The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Finance on Feb. 25, 2025.
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Feb. 25, 2025, 10 a.m.
Hawaii State Capitol
Conference Room 308 and Videoconference
To: House Committee on Finance
Rep. Kyle T. Yamashita, Chair
Rep. Jenna Takenouchi, Vice-Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: HB1410 HD2 — RELATING TO HOUSING
Aloha Chair Yamashita, Vice-Chair Takenouchi and other members of the Committee,
The Grassroot Institute of Hawaii offers comments on HB1410 HD2, which would increase the property conveyance tax for higher tiers.
Put simply, we are concerned that these proposed higher conveyance taxes could harm the economy and negatively affect Hawaii’s already-fragile housing market.
A report by the Sage Policy Group on real estate transfer taxes — exactly the type of tax contemplated in this bill — noted that such laws can “lead to decreases in population, real incomes, real estate transactions, investment in structures, and quality of the built environment.”[1]
When applied to higher-value properties, transfer taxes reduce investment in both commercial and residential properties, leading to lost jobs and reduced economic activity.
We at Grassroot believe it is counterintuitive to pursue affordable housing initiatives while simultaneously making it more expensive to buy and sell homes.
Further, this measure could discourage adaptive reuse — the conversion of old buildings to new purposes. Hawaii’s counties can leverage adaptive reuse to add to their housing stock, as they are doing now,[2] but higher conveyance taxes could chill the sale of old buildings, which might not necessarily qualify as “multifamily residential property” at the time of sale.
The Sage report stated: “Many properties will need to be upgraded and/or adaptively reused to remain viable. Excessive transfer tax rates can frustrate the exchange of property that is often required to return to commercial viability.”[3]
This bill deserves some praise for seeking to adjust the tax for multifamily residential properties to reflect value on a per-unit basis. This would help address some concerns related to the purchase of property for affordable housing or rentals. However, it would not fully mitigate the potential harm from an increase in the conveyance tax.
Ultimately, the conveyance tax is not the proper mechanism to fund new housing initiatives. Rather than help, it could harm the state’s economy and housing market.
Thank you for the opportunity to testify.
Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] “The Unintended Consequences of Excessive Transfer Taxes,” Sage Policy Group, Inc. on behalf of the Community Coalition for Jobs and Housing, June 2022, p. 3.
[2] Lana Teramae, “Local Architects Talk About Repurposing Existing Buildings in Post-Pandemic Hawai‘i,” Hawaii Business Magazine, Sept. 6, 2021.
[3] “The Unintended Consequences of Excessive Transfer Taxes,” p. 3.
