An Empty Homes Tax Is A Good Tax For Honolulu - Honolulu Civil Beat

About the Author

Ellen Godbey Carson

Ellen Godbey Carson is a retired attorney, who previously served as president of Hawaii State Bar Association, Hawaii Women Lawyers, and the Institute for Human Services.

It would provide a better fit for our housing crisis while avoiding harsh consequences for our residents.

Honolulu has a housing crisis that grows each year. Yet, the 2020 U.S. Census reported that Honolulu has 34,253 vacant housing units, with almost one in every 10 housing units on the island being unoccupied.

Our property tax policies fail to address this crisis, and fail to prioritize our housing for Hawaii’s residents.

The Empty Homes Tax proposed for Honolulu by Bill 9 (2022) could create thousands more local rental units while raising substantial revenues for affordable housing and homelessness — a definite win-win.

An empty homes tax is a smart tax policy that helps address these problems on many levels. This tax would incentivize property owners to address our critical needs, and would:

  • encourage existing owners to rent or sell vacant housing for use as homes for local residents;
  • increase our available supply of homes to better meet local demand and reduce market pressures that cause high costs;
  • and raise funds for essential solutions to affordable housing and homelessness. 

Several jurisdictions already have adopted empty home taxes, including Oakland, San Francisco and Berkeley, Vancouver, and British Columbia. Bill 9 is most closely modeled on Vancouver’s empty homes tax, which in five years has raised over $115 million revenues for affordable housing while vacant homes have decreased by 36%.

An empty homes tax provides a better “fit” for our housing crisis, while avoiding harsh consequences for our residents who live in their own homes or rent because they cannot afford to own. Our local residents already shoulder high tax burdens, so this tax will not be paid for any property where a local resident owns or rents the property as their principal residence at least six months a year.

This tax will instead be paid by those who own second homes, vacation homes, blighted homes, and investment homes that are not used as a principal residence for Hawaii residents. Each one of our 34,253 empty homes is depriving a family of a home to live in.

It’s time for an empty homes tax that can, for the first time, prioritize Honolulu’s housing for Honolulu’s residents. This tax achieves better equities than our current tax policy, by exempting all homes occupied long term by local renters or owners.

Background And Details 

A 2018 Demographia International Housing Affordability survey showed Hawaii 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 U.S.”

This crisis is getting worse, not better. Last year alone, 15,000 local residents left the islands, 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.”

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:

  • This tax would shift our housing industry away from luxury properties for rich non-residents toward homes that are affordable to local residents. 
  • The tax creates an incentive to immediately convert existing housing stock into housing for long term residents.
  • Converting existing investment properties into homes for local residents avoids the need for costly construction, long delays for development and permitting, NIMBY challenges, government subsidies, and taking more rural lands.
  • The tax will produce a strong net increase in tax revenues, and create a steady fund source to address affordable housing programs and homelessness. 
  • The tax will help control and potentially even lower our rapidly increasing housing prices, as it would discourage outside investors and speculation. 
  • The tax should help control rental prices, as landlords who wish to avoid the tax will need to offer reasonable rent prices to secure long term local renters.
  • The tax would help the city’s efforts to control proliferation of vacation home rentals.
  • Only housing not used for long-term residents would pay higher property taxes.
  • Owner-occupants and long-term residents/renters will not experience higher taxes for their home, so it does not increase their cost of housing.

Sadly, there is no silver bullet that can solve our housing and homelessness crises. 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.

Honolulu recently issued an RFP (request for proposal) to hire a consultant to design an empty homes tax program for Honolulu and outline the essential steps required for the effective implementation of the program.

An empty homes tax will assure that all housing on Oahu will be prioritized for homes for local residents.

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About the Author

Ellen Godbey Carson

Ellen Godbey Carson is a retired attorney, who previously served as president of Hawaii State Bar Association, Hawaii Women Lawyers, and the Institute for Human Services.

Latest Comments (0)

Some things that might increase support for this idea: (a) add enough staff to government for enforcement and money for needed IT; (b) impose the tax only on property for which vacancy exceeds 9 months a year (so that we don't pick up the OCB re-renting delays that can occur because you're trying to find the right tenants and doing renovations, etc); (c) don't overstate the impact on making affordable housing available; (d) don't overstate the domino effect of people trading up into very expensive units. You don't need c and d in the bill, but it helps to maintain credibility during the advocacy process and you want it after implementation to avoid more disillusionment. Underpromise and overdeliver.

Fallback25 · 1 week ago

"Each one of our 34,253 empty homes is depriving a family of a home to live in"This is the core idea behind raising taxes on empty houses. To argue against it, let's take the proposed model and expand it. By extension, are empty cars depriving those with a DL but without the wherewithal to own a car a means to drive to the mall to go shopping? And is the $10,000 in my wallet depriving someone else from paying their property taxes? What says that to the idea of private property? This is the heart of the argument, and the extension says that those who have should - no, actually they are forced, by tax policy that penalizes them for having the wherewithal to buy an asset on the open market - to give to those who don't have that same wherewithal to have the free use - no, use that the cost to them is below open market value - of someone else's property

rickycassiday · 1 week ago

As expected, many naysayers in the comments. I'll summarize the recurring themes:"It won’t make as big an impact to available housing stock (or revenues) as we think!" - So? Don’t let the perfect be the enemy of the good"It’s too hard to enforce without invasive measures!" – That’s not a valid justification to not try (and we still have the constitution). Bill 9 starts with self-declarations (and we can problem solve from there)"We should focus on XYZ instead!" (examples: zoning, permitting delays, regulations) – Why not approach this issue from multiple angles...starting with this idea"Extra tax revenues will just be wasted by the government…like with the rail!" – Red herring (irrelevant to the matter at hand)."This just penalizes those property holders!" – Well, yeah. Hoarding available housing stock and leaving it vacant is a practice that it’s in our city's best interest to discourage. Punitive measures are often an effective deterrent."This is a stupid, liberal, woke, socialist idea!" – ad hominemShrug, some are against this policy. Others are for it (including the author who wrote this great article + the UCLA Luskin School of Public Affairs). So what's next?

BeaterReader · 1 week ago

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