On February 6, 2025, the Hawaii House of Representatives introduced HB1410, a legislative bill aimed at reforming the state's conveyance tax system to better address the growing challenges of affordable housing and homelessness. The bill seeks to restructure the existing tax framework, which has not been updated since 2009, despite significant increases in property values over the past thirteen years.

The primary purpose of HB1410 is to implement a marginal rate system for the conveyance tax, which is a one-time tax levied during property sales. This new structure would apply higher tax rates only to property values exceeding certain thresholds, thereby alleviating the financial burden on affordable multifamily housing. The bill also proposes to adjust the tax calculation for these properties based on a per-unit value, recognizing that high total property values do not necessarily reflect affordability for renters.

Key provisions of the bill include an estimated 30% increase in conveyance tax revenue, projected to generate around $35 million annually. This would be achieved by raising the tax rate on non-owner-occupied homes valued over $2 million and slightly increasing the rate for owner-occupied homes valued over $6 million. Importantly, the bill aims to maintain revenue neutrality for properties valued at $6 million and under for owner-occupied homes and $2 million and under for non-owner-occupied homes.

Additionally, HB1410 proposes to tie conveyance tax rates to a cost-of-living adjustment, ensuring that the tax system remains equitable over time. A portion of the increased revenue would be allocated to a newly established Supportive Housing Special Fund, which would finance the development and maintenance of affordable housing and provide supportive services for individuals and families with special needs.

The introduction of HB1410 has sparked discussions among lawmakers and stakeholders regarding its potential impact on the housing market and the broader economy. Proponents argue that the bill is a necessary step toward addressing Hawaii's housing crisis, while critics express concerns about the potential for increased costs to be passed on to renters and the implications for property owners.

As the bill moves through the legislative process, its outcomes could significantly influence Hawaii's approach to affordable housing and homelessness, setting a precedent for future tax reforms in the state. The legislature's commitment to addressing these pressing issues through HB1410 reflects a growing recognition of the need for sustainable solutions in the face of rising housing costs.