STAND. COM. REP. NO. 54

Honolulu, Hawaii

, 2025

RE: H.B. No. 739

H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

Your Committee on Housing, to which was referred H.B. No. 739 entitled:

"A BILL FOR AN ACT RELATING TO HOUSING,"

begs leave to report as follows:

The purpose of this measure is to establish the Kamaaina Homes Program to provide funding to the counties to purchase voluntary deed restrictions from eligible homeowners or homebuyers.

Your Committee received testimony in support of this measure from the Department of Transportation; Hawaii Housing Finance and Development Corporation; Hawaii Appleseed Center for Law & Economic Justice; Wall to Wall Studios; Hawaiʻi YIMBY; Holomua Collaborative; Maui Tomorrow Foundation; Kobayashi Group; Housing Hawaiʻi's Future; Hawai‘i Community Foundation; Title Guaranty Hawaii; Mana Up; Hawai‘i Gas; HPM Building Supply; aio; Tori Richard, Ltd; Maui Chamber of Commerce; LIMBY Hawaiʻi; and numerous individuals. Your Committee received comments on this measure from the Department of Taxation; Department of the Attorney General; and Hawai‘i Association of REALTORS.

Your Committee finds that housing affordability challenges are among the most pressing issues in the State. With median home prices now exceeding $800,000, homeownership has become unattainable for many local families, forcing many residents to leave Hawaii in search of affordable living options elsewhere. Your Committee further finds that the resulting outmigration not only diminishes the State's workforce, but also erodes the cultural fabric and sense of community that make Hawaii unique. This measure builds on a successful model that works with homeowners to ensure that residents have access to housing in the State.

Your Committee notes that the intent of the Legislature with this measure is for the amount paid to the property owner to be the market rate for a deed restriction. Ideally, through a negotiation process between the county and the property owner, the rate will be high enough to incentivize a property owner to sell a deed restriction, while low enough that it remains an effective use of government funds. It is also the intent of your Committee to not subject any instruments by which a deed restriction is placed on a dwelling unit under the Kamaaina Homes Program to the conveyance tax.

Your Committee has amended this measure by:

(1) Authorizing the Hawaii Housing Finance and Development Corporation to allocate an annual lump sum, to be determined by the Corporation, rather than requiring the counties to apply for a specific minimum amount;

(2) Prohibiting the Hawaii Housing Finance and Development Corporation from distributing funds under the Kamaaina Homes Program solely based on the population size of a county;

(3) Clarifying that for a planned community, a deed restriction placed and owned by a county may be secondary only to conditions, covenants, and restrictions with a requisite first position;

(4) Deleting language that would have required a retiree or an individual with a disability to have worked for ten consecutive years and five consecutive years, respectively, in the county or State, to qualify as an owner-occupant under the Program;

(5) Changing the effective date to July 1, 3000, to encourage further discussion; and

(6) Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

Your Committee also notes that while language that could have been construed as a durational residency requirement for a retiree or an individual with a disability was removed from this measure, your Committee is working with the Department of the Attorney General on language that can withstand constitutional scrutiny to ensure that bona fide residents of the State can benefit from the Kamaaina Homes Program.

Your Committee further notes that the Department of Taxation requested in its testimony that should this measure pass the Legislature, an effective date of January 1, 2026 be included, to allow the Department sufficient time to make changes necessary for the implementation of the new conveyance tax exemption.

As affirmed by the record of votes of the members of your Committee on Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 739, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 739, H.D. 1, and be referred to your Committee on Judiciary & Hawaiian Affairs.

Respectfully submitted on behalf of the members of the Committee on Housing,

____________________________

LUKE A. EVSLIN, Chair