WAILUA — A proposed state tax on home sales could generate millions in revenue for affordable housing and more than $2 million for homeless services on Kaua‘i.
Senate Bill 678, introduced by state Sens. Stanley Chang, Joy San Buenaventura and Angus McKelvey, would place the majority of the new tax burden on the most expensive home sales, particularly those being sold to off-island investors rather than home occupants.
Under the bill, the conveyance tax on homes valued at more than $10 million would increase from 1 percent to 6 percent of the sale price. Lower-value homes would see a much smaller bump, with the conveyance tax on homes worth between $200,000 and $600,000 increasing from 0.1 percent to 0.5 percent.
Half of the funding created would go to the state Rental Housing Revolving Fund, which subsidizes the production of affordable housing projects, including several on Kaua‘i. Another 30 percent would go to the General Fund, while 10 percent would go to the Land Conservation Fund, and 10 percent would fund homeless services and supportive housing.
Based on 2018 data, the progressive group Hawai‘i Appleseed estimated the tax would generate $174 million for affordable housing and $34.8 million for homeless services statewide, including $2.1 million for Kaua‘i. Considering home prices have skyrocketed since then, the actual amount of funding generated would probably be greater.
Kaua‘i homeless advocate Rowena Contrades-Pangan gathered 17 houseless local people at the Ho‘omana Thrift Shop in Kapa‘a last week to testify in favor of the measure before the Senate Committee on Housing.
But the bill was deferred before the group was able to speak. Now, Contrades-Pangan and other advocates are worried the bill may be shelved until next year.
Contrades-Pangan spoke with The Garden Island on Friday at a weekly gathering where she and allies provide food, showers and SNAP assistance to houseless people at her Ho‘omana Thrift Shop near the Wailua River. Programs like hers could be potential beneficiaries of the new stream of funds.
She said she has seen the houseless population grow on Kaua‘i since she began her program two years ago. While she initially would feed about 40 people a week, she now feeds more than 100.
“The reason I feel that it’s getting worse, is that the funds aren’t sufficient,” said Contrades-Pangan. “You have to be either damn poor to get help, or damn rich. You can’t be a middle-class person and get assistance.”
Andrew Denny was one of the houseless people who gathered to testify before the bill was deferred.
“I think that as a born and raised Kauaian, things have gotten out of control on the development side,” said Denny at Contrades-Pangan’s event. “The conveyance tax seems like a logical place to pull from.”
A military veteran, Denny now works as a taro farmer in Wailua. After his parents passed away, they lost their family home, and he is now living out of his car with his partner and their child.
“It just seems hopeless to rent here, so living the mobile, houseless lifestyle is really the only economically viable thing right now,” he said.
Denny said, if he were selling a second home, he would not mind paying a tax on the sale to fund homeless services.
“Maybe that’s the reason I’m not rich,” he said.
Nicky Winter, director of Achieve Zero, a group focused on ending homelessness, said at Ho‘omana on Friday that she thinks the housing crisis will get worse before it gets better.
“We still haven’t seen the full depth and breadth of impact because there are still people on subsidies. Once that stops, we’re going to get into a lot of trouble,” said Winter. “Our fixes and solutions are not growing with the problem.”
Many individuals and advocacy groups submitted testimony in support of the SB 678, including Kaua‘i nonprofit Permanently Affordable Living Kaua‘i.
The Commercial Real Estate Development Association of Hawai‘i was one of a handful of groups that submitted testimony against the measure, arguing it would disincentivize property sales and put a damper on economic growth.
“Hawai‘i is already rated as one of the least business-friendly states in the nation, and increasing this tax rate will further discourage much-needed investment here locally. Rather, additional efforts to encourage investment in Hawai‘i and incentivize the creation of new projects and businesses in Hawai‘i would stimulate our economy by creating jobs and tax revenue,” wrote organization President Jennifer Camp.
Though the measure is currently deferred, it can still be revived if state Senate President Ron Kouchi refers it to another committee.
Another measure increasing the conveyance tax, Senate Bill 362, did pass second reading in committee last week. However, it would not provide funds for homeless services and has a much smaller rate bump, increasing the tax on $10 million dollar properties from 1 to 2.5 percent and holding the rate for homes valued below $2 million steady.
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Guthrie Scrimgeour, reporter, can be reached at 808-647-0329 or gscrimgeour@thegardenisland.com.
