STAND. COM. REP. NO. 3396

Honolulu, Hawaii

RE: H.B. No. 2049

H.D. 3

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

Your Committees on Water, Land, Culture and the Arts, Housing, and Hawaiian Affairs, to which was referred H.B. No. 2049, H.D. 3, entitled:

"A BILL FOR AN ACT RELATING TO HOUSING,"

beg leave to report as follows:

The purpose and intent of this measure is to:

(1) Restructure the conveyance tax to a marginal rate system for the sale of properties with residential use;

(2) Adjust the conveyance tax for multifamily properties to reflect value on a per-unit basis;

(3) Apply a cost-of-living adjustment to conveyance tax rates;

(4) Allocate revenues from conveyance tax collections;

(5) Allocate a portion of conveyance tax collections to the Dwelling Unit Revolving Fund to fund infrastructure programs in areas that meet minimum standards of transit-supportive density;

(6) Allocate a portion of conveyance tax revenues to the Hawaiian Home Lands Infrastructure and Housing Special Fund; and

(7) Establish and appropriate funds out of the Hawaiian Home Lands Infrastructure and Housing Special Fund.

Your Committees received testimony in support of this measure from the Department of Land and Natural Resources; Department of Hawaiian Home Lands; Office of Planning and Sustainable Development; Office of Hawaiian Affairs; Hawaiʻi Public Health Institute; Catholic Charities Hawaiʻi; Hawaiian Council; Hawaii Appleseed Center for Law & Economic Justice; Hawaiʻi Children's Action Network Speaks!; Oahu Metropolitan Planning Organization; Indivisible Hawaiʻi; Hawaiʻi YIMBY; Mark Development, Inc.; Church of the Crossroads; Green Party of Hawaiʻi; Kukulu Kumuhana O Anahola; Kona Indivisible; Kula No Nā Poʻe Hawaiʻi; Dowling Company, Inc.; Gentry Homes, Ltd.; Association of Hawaiians for Homestead Lands; Kaupeʻa Homestead Association; The Institute for Human Services, Inc.; Save Honolua Coalition; Association of Hawaiian Civic Clubs; ACLU Hawaiʻi; and numerous individuals.

Your Committees received testimony in opposition to this measure from Avalon Development, Grassroot Institute of Hawaii, NAIOP Hawaii, Hawaiʻi Association of REALTORS, and five individuals.

Your Committees received comments on this measure from the Department of Taxation; Tax Foundation of Hawaii; The Nature Conservancy, Hawaiʻi and Palmyra; and one individual.

Your Committees find that the State's conveyance tax framework has not been updated since 2009, is significantly lower than comparable jurisdictions in the nation, and threatens to further strain the State's housing crisis by disproportionately affecting affordable multifamily housing and creating further market inequities. Your Committees also recognize that two separate initiatives aiming to increase housing would benefit from dedicated, predictable annual funding: transit-oriented development infrastructure in zones surrounding transportation hubs and the planning and infrastructure of the Department of Hawaiian Home Lands necessary to provide homes for all beneficiaries. This measure will address all these issues by reforming the conveyance tax to foster affordable housing and infrastructure for residents and promote economic justice and equity.

Your Committee has amended this measure by:

(1) Changing the tax rates and thresholds to unspecified amounts for:

(A) The sale of a property with a residential dwelling unit for which the purchaser is eligible for a county homeowner's exemption from property tax;

(B) The sale of a property with a residential dwelling unit for which the purchaser is ineligible for a county homeowner's exemption from property tax; and

(C) The sale, lease, sublease, or assignment of any property with no residential dwelling unit;

(2) Restoring existing statutory language specifying that ten percent or $10,000,00, whichever is less, of the taxes collected each fiscal year under chapter 247, Hawaii Revised Statutes (HRS), shall be paid into the Land Conservation Fund established pursuant to section 173A-5, HRS;

(3) Inserting language specifying that fifteen percent or $15,000,000, whichever is less, of the taxes collected each fiscal year under chapter 247, HRS, shall be paid into the Hawaii Agricultural Development Revolving Fund established pursuant to section 163D-17, HRS, for land acquisition;

(4) Inserting language specifying that fifteen percent or $15,000,000, whichever is less, of the taxes collected each fiscal year under chapter 247, HRS, shall be paid into the Special Land and Development Fund established pursuant to section 171-19, HRS, for land acquisition and development of community access pursuant to sections 198D-2 and 198D-5, HRS;

(5) Clarifying that twenty percent of $40,000,000, whichever is less, of the taxes collected each fiscal year under chapter 247, HRS, shall be paid into the Hawaiian Home Lands Infrastructure and Housing Special Fund established pursuant to this measure;

(6) Inserting language authorizing the Hawaii Agricultural Development Revolving Fund to be used to acquire land;

(7) Amending section 1 to reflect its amended purpose; and

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

Your Committees note that this measure, as amended, contains tax rates and thresholds of unspecified amounts. Should your Committee on Ways and Means choose to deliberate on this measure, your Committee respectfully requests that it consider inserting appropriate amounts greater than the amounts proposed by the H.D. 3 version of this measure.

As affirmed by the records of votes of the members of your Committees on Water, Land, Culture and the Arts, Housing, and Hawaiian Affairs that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2049, H.D. 3, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 2049, H.D. 3, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Water, Land, Culture and the Arts, Housing, and Hawaiian Affairs,

________________________________ STANLEY CHANG, Chair	________________________________ CHRIS LEE, Chair
	________________________________ HERBERT M. RICHARDS, III, Chair