Hawaii's real estate market could be on the cusp of significant changes, as discussions surrounding capital gains taxes on housing gain momentum. A key proposal, known as the “More Homes on the Market Act,” could have a positive impact, offering relief to homeowners and, consequently, boosting the state’s economy.
According to a recent analysis, the “More Homes on the Market Act” could double the existing tax exclusions for home sales, while also adjusting these limits annually to account for inflation. This move is designed to remove some of the financial disincentives that currently prevent many homeowners from selling their properties. The primary goal is to increase the supply of available housing, thereby addressing the long-standing issue of high housing costs in the islands.
The implications of such a policy shift could be considerable for various stakeholders in Hawaii's business and real estate sectors. For example, local entrepreneurs involved in construction and real estate development might experience increased demand as more properties enter the market. Investors, too, stand to benefit from a potentially more active and dynamic market environment, as increased inventory can create new investment opportunities. Professionals in the real estate industry, including agents and brokers, could enjoy a more robust and active market, leading to greater sales and commissions. However, others may claim that these measures would benefit high-income homeowners more than low-income residents.
The potential for capital gains tax relief comes at a critical time, given the upward trajectory of Hawaii's housing prices. The Grassroot Institute of Hawaii recently highlighted how current tax policies may be hindering the natural flow of the market, by disincentivizing homeowners from selling. The institute also noted how significant tax bills could dissuade homeowners from putting their homes on the market, leading to a shortage of available properties especially for those looking to move closer to their children, this can particularly affect older homeowners. Furthermore, a study by the Congressional Research Service, examined how factors like labor mobility are affected. The CRS study shows that high housing prices and other factors create many hurdles and can impact many homeowners.
While the proposed legislation offers a potential remedy, its success hinges on several factors, including political support and its ultimate implementation. However, by reducing the capital gains tax burden, the legislation could offer a crucial step toward a more balanced and accessible housing market that benefits everyone.
