LIHU‘E — A bill to tax the sale of multimillion-dollar properties and use the proceeds to fund affordable housing became one of the most popular proposals in the state Legislature this session, garnering dozens of pages of supportive testimony.
After the chair of the House Finance Committee did not schedule the bill for a hearing by the Thursday deadline, the legislation appears to be dead in the water.
Introduced by Sen. Stanley Chang, Senate Bill 362 would have doubled the conveyance tax rate on properties valued over $2 million dollars (not eligible for the county homeowner exemption), while introducing new brackets for extremely high-value home sales. The sale of houses valued at more than $26 million would be taxed at a top rate of 7.25 percent.
Of the revenue generated, 50 percent would go to a rental housing revolving fund, 10 percent would go toward a land conservation fund and 10 percent would fund homeless services. The bill would also have removed the caps on the amount of revenue that could go to those funds.
Kenna StormoGipson, of the Hawai‘i Budget &Policy Center, emphasized that the bill was the “most popular housing measure of the session,” receiving more supportive testimony than any other housing-related bills.
“I think when dozens of individuals and organizations supporting affordable housing and homeless services show up and they aren’t given the opportunity of a hearing, it can undermine faith in the public process,” StormoGipson said.
The bill received strong support from affordable housing and homeless advocates on Kaua‘i. The Hawai‘i Budget &Policy Center estimated an early draft of the bill would generate more than $2 million for homeless services on Kaua‘i.
Though he did not comment on SB 362 specifically, since it did not pass through any of his committees, Kaua‘i state Rep. Luke Evslin emphasized the importance of a conveyance tax in a statement to The Garden Island.
“Not only can the conveyance tax be a powerful revenue source for affordable housing, but I think that a properly formatted progressive tax can discourage speculation in the housing market where homeowners are purchasing and selling homes as an investment rather than as a place to live,” he said.
Evslin also emphasized that a conveyance tax increase should be marginal, meaning only the amount of value above a given cost threshold would be taxed at a higher rate.
The bill has been opposed by real estate industry groups and developers. The Land Use Research Foundation of Hawai‘i, an advocacy group for developers and landowners, submitted testimony in opposition, arguing “it is ironic and unfair that among the entities which will be hardest hit by these types of measures include Hawai‘i’s large landowners that build housing (including affordable housing) and serve as stewards of our lands.”
The bill would have exempted government-assisted affordable housing developments and properties sold to nonprofit organizations from the new tax.
Finance Committee Chair Kyle Yamashita did not respond to questions about his decision not to schedule the measure for a hearing.
This practice is common in the state Legislature, where bills frequently die quietly in committee after being deferred indefinitely or not scheduled for a hearing.
The Foley Commission, formed last year in the wake of a series of public corruption scandals to improve ethics in government, took aim at the practice in a report issued last year.
The commission criticized the “lack of transparency in the process of determining why certain measures referred to a committee are either scheduled or not scheduled for a public hearing,” and recommended requiring chairs to “articulate their reasons for deferring measures indefinitely and for not.”
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Guthrie Scrimgeour, reporter, can be reached at 808-647-0329 or gscrimgeour@thegardenisland.com.
