable development in transit-oriented areas. The next steps will involve further discussions and potential amendments as lawmakers weigh the bill's implications for Hawaii's future housing strategy.