HB1410

SECTION 1. The legislature finds that the Hawaii transit-oriented development strategic plan highlights a lack of infrastructure necessary to support affordable housing and mixed-use development near transit. Furthermore, the transit-oriented development infrastructure and finance delivery strategy (2023), developed by the office of planning and sustainable development, identifies the current fragmented infrastructure funding process as a source of inequitable outcomes. The first recommendation of the report is to increase the conveyance tax on high-value, non-owner-occupied homes and allocate a portion of the revenue to finance infrastructure in transit-oriented development zones.

The legislature further finds that there is a need to provide a dedicated funding source to support housing designed for individuals with special needs, including those with alcohol or drug addictions, individuals transitioning from incarceration, youth aging out of foster care, survivors of domestic violence, veterans, individuals with disabilities or mental illness, frail elderly, and chronically homeless individuals. Although significant resources are allocated annually for supportive housing, reliance on legislative appropriations creates uncertainty for non-profit providers and the counties, which face significant risks in developing permanent supportive housing.

The legislature also finds that the conveyance tax, a one-time tax levied at the time of property sales, is identified as an appropriate revenue source for affordable housing, infrastructure, land conservation, and homeless services. Despite dramatic increases in housing prices over the past thirteen years, the conveyance tax rates have not been updated since Act 59, Session Laws of Hawaii 2009. In fact, Hawaii's conveyance tax remains significantly lower than comparable high-cost areas in the nation.

The legislature recognizes that without reform, the current conveyance tax rate structure could disproportionately affect affordable multifamily housing, as high total property values for these complexes do not reflect the lower per-unit costs. High conveyance taxes on these properties could be passed on to renters. Moreover, the current rate structure may create market inequities, where even small increases in property value could result in disproportionate tax burdens. Because the conveyance tax is not tied to inflation, rising home prices will eventually push moderately priced homes into higher tax brackets, compounding the issue.

Accordingly, the purpose of this Act is to:

(1) Restructure the conveyance tax to a marginal rate system, applying higher rates only to property values exceeding specified thresholds;

(2) Adjust the conveyance tax for multifamily properties to reflect value on a per-unit basis;

(3) Increase conveyance tax revenue by approximately thirty per cent, generating an estimated $35,000,000 annually, by:

(A) Raising the tax rate on non-owner-occupied homes valued at over $2,000,000;

(B) Slightly increasing the tax rate on owner-occupied homes valued at over $6,000,000; and

(C) Ensuring revenue neutrality for owner-occupied homes valued at $6,000,000 and under and non-owner-occupied homes valued at $2,000,000 and under through the adjusted marginal rate structure;

(4) Tie conveyance tax rates to a cost-of-living adjustment to maintain equity over time; and

(5) Allocate a portion of the additional revenue to permanent supportive housing and infrastructure in transit-oriented development zones.

SECTION 2. Chapter 201H, Hawaii Revised Statutes, is amended by adding a new subpart to part III to be appropriately designated and to read as follows:

" . Supportive Housing Special Fund

§201H-A Supportive housing special fund. (a) There is established a supportive housing special fund to be administered by the corporation for the purpose of developing, operating, and maintaining affordable, permanent housing and the provision of supportive services for individuals or families with special needs.

(b) Moneys in the fund may be used to:

(1) Make loans to finance the development, pre-development, construction, acquisition, preservation, or substantial rehabilitation of supportive housing projects;

(2) Make project-based rental assistance payments;

(3) Make payments for supportive services for households residing in the supportive housing projects; and

(4) For other housing services or activities as provided in rules adopted by the corporation without regard to chapter 91.

(c) The fund may include sums appropriated by the legislature, private contributions, proceeds from repayment of loans, interest, fees, other returns, and moneys from other sources.

(d) An amount from the fund, to be set by the corporation and authorized by the legislature, may be used for administrative expenses incurred by the corporation in administering the fund; provided that moneys in the fund shall not be used to finance day-to-day administrative expenses of the projects allotted moneys from the fund.

