Reactions to April 29 Informational Briefing by Ernst & Young
Housing Now! Coalition: Empty Homes Tax Whitepaper
Introduction
On April 29, 2025, the Committee on Budget held an informational briefing with a presentation by Ernst & Young LLP (“EY”) on the first phase of work covering the feasibility of the proposed Empty Homes Tax (“EHT”) proposed in Bill 46 (2024).
The EY report can be found on the Bill 46 (2024) measure page at DEPT. COM. 294.
EY Study Suggests Multiple Factors in Support of Empty Homes Tax
As noted during the informational briefing and ensuing Councilmember discussion, the EY report suggests that the current form of Bill 46 (using EY’s self-acknowledged conservative estimates/methodology) could yield the following benefits:
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Incremental Net Revenues: New net tax revenues of $290,000,000 over the same 10 year period; and
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Enhanced Property Tax Resources: Updated software, hardware, and enforcement staff that will allow much greater future flexibility for Hawaiʻi’s tax policy needs.
Conservative Estimates in the EY Study
EY acknowledged that the estimates in their report were intended to be conservative. The conservative estimates were driven by EY’s usage of a methodology that relied primarily on Honolulu Board of Water Supply (“BWS”) usage data which would not capture the following:
(a) Condo Units: Any empty homes in condo buildings without independent water metering, and
(b) Empty Units with Sufficient Water Usage: Any empty homes with high water usage related to activities that aren’t connected to occupancy as a primary residence (e.g., empty homes with water usage for landscaping or occupancy by visitors or other persons not using the property as their primary residence).
The UHERO 2025 Hawai‘i Housing Factbook, also provided analysis of the EY report’s estimates/methodology and agreed with EY’s own self-assessment that such BWS methodology would likely yield conservative results.(FN2)
As such, we believe using alternative estimates of empty units may provide more relevant projections for the 10 year empty home conversions and related tax revenues. For example, using third party reports of vacant units on O‘ahu (e.g., UHERO or the U.S. Census) results in significantly higher amounts.
Alternatives to EY’s Self-Acknowledged Conservative Estimates
To illustrate the potential impact that higher estimates of total vacant units could have on the EY study’s annual behavior response rate (“ABBR”), the following high-level analysis uses different baseline estimates of vacant units (starting with EY’s estimates of 7,000 to 11,000 and including UHERO’s estimates of 26,000 and the U.S. Census Bureau’s estimates of 34,000 vacant units).
The results of our high-level analysis, based on current language of Bill 46, follows. Note this analysis assumes all exemptions in the current version of Bill 46 remain intact. Scaling back any of the current exemptions will further increase the resulting ABBR conversion estimates.
Extending these alternative ABBR conversion estimates, the resulting conversions over a ten year period would result in housing units with an economic value totaling billions of dollars.(FN3)
To put these economic values of converted homes into context, the Hawai‘i Public Housing Authority’s Ka Lei Momi plan (to dramatically expand the stock of public housing by over 10,000 units over a ten-year period) has been projected to cost $6.6 billion according to reports from local publications.
Overall, we believe that in our severe housing crisis, every potential unit is critical and any efforts to increase supply of affordable housing must be considered as part of a full complementary suite of solutions.
Enhanced Property Tax Resources
As further noted during discussion following the EY presentation, the EHT could favorably impact Honolulu’s ability to administer existing property tax needs through the following:
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Finally updating the City’s antiquated real estate taxation software and hardware, along with tax enforcement staffing, so the City may finally undertake other more progressive tax policy reforms;
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Creating a database and IT capabilities that would allow the City to enhance short term rental (STR) enforcement, specifically focusing on easing the depletion of housing supply from illegal, non permitted STR activity.
Conclusion
Overall, we continue to believe that the EY report showing the financial feasibility of the program, as well as all other factors discussed above, overwhelmingly supports a YES vote on Bill 46 (2024).
Organization details
Prepared by: Housing Now! Coalition (https://www.hihousing.org/)
Date: May 2025
Contact: Ross Isokane, isokane@gmail.com
FN1 Estimated using a weighted average assessed value of $1.1 million (weighted average calculated using assessed values of $750K for Condos/$1.4 million for Other + 47% Condo/53% Other as noted in the EY report).
FN2 See discussion in UHERO 2025 Hawai‘i Housing Factbook on page 20 1 Estimated using a weighted average assessed value of $1.1 million (weighted average calculated using assessed values of $750K for Condos/$1.4 million for Other + 47% Condo/53% Other as noted in the EY report).
FN3 Estimated by multiplying the resulting ABBR estimated 10-year units by a weighted average assessed value of $1.1 million (weighted average calculated using assessed values of $750K for Condos/$1.4 million for Other + 47% Condo/53% Other as noted in the EY report).
