The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Finance on March 3, 2026.
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March 3, 2026, 10 a.m.
Hawaii State Capitol
Conference Room 308 and Videoconference
To: House Committee on Finance
Rep. Chris Todd, Chair
Rep. Jenna Takenouchi, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
TESTIMONY IN OPPOSITION TO HB2049 HD2 — RELATING TO HOUSING
Aloha Chair, Vice Chair and other Committee members,
The Grassroot Institute of Hawaii opposes HB2049 HD2, which aims to double existing conveyance tax revenues, largely through increasing rates on higher residential tiers as well as commercial and investment real estate.
It is difficult to properly evaluate the impact of a bill with no listed tax rates. But based on the stated intent to increase tax revenues in order to fund certain projects, we must assume that this bill is intended to impose a sizable tax hike on higher-tiered properties.
We appreciate and support a marginal conveyance tax rate more generally, however, we are concerned that the proposed tax hikes 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 proposed 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 property.
Further, this measure could discourage the conversion of old buildings to new purposes, which is already taking place in Honolulu.[2] These so-called adaptive reuse projects have the potential to add to the state’s housing stock. 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.
Moreover, higher taxes will be a significant burden to businesses in general, regardless of whether they are planning to adapt a property for residential use. 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, which 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 that could come from increasing the conveyance tax.
Ultimately, the conveyance tax should only cover administrative needs. It is not the proper mechanism to create revenue for new projects.
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 Jo, 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.
