Among Honolulu Mayor Kirk Caldwell’s plans for addressing Oahu’s affordable housing shortage are proposals to levy heftier taxes on high-end investment properties and impose other taxes on vacant properties.

The initiatives are part of Caldwell’s 44-point action plan unveiled Thursday that seeks to address Oahu’s housing affordability challenges, resilience against natural disasters and rapidly changing climate.

The vacancy tax, modeled after one in Vancouver, British Columbia, would be levied on residential units not occupied for more than six months each year. The property tax increase, meanwhile, would be levied on certain properties valued at over $1 million.

Mayor Kirk Caldwell walks out before presser discussing where his administration is going to find the $44 million tor rail.
Mayor Kirk Caldwell, seen here at a press conference last November, unveiled a 44-point plan for Honolulu on Thursday. Cory Lum/Civil Beat/2018

Caldwell, who was elected to his first term in 2012, will leave office in January 2021.

“It’ll be controversial,” Caldwell said of the vacancy tax during his State of the City address Thursday night. “But it’s something we’ve got to do.”

Caldwell said that Ikaika Anderson, the City Council chair, has already begun to work on a bill to impose the vacancy tax.

About 5.3% of Oahu’s long-term housing inventory is vacant, according to the Oahu Resiliency Strategy report released by the mayor’s office Thursday.

Caldwell plans to model the legislation after Vancouver’s Empty Homes Tax, which levies a 1% tax on the assessed value of unoccupied land.

Properties that are principal residences or are being rented for more than half the year would be exempted. There would also be an exemption if they have just been sold or are under construction.

Vancouver and the province of British Columbia, which has a separate vacancy tax, require property owners to file declaration forms each year to establish their occupancy status.

The vacancy tax would be intended to flush out offshore investors who may not reside in the state or encourage them to rent out units to Hawaii residents.

“These are innovative approaches to increasing our housing inventory,” said Caldwell’s chief of staff, Gary Kurokawa. “If you drive by Kakaako at night, most of the units are dark. Those are probably the units we’re looking at.”

The new report estimates a 1% tax could free up 10,000 housing units or contribute $60 million to the county’s general fund.

Vancouver generated $38 million in the first year of the tax, according to a February report to the Vancouver City Council. However, that report notes that the tax was intended to free up housing units and not just generate revenue and recommended raising the tax.

“Given the number of property owners that chose to pay the tax instead of renting their property, it is possible that the current tax rate is not enough of an incentive to rent,” the Vancouver report said.

Hokua Naru Towers Kakaako Condominiums Ala Moana Beach Park aerial.
The vacancy tax is intended to get more units into the housing inventory. Cory Lum/Civil Beat/2018

Vacancies fell by about 15 percent, which represented 163 units being put back into the housing  inventory, according to the report.

Caldwell may also consider proposing to increase taxes on properties valued at $1 million or more that aren’t used as a place of residence.

The exact tax scheme isn’t outlined in the Honolulu report, which says residents least able to pay would retain lower rates while properties that are likely owned by offshore investments would bear the brunt of rate increases.

The Honolulu City Council is currently considering across-the-board property tax increases to help pay for the operations and maintenance expenses of Honolulu’s rail project.

The new report, though, mentions that additional increases for certain high-end properties could generate from $24 million to $119 million in additional revenues. Some of that could be used for affordable housing projects, the report said.

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