State Legislature advances bipartisan effort to support first-time homebuyers

The Hawai‘i State Legislature advanced Senate Bill 2552 that would help local people save for and eventually purchase a home in Hawai‘i. 

A recent study found that Hawai‘i ranked lowest in the nation in homeownership among young people. In fact, as of 2024 less than 2% of residents under age 34 own a home. This is due in large part to Hawai‘i’s high housing costs, which can include down payments costing hundreds of thousands of dollars.

“It’s no secret that young people can’t afford to live here,” said Lee Wang, Executive Director of Housing Hawai‘i’s Future. “Down payments are a big part of that. It can take years – even decades – for some people to save the money it takes to make a down payment on a home. This bill gives young people hope. It gives them a better chance to stay here, to raise a family here.”

The nonprofit is dedicated to creating opportunities for Hawai‘i’s next generation by ending the workforce housing shortage.

SB2552 reinvigorates a long-standing program designed to help prospective homeowners with their down payment. Established in 1982, the Individual Housing Account (IHA) allowed Hawai‘i residents to save up to $5,000 per-year free of State income tax by creating an account with a participating financial institution. 

More than forty years later, the program has stalled. Since state law never adjusted the cap to keep up with inflation, financial institutions stopped offering the program. 

“This bill has been a long time coming,” said Minority Leader Lauren Matsumoto, who pushed for the measure for several years. “As Hawaii gets more expensive, it is more important than ever that we give local people more ways to save money on their housing costs. That is why I have been fighting for the last half-decade to get this program updated. It lowers taxes for a critical demographic: residents who are saving to own their first home.”

This year, the measure was introduced as a bi-partisan effort on behalf of the Future Caucus.

“Our affordability crisis is twofold: we don’t have enough high-paying jobs and our everyday costs, including housing costs, are massive,” said Rep. Greggor Ilagan of Oʻahu, who introduced the House version of the bill and also Chairs the House Committee on Economic Development and Technology. “If we’re going to solve this crisis, we need to address the issue comprehensively. That means both diversifying our economy and finding ways to bring down costs for local people. This bill addresses the latter, allowing residents to save thousands of dollars tax-free for housing costs.”

The new bill would update the current $5,000 cap, increasing the maximum to $20,000 per-year for an individual and $40,000 for a married couple.

“In a year with significant budget constraints, it is critical to find low-cost, high-impact ways to address Hawai‘i’s housing crisis,” said Sen. Troy Hashimoto of Maui, who introduced SB 2552 and is also the Vice Chair on the Senate Committee on Housing. “This bill finds that balance, reviving a program that makes homeownership easier without increasing expenses or creating more bureaucracy. It can be the difference-maker for a Hawai‘i resident looking to buy a home.”

SB2552 has passed final reading by both the State House of Representatives and the State Senate and will now move on to the governor for signature. If the bill is signed into law, financial institutions can begin offering updated Individual Housing Account programs by January 1, 2027.