(e) The corporation shall consult with the counties and community-based organizations to leverage funds and obtain input on selection of projects.

(f) The corporation may contract with other executive branch departments or agencies, the counties, or private or nonprofit organizations as necessary for the provision of supportive housing and services. The corporation shall be exempt from chapter 103D in selecting a qualified private or nonprofit organization to assist with the development and maintenance of supportive housing and provision of rental assistance and supportive services. The corporation may, without regard to chapter 91, establish rules and qualification standards for participants of the supportive housing program.

(g) The corporation may establish, revise, charge, and collect a reasonable service fee, as necessary, in connection with its financing, services, and approvals under this subpart. The fees shall be deposited into the supportive housing special fund.

(h) The corporation shall submit a report to the legislature no later than twenty days prior to the convening of each regular session describing the projects funded using moneys from the supportive housing special fund.

§201H-B Additional powers. The powers conferred upon the corporation by this subpart shall be in addition and supplemental to the powers conferred by any other law, and nothing in this subpart shall be construed as limiting any powers, rights, privileges, or immunities conferred."

SECTION 3. Section 247-2, Hawaii Revised Statutes, is amended to read as follows:

"§247-2 Basis and rate of tax. (a) The tax imposed by section 247-1 shall be based on the actual and full consideration (whether cash or otherwise, including any promise, act, forbearance, property interest, value, gain, advantage, benefit, or profit), paid or to be paid for all transfers or conveyance of realty or any interest therein, that shall include any liens or encumbrances thereon at the time of sale, lease, sublease, assignment, transfer, or conveyance, and shall be at the following rates:

(1) Except as provided in paragraph (2):

(A) [~~Ten cents per $100 for~~] For properties with a value of less than $600,000[;]: 10 cents per $100;

(B) [~~Twenty cents per $100 for~~] For properties with a value of at least $600,000, but less than $1,000,000[;]: $600 plus 35 cents per $100 of excess over $600,000;

(C) [~~Thirty cents per $100 for~~] For properties with a value of at least $1,000,000, but less than $2,000,000[;]: $2,000 plus 60 cents per $100 of excess over $1,000,000;

(D) [~~Fifty cents per $100 for~~] For properties with a value of at least $2,000,000, but less than $4,000,000[;]: $8,000 plus 85 cents per $100 of excess over $2,000,000;

(E) [~~Seventy cents per $100 for~~] For properties with a value of at least $4,000,000, but less than $6,000,000[;]: $25,000 plus $1.20 per $100 of excess over $4,000,000;

(F) [~~Ninety cents per $100 for~~] For properties with a value of at least $6,000,000, but less than $10,000,000[~~; and~~]: $49,000 plus $1.75 per $100 of excess over $6,000,000; and

(G) [~~One dollar per $100 for~~] For properties with a value of at least $10,000,000 [~~or greater; and~~]: $119,000 plus $3 per $100 of excess over $10,000,000; and

(2) For the sale of a condominium or single family residence for which the purchaser is ineligible for a county homeowner's exemption on property tax:

(A) [~~Fifteen cents per $100 for~~] For properties with a value of less than $600,000[;]: 15 cents per $100;

(B) [~~Twenty-five cents per $100 for~~] For properties with a value of at least $600,000, but less than $1,000,000[;]: $900 plus 40 cents per $100 of excess over $600,000;

(C) [~~Forty cents per $100 for~~] For properties with a value of at least $1,000,000, but less than $2,000,000[;]: $2,500 plus 65 cents per $100 of excess over $1,000,000;

(D) [~~Sixty cents per $100 for~~] For properties with a value of at least $2,000,000, but less than $4,000,000[;]: $9,000 plus $2.00 per $100 of excess over $2,000,000;

(E) [~~Eighty-five cents per $100 for~~] For properties with a value of at least $4,000,000, but less than $6,000,000[;]: $49,000 plus $2.50 per $100 of excess over $4,000,000; and

(F) [~~One dollar and ten cents per $100 for~~] For properties with a value of at least $6,000,000, but less than $10,000,000[~~; and~~]: $99,000 plus $3.25 per $100 of excess over $6,000,000; and

