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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 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 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.