RELATING TO THE CONVEYANCE TAX.

SB469

THE SENATE

S.B. NO.

469

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 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 the enactment of 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 at 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 worth more than $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 per 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 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 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 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
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 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 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 Service; 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.
"

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Statutory material to be repealed is bracketed and stricken.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

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

INTRODUCED BY:

_____________________________

By Request

Report Title:

Hawaii
State Association of Counties Package; DHS; Affordable Housing; Conveyance Tax;
Rates; Exemption; Homeless Services 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.
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Establishes new exemptions to the conveyance
tax.
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Allocates collected conveyance
taxes to the Affordable Homeownership Revolving Fund, Homeless Services Special
Fund and, 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.