RELATING TO THE CONVEYANCE TAX.

HB1208

HOUSE OF REPRESENTATIVES

H.B. NO.

1208

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

relating
to the conveyance tax
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

����
SECTION
1.
�
The legislature finds that the
health, happiness, and well-being of Hawaii's people depends on the State's
ability to address the high cost of living, particularly the high cost of
housing, that is fueling the homelessness crisis and forcing local families to
move out of the State.
�
The
sustainability of the State's unique and irreplaceable natural resources is
critical to its residents' quality of life.
�

To address these problems and secure a prosperous future for the State's
children, greater investment into public resources from a sustainable revenue
source is needed to reduce the cost of housing for residents, preserve the
State's natural resources, and provide solutions for community members
experiencing houselessness.

����
The legislature also finds that the
conveyance tax, a one-time tax at the time of real property conveyances, is an
appropriate revenue source for affordable housing, land conservation, and
homeless services.
�
Although housing
prices in the State have risen dramatically over the past thirteen years, the
State's conveyance tax rates have not been updated since Act 59, Session Laws
of Hawaii 2009.
�
Presently, the State's conveyance
tax is significantly lower than the rates of other high-cost areas in the country.

����
Cities across the country are
increasing their conveyance tax rates to fund affordable housing.
�
San Francisco increased the tax rate to 5.5
per cent on homes valued over $10,000,000 in 2020, and two years ago Los
Angeles increased the real property transfer tax to 4.5 per cent on any
residential or commercial property over $5,000,000 in value and six per cent on
property sales over $10,000,000 in value.
�
Smaller cities with high housing costs are
also increasing the taxes on real estate sales to mitigate the impacts of
housing costs.
�
Crested Butte and
Telluride in Colorado, which attract wealthy buyers due to access to world-class
ski opportunities, have a tax of three per cent on home sales regardless of
price.
�
Aspen, Colorado has the most
well-developed workforce housing program in the country, with almost forty per
cent of its total housing stock reserved as permanently affordable housing for
full-time residents, and has largely funded its workforce housing program
through a 1.5 per cent tax on property sales that has been in place since 1989.

����
Presently, it is common practice to
tax property sales as a means to mitigate the impacts of high home costs and
the loss of land due to housing development.
�
Furthermore, a conveyance tax of 0.5 per cent
on homes valued at less than $5,000,000, a rate of four per cent on homes
valued between $5,000,000 and $10,000,000, and six per cent on homes valued at
over $10,000,000 conforms to tax rates that other cities are assessing to fund
their various housing programs.

����
The legislature additionally finds
that an increase in tax rates on homes over $5,000,000 is unlikely to have any
negative impact on local full-time residents as the vast majority of buyers who
purchase these homes do so as an investment and not as their full-time
residence.
�
The monthly mortgage cost of
a $5,000,000 home is approximately $32,600, which would be considered
affordable for an individual or a couple earning $81,500 per month, or roughly
$978,000 a year.
�
Very few families in
Hawaii would fall within these income categories, and those that do most likely
already own a home and are not impacted by rising rents or the lack of
affordable housing.
�
Accordingly, it is
appropriate for out-of-state investors of real estate to assist in mitigating
the impacts for residents who are not benefiting from the current market
dynamics.
�
Renters, houseless residents,
and the local workforce are struggling with the rising cost of housing, thus a
tax on real estate at the time of sale to help mitigate those costs is
appropriate and fair.

����
The legislature recognizes that the
increases in housing prices, residential rent, and the homeless population over
the past several years has accelerated the urgent need to sustainably fund
affordable housing and homeless services in Hawaii.
�
The 2023 point-in-time count estimates that
there are currently 6,223 individuals living unsheltered in the State, not
including the greater number of "hidden homeless" individuals temporarily
living with friends or relatives because they cannot afford to live on their
own.
�
Investing in affordable housing and
homeless services, including supportive housing, is key to addressing
homelessness and ensuring that everyone in the State has an affordable place to
live.

