STAND. COM. REP. NO. 2639

Honolulu, Hawaii

RE: S.B. No. 2617

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2024

State of Hawaii

Sir:

Your Committees on Commerce and Consumer Protection and Transportation and Culture and the Arts, to which was referred S.B. No. 2617 entitled:

"A BILL FOR AN ACT RELATING TO REAL PROPERTY,"

beg leave to report as follows:

The purpose and intent of this measure is to:

(1) Prohibit foreign principals from acquiring real property in the State or any interest in real property in the State, except a de minimus indirect interest;

(2) Require a foreign principal that owns real property that was acquired before this measure's effective date to register the ownership with the Department of the Attorney General;

(3) Require a buyer of real property to provide a signed affidavit attesting that the buyer is not a foreign principal;

(4) Authorize the forfeiture of real property or an interest in real property that is owned or acquired unlawfully;

(5) Establish criminal penalties for violations; and

(6) Make an appropriation.

Your Committees received testimony in support of this measure from Hoʻomana Pono, LLC; Hoʻākeolapono Trades Academy and Institute; Ultimate Burger; Hawaii Federation of Republican Women; Palolo Tenant Association; Hawaii Family Advocacy Group; Cannabis Society of Hawaiʻi; Hālau Kū Māna; Hui o Kuapa; and more than two thousand one hundred individuals.

Your Committees received testimony in opposition to this measure from the Department of the Attorney General; NAIOP Hawaii; Hawaii First Realty LLC; Hawaiʻi Association of REALTORS; Biotechnology Innovation Organization; Maukele Ranch LLC; and fifteen individuals.

Your Committees received comments on this measure from the Division of Financial Institutions of the Department of Commerce and Consumer Affairs, Department of Land and Natural Resources, Hawaii Credit Union League, Building Owners and Managers Association of Hawaiʻi, and eighteen individuals.

Your Committees find that homeownership helps build strong and stable communities, which is critical to local economies. However, due to the lack of affordable options, your Committees find that the State is in a housing crisis, and that competition from affluent foreign principals has denied many Hawaii residents from realizing the benefits of homeownership. Therefore, this measure, in its current form, would prohibit foreign principals from acquiring real property in the State or any interest in real property in the State, except a de minimus indirect interest.

Notwithstanding, your Committees acknowledge the concerns raised by testifiers that the legally and socially complicated framework proposed in this measure deserves further consideration and study. Therefore, amendments to this measure are necessary to address these concerns.

Accordingly, your Committees have amended this measure by:

(1) Deleting its contents and inserting language to direct the Legislative Reference Bureau to conduct a study and report on the forty-one other states that have enacted laws limiting the sale of property to foreign individuals or entities, and how those laws and related constitutional precedents could inform demand-side regulations for the real estate market in Hawaii in favor of resident ownership, specifically owner-occupied resident ownership;

(2) Inserting an effective date of July 1, 2040, to encourage further discussion; and

(3) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the records of votes of the members of your Committees on Commerce and Consumer Protection and Transportation and Culture and the Arts that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2617, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2617, S.D. 1, and be referred to your Committees on Ways and Means and Judiciary.

Respectfully submitted on behalf of the members of the Committees on Commerce and Consumer Protection and Transportation and Culture and the Arts,

________________________________ CHRIS LEE, Chair

________________________________ JARRETT KEOHOKALOLE, Chair