House bill seeks to rein in real estate profiteering
The measure would raise taxes on quick turnaround sales
House lawmakers are taking aim at real estate speculators with a new bill that would require people who sell a property within two years of buying it to pay more taxes on the sale.
The extra money gleaned from the tax boost would go into a new special fund earmarked for homeless programs.
"I don't think we can ever curtail it, but I think it's an opportunity for us to capitalize on people who do this," said Rep. Jerry Chang of real estate speculation in the state.
Most people are concerned about homelessness, but the trouble is finding enough funding for programs to combat the problem, said Chang (D, Piihonua-Kaumana), who wrote the bill signed by 17 of his fellow House members.
"This is one way of getting it from the people who are making big profits in real estate," he said.
People who buy and sell Hawaii homes only with the intention of making money on escalating prices by "flipping" the properties in a quick sale have been blamed for years for driving up the price of local real estate.
While sales numbers have been taking a slight dip lately, prices remain considerably higher than just a year ago.
The median sales price for a single-family house in December on Maui, for example, was $725,000, or $130,500 more than in December 2004, according to the Realtors Association of Maui.
The House bill would multiply the rate of the conveyance tax -- the tax paid to the state on any real estate sale -- based on how many times the property had been sold over the past two years. Under the proposed law, the seller alone would be responsible for paying the tax increase.
Exemptions would be made if the profit made by the seller is relatively low or in cases when the seller can demonstrate hardship, such as needing to sell to pay large medical bills.
The profit cutoff originally stood at $100,000. But House Water, Land & Ocean Resources Committee member Rep. Cynthia Thielen (R, Kaneohe-Kailua) called for that to be reduced.
Real estate developers selling homes for the first time would not be subject to the tax.
So far, the size of the increases are still left blank on the bill, which passed out of the House Water, Land & Ocean Resources Committee Feb. 13. It heads next to the House Finance Committee.
State Taxation Director Kurt Kawafuchi said his department is generally opposed to tax increases and that it would be more appropriate to put the extra tax on the buyer. That is because only the buyer truly knows whether he plans to actually live in the home, he said.
"Well, it doesn't really matter whether they're living in it or not," Chang said. "I mean, if they're buying in it. They're living in it. They turn around and sell it within a year. You're still making a big profit."