����
Accordingly, the purpose of this Act
is to:

����
(1)
�
Establish the homeless
services special fund;

����
(2)
�
Allow
counties to apply for matching funds from the affordable homeownership revolving
fund for housing projects that are subject to a perpetual affordability
requirement
;

����
(3)
�
Increase
the conveyance tax rates for certain properties;

����
(4)
�
Establish
conveyance tax rates for multifamily residential properties;

����
(5)
�
Exempt
from conveyance taxes the conveyances of real property to:

���������
(A)
�
Organizations with certain affordability
requirements;

���������
(B)
�
Certain nonprofit organizations; and

���������
(C)
�
An owner-occupant or renter-occupant of the
property; and

����
(6)
�
Allocate
collected conveyance taxes to the affordable homeownership revolving fund, homeless
services special fund, and dwelling unit revolving fund and amend allocations
to the land conservation fund and rental housing revolving fund.

����
SECTION
2
.
�
Chapter 346,
Hawaii Revised Statutes, is amended by adding a new section to part XVII to be
appropriately designated and to read as follows:

����
"
�346-
�
Homeless
services special fund.
�
(a)
�

There is established within the state treasury a homeless services special
fund, to be administered and managed by the department and into which shall be
deposited:

����
(1)
�
Ten per cent of
the conveyance tax collected and allocated to the homeless services special fund
pursuant to section 247-7;

����
(2)
�
Appropriations
made by the legislature; and

����
(3)
�
Interest earned
upon any moneys in the fund.

����
(b)
�
Moneys from any other private or public
source may be deposited in or credited to the fund; provided that any mandates,
regulations, or conditions on these funds do not conflict with the use of the
fund under this section.
�
Moneys received
as a deposit or private contribution shall be deposited, used, and accounted
for in accordance with the conditions established by the agency or person
making the contribution.

����
(c)
�
Moneys in the homeless services special fund
shall be used by the department for homeless services and supportive housing,
including homeless facilities programs for the homeless authorized by the department.

����
(d)
�
The department shall submit a report to the
legislature providing an accounting of the fund no later than twenty days prior
to the convening of each regular session
.
�
The report shall
include, at minimum:

����
(1)
�
A detailed
account of all funds received; and

����
(2)
�
All moneys expended
from the homeless services special fund.
"

����
SECTION
3
.
�
Section
201H-206, Hawaii Revised Statutes, is amended to read as follows:

����
"
[
[
]
�201H-206[
]
]
�
Affordable homeownership revolving fund.
�
(a)
�

There is established an affordable homeownership revolving fund to be
administered by the corporation for the purpose of providing, in whole or in
part, loans to nonprofit community development financial institutions and
nonprofit housing development organizations for the development of affordable
homeownership housing projects.

����
(b)
�
Loans
shall be awarded in the following descending order of priority:

����
(1)
�
Projects or units
in projects that are funded by programs of the United States Department of
Housing and Urban Development, United States Department of Agriculture Rural
Development, and United States Department of the Treasury Community Development
Financial Institutions Fund, wherein:

���������
(A)
�
At least fifty per
cent of the available units are reserved for persons and families having
incomes at or below eighty per cent of the median family income and of which at
least five per cent of the available units are for persons and families having
incomes at or below fifty per cent of the median family income; and

���������
(B)
�
The remaining
units are reserved for persons and families having incomes at or below one
hundred twenty per cent of the median family income; and

����
(2)
�
Mixed-income
affordable for-sale housing projects or units in a mixed-income affordable
for-sale housing project wherein all of the available units are reserved for
persons and families having incomes at or below one hundred per cent of the
median family income.

����
(c)
�

Moneys in the fund shall be used to provide loans for the development,
pre-development, construction, acquisition, preservation, and substantial
rehabilitation of affordable for-sale housing units.
�
Uses of moneys in
the fund may include but are not limited to planning, design, and land
acquisition, including the costs of options, agreements of sale, and down
payments; equity financing as matching funds for nonprofit community
development financial institutions; or other housing development services or
activities as provided in rules adopted by the corporation pursuant to chapter
91.
�
The rules may provide that money
from the fund shall be leveraged with other financial resources to the extent
possible.

����
(
d)
�

The fund may include [
sums
]
:

����
(1)
�
Sums
appropriated
by the legislature[
, private
]
;

����
(2)
�
Private

contributions[
, proceeds
]
;

����
(3)
�
Proceeds

from repayment of loans[
, interest,
]
;

����
(4)
�
Interests and

other returns[
,
]
;

����
(5)
�
Conveyance
taxes collected under chapter 247 and allocated to the affordable homeownership
revolving fund pursuant to section 247-7;
and [
moneys
]

����
(6)
�
Moneys
from
other sources.

