Empty Homes Tax
Honolulu has a housing crisis that grows each year. Yet, the 2020 U.S. Census reported that Honolulu has 34,253 vacant housing units! Almost 1 in every 10 housing units on our island is vacant. Our property tax policies exacerbate our housing crisis by failing to prioritize our housing for Hawaii’s residents.
An Empty Homes Tax proposed for Honolulu (Bill 46, 2024), could create thousands more local rental units while raising substantial revenues ear-marked for affordable housing and homelessness – a definite win-win. This tax would, for the first time, prioritize our housing for Hawaii’s residents, as well as:
1. encourage existing owners to rent or sell vacant housing for use as homes for local residents;
2. increase our available supply of homes to better meet local demand and reduce market pressures that cause high costs; and
3. raise funds for essential solutions to affordable housing and homelessness.
Hawaii has the lowest property taxes in the nation. This attracts investors who buy our properties for a tax haven without ever using them as homes for local residents. Our local residents have to compete with millionaires around the world who enjoy our beautiful islands. That just drives up our prices even more. Without an empty homes tax, when we build more houses, we end up with more empty homes.
Local residents already pay high tax burdens, so the empty homes tax exempts any property where a local resident owns, rents or occupies the property as their principal residence at least 6 months a year. This tax will instead be paid by those who own empty homes, that is, second homes, vacation homes, blighted homes, corporate retreats, and investment properties that are not used as a home (principal residence) for Hawaii residents.
An Empty Homes Tax offers many advantages not achieved by just increasing property taxes on all properties or on Residential A properties (those not owner-occupied). These advantages include:
· Shifting our housing industry away from luxury properties for rich non-residents toward homes that are affordable to local residents.
· Creating an incentive to immediately convert thousands of existing housing units into housing for long term residents.
· Converting empty homes into homes for local residents without long delays for development and permitting, costly construction, government subsidies, NIMBY challenges, and taking more rural lands.
· Producing a strong increase in tax revenues, and creating a steady fund source to address our critical needs for affordable housing programs & homelessness.
· Controlling and potentially even lowering our rapidly increasing housing prices, as the tax would discourage outside investors and speculation.
· Controlling rental prices, as landlords who wish to avoid the tax will need to offer reasonable rent prices to secure long term local renters.
· Helping the City’s efforts to control proliferation of vacation home rentals.
· Helping the City’s residents, since owner-occupants and long-term residents/renters will not experience higher taxes for their home, so it will not increase their cost of housing.
Several jurisdictions have adopted empty home taxes. Bill 46 is most closely modeled on Vancouver’s empty homes tax, which in 6 years has raised over $140 million revenues for affordable housing while vacant homes have decreased by 54%.
Empty Homes Tax Background and details:
A 2018 Demographia International Housing Affordability survey showed Hawaiʻi has the highest median home price, second highest median rents, second highest rate of homelessness per capita, and fourth highest rate of net out-migration in the US." In 2024, Demographia reported that Honolulu now has the 5th worst “impossibly unaffordable housing” in the world. This crisis is getting worse, not better. The population in Hawaii has decreased for the past eight years with 15,000 local residents leaving the islands in 2022, largely due to these high costs.
The 2020 Report to the Mayor’s office on “Housing in Honolulu: Analyzing the Prospect of Taxing Empty Homes,” shows major positive implications for an Empty Homes Tax:
· “High residential vacancy rates are a major facet of Honolulu’s housing problem. Because Hawaii has the lowest property tax rate in the nation, international investors are incentivized to purchase property for speculation or use the island as a tax haven. Additionally, wealthy individuals from the mainland and neighboring countries purchase vacation homes for seasonal use. These practices lead to homes sitting empty where they are much needed in high-density urban areas like Honolulu County.”
· “The prevalence of short-term, vacation, and high-end rentals constrict the supply of moderate-to-affordable housing in Honolulu. The aim of a vacancy tax is to generate revenue from properties that investors will continue to keep vacant in the interest of maintaining equity value as well as encourage the return of vacation and short-term rentals to the housing stock.”
We know there is no silver bullet that can solve our housing and homelessness crises, and that many different solutions need to be created. An empty homes tax is one important step to finally prioritize Oahu’s housing for Oahu’s residents and create a dedicated revenue stream for solutions for affordable housing and homelessness.
Yes, there are implementation and enforcement issues to deal with, as exist for any new type of tax. But those are solvable, as Vancouver, Canada has already shown. Vancouver’s non-compliance rate has fallen from 7.5% in 2017 to 0.7% in 2023, and the new revenues for affordable housing far exceed implementation costs. Honolulu has hired a consultant to assist with essential steps required for design, effective implementation and enforcement for the program.
Please help us support Bill 46, an Empty Homes Tax for Honolulu.