RELATING TO THE CONVEYANCE TAX.

HB2072

HOUSE OF REPRESENTATIVES

H.B. NO.

2072

THIRTY-THIRD LEGISLATURE, 2026

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 depend 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 sales, 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 rate 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, which has the most
well-developed workforce housing program in the country, where almost forty per
cent of the total housing stock is reserved as permanently affordable housing
for full-time residents, has largely funded their 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 increases 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 costs of
a $5,000,000 home are approximately $32,600 a month, 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 real estate investors 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 have accelerated the urgent need to sustainably fund
affordable housing and homeless services in Hawaii.
�
The 2023 point in time count estimated 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 homeless services special fund and 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 the conveyance
tax 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 tax revenues 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
conveyance tax revenues collected and allocated to the homeless services 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 into 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 and 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;

����
(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; and

����
(3)
�
Loan funds
administered by certified nonprofit community development financial
institutions to finance the development, pre-development, construction,
acquisition, preservation, and substantial rehabilitation of affordable
for-sale housing for persons and families having incomes set forth in
paragraphs (1) and (2).

����
(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; financing as matching funds for
nonprofit community development financial institutions to mobilize
philanthropic, private, or other public funding sources; 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 tax
revenues 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
]
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 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 having 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 having 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
]

Thirty-eight
per cent [
or $38,000,000, whichever is less,
] 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.
�
Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.

����
SECTION 8.
�
This Act shall take effect on July 1, 2026.

INTRODUCED BY:

_____________________________

By Request

Report Title:

Hawaii
State Association of Counties Package; 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

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 Special
Fund, and Dwelling Unit Revolving Fund.
�

Amends allocations to the Land Conservation Fund and Rental Housing
Revolving Fund.

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