����
(e)
�
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.

����
(f)
�

The corporation may provide loans under this section as provided in
rules adopted by the corporation pursuant to chapter 91.

����
(g)
�

The corporation may contract with nonprofit community development
financial institutions to fund loans under this section.
�
The corporation may contract for the service
and custody of its loans.

����
(h)
�

The corporation may establish, revise, charge, and collect a reasonable
service fee, as necessary, in connection with its loans, services, and
approvals under this part.
�
The fees
shall be deposited into the affordable homeownership revolving fund.

����
(i)
�
Counties may apply for matching funds from
the fund; provided that prior to applying for any matching funds, the counties
shall have an approved comprehensive affordable housing plan that:

����
(1)
�
Identifies
available lands for affordable housing;

����
(2)
�
Identifies
infrastructure needs and availability; and

����
(3)
�
Requires
housing projects developed using moneys from the fund to be subject to an
affordability clause that keeps the property affordable in perpetuity, also
known as a "deed-restricted property";

provided further that costs for the development
of or an update to an existing county comprehensive affordable housing plan
may, upon application, be paid out of these funds.

����
[
(i)
]
(j)
�
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 affordable
homeownership revolving fund."

����
SECTION
4
.
�
Section 247-2,
Hawaii Revised Statutes, is amended to read as follows:

����
"
�247-2
�
Basis and rate of tax.
�
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):
]
paragraphs (2) and (3):

���������
(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[
;
]
:
�
20
cents per $100;

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

���������
(D)
�
[
Fifty
cents per $100 for
]
For
properties with a value of at least
$2,000,000, but less than $4,000,000[
;
]
:
�
50 cents per $100;

���������
(E)
�
[
Seventy
cents per $100 for
]
For
properties with a value of at least
$4,000,000, but less than $6,000,000[
;
]
:
�
70 cents per $100;

���������
(F)
�
[
Ninety
cents per $100 for
]
For
properties with a value of at least
$6,000,000, but less than $10,000,000[
; and
]
:
�
$1.10 per $100;

���������
(G)
�
[
One
dollar per $100 for
]
For
properties with a value of
at least

$10,000,000 [
or greater; and
]
, but less than $14,000,000:
�
$1.40 per $100;

���������
(H)
�
For properties with a value of at least $14,000,000, but less
than $18,000,000:
�
$2.00 per $100;

���������
(I)
�
For properties with a value of at least $18,000,000, but less
than $22,000,000:
�
$3.00 per $100;

���������
(J)
�
For properties with a value of at least $22,000,000, but less
than $26,000,000:
�
$4.00 per $100; and

���������
(K)
�
For properties with a value of $26,000,000 or greater:
�
$6.00 per $100;

����
(2)
�
For the sale of
a multifamily residential property:

���������
(A)
�
For
properties with a value of less than $600,000:
�

10 cents per $100;

���������
(B)
�
For
properties with a value of at least $600,000, but less than $1,000,000:
�
20 cents per $100;

���������
(C)
�
For properties with a value of at least $1,000,000, but less
than $2,000,000:
�
30 cents per $100;

���������
(D)
�
For properties with a value of at least $2,000,000, but less
than $4,000,000:
�
50 cents per $100;

���������
(E)
�
For properties with a value of at least $4,000,000, but less
than $6,000,000:
�
70 cents per $100;

���������
(F)
�
For properties with a value of at least $6,000,000, but less
than $10,000,000:
�
90 cents per $100;

���������
(G)
�
For properties with a value of at least $10,000,000, but less
than $20,000,000:
�
$1 per $100;

���������
(H)
�
For properties with a value of at least $20,000,000, but less
than $50,000,000:
�
$1.25 per $100;

���������
(I)
�
For properties with a value of at least $50,000,000, but less
than $100,000,000:
�
$1.50 per $100; and

���������
(J)
�
For properties with a value of $100,000,000 or greater:
�
$2.00 per $100; and

���
[
(2)
]

(3)
�
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[
;
]
:
�
25 cents per $100;

