Honolulu Council Punts Empty Homes Tax Vote, Extends Sprinklers聽Deadline
Property owners worried about increasing costs got their way Wednesday when the City Council killed its empty homes tax and extended the deadline for condo fire safety measures.
Honolulu homeowners got a double win during the City Council’s monthly meeting Wednesday, delaying a vote on a controversial tax on empty homes and extending a deadline for condominiums to pass a fire and life safety evaluation in lieu of installing expensive sprinkler systems. Correction: A previous version of this story said the deadline was extended to install sprinkler systems.
The empty homes proposal, which would raise property taxes on homes left vacant at least six months out of the year, drew a packed house and hours of testimony before the council delayed a vote until the completion of a fiscal study, with initial results expected in January.
Owners of vacant homes on O驶ahu would be charged higher property taxes starting in fiscal year 2027, a move meant to increase the supply of housing as many residents struggle to find affordable options and point to offshore real estate investors as the ones to blame.
The tax is intended to boost local housing supply by incentivizing owners to fill or sell the homes. In the version tax rates would be proposed by the Mayor’s administration for council approval, but previous versions would have cost the owner of a median single family home on O驶ahu about $30,000 a year.
Earlier during the same meeting, the council took up a fire safety law that requires hundreds of older high-rise condominium buildings to either retrofit with fire sprinklers or pass a fire and life safety evaluation. The council first took up the issue in 2018, and set a deadline of 2024. But council members have since extended that multiple times, and Wednesday’s vote pushed it to 2038 with an interim deadline of 2030 to come up with a plan to pay for the improvements.
The empty homes tax proposal faced heavy lobbying by realtors and others. The council responded with over a dozen exemptions, including for people in the armed forces sent away on duty, people living elsewhere for medical treatment and people whose homes are undergoing construction.
Homes for sale are exempt too, and there is no time limit for how long it can sit on the market while avoiding the tax. The bill also owned by O驶ahu residents, descendants of people who owned the property for at least 25 years, or that are jointly owned by at least two families, and it was amended in September to not cover homes used as short-term rentals.听Correction: A previous version of this story said the bill grandfathered in second homes owned by people who receive a majority of their income from an O驶ahu based source. That was changed by a Wednesday amendment to the bill.
Pros And Cons Hashed Out
Both supporters and opponents came out strong during the empty home bill鈥檚 months of hearings. Opposition at Wednesday’s hearing dwarfed support, and many opponents came from the real estate industry, including Honolulu Board of Realtors CEO Suzanne Young.
Robert St. Onge, a realtor with Hawaii Home Finders, testified that he and his husband own a condo in Waik墨k墨 in addition to their primary unit in New Mexico, which is closer to family. They would either have to reside in Honolulu for more of the year or pay a much higher property tax.
“It’s essentially a financial ankle bracelet imposed by the city,” he said.
Opponents pointed out that not every empty home is owned by a wealthy investor, and that individual circumstances could be nuanced. They also said imposing the tax wouldn’t help locals, since many empty homes are too expensive for people who struggle to make ends meet.
“The sale of my property will not solve your homelessness problem,” William Deeb, who owns two long-term rentals and one second home, testified. “Locals are not clamoring to rent or purchase properties like mine 鈥 which are worth $2 million, $3 million, $5 million or more.”
Some supporters criticized exemptions that could neuter its intention, but many urged the council to pass the bill anyway.
“Yes, it can be improved for the future, and yes, we all have some reservations and preferences that could be different,” Ellen Carson testified in support. “But let’s do something for Honolulu that can make a better future for all of us.”
Former state Rep. Matt LoPresti also testified in support, saying the state wants to reduce how much revenue will go to the counties from the general excise tax, which would force counties to find more money through higher property taxes.
The bill leaves figuring out the logistics of enforcement to the Department of Budget and Fiscal Services, which this summer hired the consultant group Ernst and Young to study how to oversee the tax.
That study is scheduled to be completed next summer, but an initial report is expected in January. Council member Esther Kia驶膩ina voted against the bill during a November hearing because she wants to wait for the initial report, which she hopes will clear up some of the uncertainty over its effects. Many opponents pointed to this study, saying the City Council should wait for its results, but supporters worry that’s a stalling tactic.
Last month, University of Hawaii Economic Research Organization, or UHERO, estimated that the tax measure would fill between 4,000 and 20,000 vacant homes and that annual tax revenue would be .
The version of the bill deferred on Wednesday called for at least 20% of revenue to be spent on affordable housing initiatives.
Honolulu council members have deliberated over an empty homes tax for years, starting from before any of the current council members were in office. But previous versions of the bill kept fizzling, a fact that Waters and other supporters frequently reference.
Opponents predict the measure will be challenged in court. They point to San Francisco, where a similar empty homes tax law was struck down by a judge before it could take effect in 2025. Supporters are confident that a recent amendment folding the tax into the existing property tax classification system will help it hold up legally.
Sprinkler Deadline Delayed Again
Council members also voted Wednesday to extend the deadline for when high rise condominiums need to pass mandatory fire and life safety evaluations, seven years after a fire killed four people at the Marco Polo and first inspired new city legislation designed to promote fire safety.
Marco Polo didn鈥檛 have fire sprinklers when it caught fire, allowing the deadly blaze to spread. While fire sprinklers have been required in new residential high rises since 1975, that leaves hundreds of older condominiums without them.
A mandate to retrofit older high rise condominiums with sprinklers was introduced in the City Council after the Marco Polo fire. But it received pushback from owners concerned about the high cost, which varies by building. Marco Polo鈥檚 added sprinklers in 2021 cost $6 million, or about $10,500 per unit. At Kahala Towers, the price would be about $4 million to $5 million, or about $17,000 to $21,500 per unit.
As a compromise, the law allows condo associations to instead pass a fire and life safety evaluation. A little more than 20 out of over 300 high-rises had passed the evaluation . The deadline to either pass the evaluation or retrofit with fire sprinklers has been extended multiple times, and Wednesday’s decision pushes the evaluation deadline to 2038 to match the sprinkler deadline.
The move was taken with little fanfare. It started as its own bill, with versions introduced by council members and , and ended as an amendment to the city鈥檚 long and technical fire code. Nobody testified about it Wednesday.
“We’re trying to get a point where the law is written clearly and also that we have the resources to help these buildings and associations comply,” Tupola said Wednesday.
The City Council also passed a resolution to condemn Kaimuk墨’s dilapidated Queen Theater. The theater, on the neighborhood鈥檚 main drag Wai驶alae Avenue, has sat mostly unused for the past 40 years since it was raided in the 1980s for pornography.
