Raise sales tax on costly homes, build more rentals

We need to build more housing in Hawaiʻi, and specifically more affordable rental housing. The question is how.

The answer, in part, entails harnessing some of the tools we already have at our disposal. Legislators are considering House Bill 1410, which would fund new supportive and affordable housing by increasing the tax on sales of high-value homes to help address the state’s housing crisis. The bill improves our existing conveyance tax by lowering the tax for less expensive homes and increasing the rate for higher-value properties that sell for $1.3 million or more.

The rate increase would fall primarily on investors and wealthy out-of-towners who are buying second homes and can afford to pay the tax. Research shows that the bulk of properties sold across the state are in the $1 million to $2 million range, and the share of owner-occupied sales decreases dramatically above $1.5 million.

The state has already invested in thousands of affordable rental units through the Rental Housing Revolving Fund, which is supported by revenue from the conveyance tax. Restructuring the tax would increase revenue to put toward the future construction of thousands more affordable units. That could help make a real dent in our housing crisis, especially since data shows we are lagging behind in making a real impact for extremely-low income rentals.

We can’t afford to wait to take action any longer. We need to build an estimated 5,000 new units per year at minimum. We need to invest in construction of housing now to keep our economy running, or we run the risk that it will stall out. Raising revenue to invest in more housing is a commonsense way to make our economy more resilient.