���������
(C)
�
[
Forty
cents per $100 for
]
For
properties with a value of at least
$1,000,000, but less than $2,000,000[
;
]
:
�
40 cents per $100;

���������
(D)
�
[
Sixty
cents per $100 for
]
For
properties with a value of at least
$2,000,000, but less than $4,000,000[
;
]
:
�
$1.00 per $100;

���������
(E)
�
[
Eighty-five
cents per $100 for
]
For
properties with a value of at least
$4,000,000, but less than $6,000,000[
;
]
:
�
$1.50 per $100;

���������
(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
]
:
�
$2.00 per $100;

���������
(G)
�
[
One
dollar and twenty-five cents per $100 for
]
For
properties with a
value of
at least
$10,000,000 [
or greater,
]
, but less than
$14,000,000:
�
$3.00 per $100;

���������
(H)
�
For properties with a value of at least $14,000,000, but less
than $18,000,000:
�
$4.00 per $100;

���������
(I)
�
For properties with a value of at least $18,000,000, but less
than $22,000,000:
�
$5.00 per $100;

���������
(J)
�
For properties with a value of at least $22,000,000, but less
than $26,000,000:
�
$6.00 per $100; and

���������
(K)
�
For properties with a value of $26,000,000 or greater:
�
$7.00 per $100,

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 less than $1.

����
For the purposes of this section,
"multifamily residential property" means a structure that is located
within the state urban land use district and divided into five or more dwelling
units.
"

����
SECTION
5
.
�
Section 247-3,
Hawaii Revised Statutes, is amended to read as follows:

����
"
�247-3
�
Exemptions.
�
The tax imposed by section 247-1 shall not
apply to:

����
(1)
�
Any document or
instrument that is executed prior to January 1, 1967;

����
(2)
�
Any document or
instrument that is given to secure a debt or obligation;

����
(3)
�
Any document or
instrument that only confirms or corrects a deed, lease, sublease, assignment,
transfer, or conveyance previously recorded or filed;

����
(4)
�
Any document or
instrument between husband and wife, reciprocal beneficiaries, or parent and
child, in which only a nominal consideration is paid;

����
(5)
�
Any document or
instrument in which there is a consideration of $100 or less paid or to be
paid;

����
(6)
�
Any document or
instrument conveying real property that is executed pursuant to an agreement of
sale, and where applicable, any assignment of the agreement of sale, or
assignments thereof; provided that the taxes under this chapter have been fully
paid upon the agreement of sale, and where applicable, upon such assignment or
assignments of agreements of sale;

����
(7)
�
Any deed, lease,
sublease, assignment of lease, agreement of sale, assignment of agreement of
sale, instrument or writing in which the United States or any agency or
instrumentality thereof or the State or any agency, instrumentality, or
governmental or political subdivision thereof are the only parties thereto;

����
(8)
�
Any document or
instrument executed pursuant to a tax sale conducted by the United States or
any agency or instrumentality thereof or the State or any agency,
instrumentality, or governmental or political subdivision thereof for
delinquent taxes or assessments;

����
(9)
�
Any document or
instrument conveying real property to the United States or any agency or
instrumentality thereof or the State or any agency, instrumentality, or
governmental or political subdivision thereof pursuant to the threat of the
exercise or the exercise of the power of eminent domain;

���
(10)
�
Any document or
instrument that solely conveys or grants an easement or easements;

���
(11)
�
Any document or
instrument whereby owners partition their property, whether by mutual agreement
or judicial action; provided that the value of each owner's interest in the
property after partition is equal in value to that owner's interest before
partition;

���
(12)
�
Any document or
instrument between marital partners or reciprocal beneficiaries who are parties
to a divorce action or termination of reciprocal beneficiary relationship that
is executed pursuant to an order of the court in the divorce action or termination
of reciprocal beneficiary relationship;

���
(13)
�
Any document or
instrument conveying real property from a testamentary trust to a beneficiary
under the trust;

���
(14)
�
Any document or
instrument conveying real property from a grantor to the grantor's revocable
living trust, or from a grantor's revocable living trust to the grantor as
beneficiary of the trust;

���
(15)
�
Any document or
instrument conveying real property, or any interest therein, from an entity
that is a party to a merger or consolidation under chapter 414, 414D, 415A,
421, 421C, 425, 425E, or 428 to the surviving or new entity;

