The new legislation aims to potentially increase housing supply by disincentivizing property owners from leaving properties vacant. The funds generated from this vacancy surcharge could be used to support housing development projects through the Hawaii Housing Finance and Development Corporation. This is a strategic approach considering Hawaii's ongoing issues with housing shortages, making it a focus of current legislative efforts.
Senate Bill 2246 proposes changes to Hawaii's tax laws, primarily introducing a conveyance tax vacancy surcharge aimed at properties that have remained vacant for an extended period, specifically 180 days or more. This surcharge is set at 1% of the actual consideration paid during property transfers, thereby providing a financial incentive for property owners to either rent or sell their vacant properties rather than allow them to remain idle. The legislation intends to address housing shortages by encouraging the use of unoccupied real estate, thus enhancing residential availability in the state.
Opponents may argue that the imposition of a tax surcharge on vacant properties could lead to further financial burdens for property owners, particularly in a market where property values are already high. Additionally, concerns about the administrative capacity to determine vacancy status and collection of the surcharge could arise. The bill also disallows deductions for dividends paid by real estate investment trusts, which may face opposition from these entities that could argue it affects their profitability and investment in local housing solutions.