Hawaii Senate Bill SB1405

Hawaii 2025 Regular Session

• Introduced: 1/23/25
• Refer: 1/27/25
• Report Pass: 2/13/25
• Refer: 2/13/25

Caption

Relating To Housing.

Summary

SB1405 would create a new general excise tax (GET) exemption and corresponding use tax exemption for development of homestead lots or housing for the Department of Hawaiian Home Lands (DHHL). The exemption applies to amounts related to planning, design, financing, and construction for new construction, moderate rehabilitation, or substantial rehabilitation projects tied to DHHL homestead lots or housing. It also covers certain projects developed under DHHL-approved government assistance programs, nonprofit-sponsored housing for qualified Hawaiian Home Lands families, and affordable rental housing where at least half of the units are reserved for households at or below 80 percent of area median income. The bill requires exemption claims to be certified by DHHL and forwarded to the Department of Taxation. It defines key terms such as “homestead lot,” “qualified person or firm,” and rehabilitation categories by reference to existing law. The measure also directs DHHL to submit annual reports to the Legislature through 2031 on cost savings, reinvestments, and any increase in housing production attributable to the tax exemption, and it would take effect on January 1, 2026.

Impact

If enacted, SB1405 would amend chapters 237 and 238 of the Hawaii Revised Statutes to remove GET and use tax liability from qualifying DHHL housing development activities. This would reduce project costs for DHHL-related homestead and affordable housing development, potentially allowing more funds to be redirected toward construction, rehabilitation, and related housing production. The bill would also create a new administrative role for DHHL in certifying exemption claims and reporting annually to the Legislature on the fiscal and housing outcomes of the tax preference.

Sentiment

The available voting history suggests strong support in committee, with the bill passing both Senate Housing and Senate Hawaiian Affairs on 4-0 votes, each with amendments. That indicates broad agreement on the policy goal of lowering costs for DHHL housing development and supporting Native Hawaiian homesteading and affordable housing. No committee transcripts were provided, so there is no recorded debate to indicate broader public or legislative opposition in the materials supplied.

Contention

The main policy issue is the use of tax exemptions to subsidize DHHL housing development. Supporters appear to view the exemption as a way to make already-affordable homestead housing even more attainable and to increase production, while any concerns would likely center on lost tax revenue, the scope of the exemption, and whether the benefits are sufficiently targeted. The bill narrows eligibility through DHHL certification and an affordable-housing threshold for rental projects, which may have been intended to address concerns about overbroad tax relief.