���
(16)
�
Any document or
instrument conveying real property, or any interest therein, from a dissolving
limited partnership to its corporate general partner that owns, directly or
indirectly, at least a ninety per cent interest in the partnership, determined
by applying section 318 (with respect to constructive ownership of stock) of
the federal Internal Revenue Code of 1986, as amended, to the constructive
ownership of interests in the partnership; [
and
]

[
[
]
(17)[
]
]Any
document or instrument that conforms to the transfer on death deed as
authorized under chapter 527[
.
]
;

���
(18)
�
Any document or
instrument conveying real property to an organization that:

���������
(A)
�
Has
a minimum of thirty years remaining of a price-restricted affordability period;
or

���������
(B)
�
Places
a deed restriction on the property to maintain permanent affordability.

���������
For
purposes of this paragraph:

�������������
"Permanent
affordability" means a requirement that a residential real property remain
affordable to households with incomes at or below one hundred twenty per cent
of the area median income as determined by the United States Department of
Housing and Urban Development for the life of the property.

�������������
"Price-restricted
affordability period" means the period for which a residential real
property is restricted to renter households with incomes at or below one
hundred twenty per cent of the area median income as determined by the United
States Department of Housing and Urban Development applicable to the location
of the real property for the applicable federal fiscal year;

���
(19)
�
Any document or
instrument conveying real property to a nonprofit organization that:

���������
(A)
�
Is
exempt from federal income tax by the Internal Revenue Services; and

���������
(B)
�
Will
hold the property in an undeveloped state and for conservation purposes in
perpetuity through a deed restriction on the property; and

���
(20)
�
Any document or
instrument conveying real property to an individual who is an owner-occupant or
renter-occupant of the property; provided the individual does not have a direct
or indirect ownership interest in any other real property, including through
ownership interest in a trust, partnership, corporation, limited liability
company, or other entity.
"

����
SECTION
6
.
�
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, whichever is less,
] shall be paid
into the land conservation fund established pursuant to section 173A-5; [
and
]

����
(2)
�
[
Fifty
per cent or $38,000,000, whichever is less,
]
Thirty-eight per cent

shall be paid into the rental housing revolving fund established by section
201H-202[
.
]
;

����
(3)
�
Eight
per cent shall be paid into the affordable homeownership revolving fund
established pursuant to section 201H-206;

����
(4)
�
Eight
per cent shall be paid into the homeless services special fund established
pursuant to section 346- ; and

����
(5)
�
Eight
per cent shall be paid into the dwelling unit revolving fund established
pursuant to section 201H-191 for the purposes of funding infrastructure
programs in transit-oriented development areas.
"

����
SECTION
7.
�
There is appropriated out of the
homeless services special fund established pursuant to section
346- , Hawaii Revised Statutes, the sum of
$ or so much
thereof as may be necessary for fiscal year 2026-2027 for the purposes of the
homeless services special fund established pursuant to section
346- , Hawaii Revised Statutes, in section 2 of this Act.

����
The sum
appropriated shall be expended by the department of human services for the
purposes of this Act.

����
SECTION 8.
�
Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.

����
SECTION 9.
�
This Act shall take effect on July 1, 2026.

INTRODUCED BY:

_____________________________

Report Title:

DHS;
Affordable Housing; Conveyance Tax; Rates; Exemption; Homeless Services Special
Fund; Affordable Homeownership Revolving Fund; Land Conservation Fund; Rental
Housing Revolving Fund; Dwelling Unit Revolving Fund; Appropriation

Description:

Establishes
the Homeless Services Special Fund.
�
Allows counties to apply for matching funds
from the Affordable Homeownership Revolving Fund for certain housing
projects.
�
Increases the conveyance tax
rates for certain properties.
�

Establishes conveyance tax rates for multifamily residential properties.
�
Establishes new exemptions to the conveyance
tax.
�
Allocates collected conveyance taxes
to the Affordable Homeownership Revolving Fund, Homeless Services Fund, and
Dwelling Unit Revolving Fund.
�
Amends
allocations to the Land Conservation Fund and Rental Housing Revolving Fund.
�
Effective 7/1/2026.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.