Addressing Housing Speculation

Housing isn’t Just a Supply Issue, it’s Also a Demand Issue – Addressing Housing Speculation

Hawai‘i's housing crisis has long been a pressing issue, with skyrocketing prices and a shortage of affordable homes. Recently, the State Legislature made significant strides with the passage of SB3202 and HB2090, with the goal of allowing increased density to increase housing supply. While this is a crucial step in addressing affordability, it's essential to recognize that increasing supply alone won't solve the problem.

Increasing housing supply can alleviate the pressure of demand-driven price inflation. With more available homes on the market, buyers have more options, reducing competition and stabilizing prices. Efforts to boost housing supply are crucial for addressing our housing shortage, but they may fall short if demand consistently outpaces availability. 

The 2019 Hawai‘i housing study estimated that we needed to build 50,000 homes by 2025 to meet demand. Yet at the same time, 12% of the state's current housing stock consists of short-term rentals or empty homes, amounting to 70,000 units left vacant either year round or seasonally. This suggests that our issue is not only with supply, but with the inefficient use of our available housing.

This imbalance is exacerbated by the trend of viewing housing primarily as an investment opportunity rather than a means of fulfilling basic housing needs, perpetuating the challenge of meeting the housing needs of our residents. In 2022, 75% of homes sold in Hawai’i were by non-owner occupied buyers. Complementary policies are needed to curb housing speculation and ensure that homes are utilized efficiently – specifically, for housing people.

An effective policy to combat speculation is the implementation of an Empty Homes Tax. Such a measure would incentivize property owners to put their vacant or underutilized properties back into the rental market, increasing housing supply for residents. Vancouver's EHT raised over $140 million for affordable housing in the last 5 years and decreased the number of vacant homes by over 50%. We're proposing an EHT for Honolulu that:

·       Taxes empty homes at a rate of 3%

·       Defines empty homes as homes with no one declaring the home as their principal residence for at least 6 months of the year (with some specified exemptions to avoid unintended consequences)

·       Revenue generated from the tax goes to funding affordable housing

An Empty Homes Tax serves to discourage buying properties solely for investment purposes. When investors are faced with additional taxes on vacant properties, they are less inclined to purchase homes with the intention of leaving them empty or using them as short-term rentals. This reduction in speculative buying leads to less competition for housing, ultimately increasing affordability for buyers.

Let's pass an Empty Homes Tax and increase housing for our local residents!

Susan Le, HiHAC (Hawaii’s Housing Affordability coalition)