(G) [~~One dollar and twenty-five cents per $100 for~~] For properties with a value of $10,000,000 or greater[,]: $229,000 plus $4.10 per $100 of excess over $10,000,000,

of [~~such~~] the actual and full consideration; provided that in the case of a lease or sublease, this chapter shall apply only to a lease or sublease whose full unexpired term is for a period of five years or more[~~, and in those cases, including (where appropriate) those cases where the~~]; provided further that if a lease has been extended or amended, the tax in this chapter shall be based on the cash value of the lease rentals discounted to present day value and capitalized at the rate of six per cent, plus the actual and full consideration paid or to be paid for any and all improvements, if any, that shall include on-site as well as off-site improvements, applicable to the leased premises; and provided further that the tax imposed for each transaction shall be [~~not~~] no less than $1.

The rates in this section shall apply to the transfer or conveyance of a multifamily residential property; provided that "value", for purposes of determining the applicable rate, shall be an amount calculated by dividing the actual and full consideration by the number of residential dwelling units in the property; provided further that the tax shall be calculated by applying the applicable rate to the actual and full consideration for the transfer or conveyance of realty or any interest therein. As used in this subsection, "multifamily residential property" means a structure that is located within the state urban land use district and divided into five or more dwelling units.

(b) For each taxable year beginning after December 31, 2025, the director of taxation, no later than December 15 of the preceding calendar year, shall recompute the rates in subsection (a) by multiplying the dollar amount for the preceding taxable year by the cost-of-living adjustment factor, if the cost-of-living adjustment factor is greater than zero, and rounding off the resulting product to the nearest $1. If the cost-of-living adjustment factor is less than or equal to zero in a given year, then no adjustment shall occur in the following year.

As used in this subsection, "cost-of-living adjustment factor" means a factor calculated by adding 1.0 to the percentage change in the Consumer Price Index for All Urban Consumers, as published by the United States Department of Labor, from July of the preceding calendar year to July of the current calendar year; provided that if the Consumer Price Index is discontinued, the Chained Consumer Price Index for All Urban Consumers, as published by the United States Department of Labor, shall be used to calculate the cost-of-living adjustment factor."

SECTION 4. Section 247-7, Hawaii Revised Statutes, is amended to read as follows:

"§247-7 Disposition of taxes. All taxes collected under this chapter shall be paid into the state treasury to the credit of the general fund of the State, to be used and expended for the purposes for which the general fund was created and exists by law; provided that of the taxes collected each fiscal year:

(1) [~~Ten~~] Eight per cent or [~~$5,100,000,~~] $10,000,000, whichever is less, shall be paid into the land conservation fund established pursuant to section 173A-5; [~~and~~]

(2) [~~Fifty~~] Thirty-eight per cent or [~~$38,000,000,~~] $50,000,000, whichever is less, shall be paid into the rental housing revolving fund established by section 201H-202[.];

(3) Eight per cent or $10,000,000, whichever is less, shall be paid into the supportive housing special fund established pursuant to section 201H-A; and

(4) Ten per cent shall be paid into the dwelling unit revolving fund established pursuant to section 201H-191 to fund infrastructure programs in county-designated transit-oriented development zones or districts that meet minimum standards of transit-supportive density; provided that these standards shall be met in order for any state or county agency or any private entity to receive funding from the dwelling unit revolving fund pursuant to this paragraph.

As used in this section, "transit-supportive density" means a floor area ratio of at least:

(1) 4.0 for all uses that are permitted in a county-designated transit-oriented development area or by the underlying county zoning;

(2) 6.0 for all uses that are permitted in a county-designated transit-oriented development area within one-half mile of a station of a locally preferred alternative for a mass transit project; and

(3) For all uses that are permitted within one-quarter mile of a station of a locally preferred alternative for a mass transit project, whichever is greater:

(A) 7.0;

(B) The maximum floor area ratio allowed by the adopted transit-oriented development special district; or

SECTION 5. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 6. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2025.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1410
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII