Honolulu has major housing problems, on two fronts: affordability and availability. Action is required in multiple ways to address these issues and make housing accessible to local residents — particularly young families and members of the workforce.
One fractional solution to the problem is readily at hand: Converting some portion of the thousands of housing units across Oahu that sit empty for six months or more.
The Honolulu City Council is now poised to pass — and should pass — Bill 46, creating an “empty homes tax” (EHT) that would nudge vacant property owners to rent or sell the units, making them available as homes.
The bill’s stated purpose is to address Honolulu’s affordability crisis — but also the growing issue of homelessness among local residents who have been priced out of access to shelter.
The bill would phase in this supplemental tax, starting with 1% of assessed value for the first tax year a home is vacant and rising to 3% in the third year and beyond. More than two years are built in for rulemaking and community outreach, as its effective date is July 1, 2027.
Last week, the University of Hawaii Economic Research Organization (UHERO) presented its analysis of an EHT, estimating that up to 14,000 housing units could draw the tax, bringing in an additional $144 million.
“We don’t know exactly how much housing and how much revenue it would generate,” said UHERO’s Justin Tyndall, “but the effects seem pretty large regardless of what assumptions we have.”
UHERO’s estimate begins with U.S. Census Bureau data cited in the bill, showing 34,253 housing units unoccupied in 2020. About a quarter of those vacancies are from homes that are listed for sale or for rent, however, and others are only temporarily vacant, UHERO found.
Nonetheless, as Tyndall noted, “The more people who fill their units, the more housing we generate; the fewer people that fill their units, the more revenue the program generates for the county.”
The basic ground rules established by Bill 46 position it to do more good than harm. “It would only be imposed on properties not used as long-term housing, and it would not raise taxes on homes occupied by long-term residents,” the bill states. Other mindful exemptions to the tax cover legal short-term rentals, ohana units and homes with an owner who has died within the year.
This empty homes tax is a win-win. If an owner opts to rent out or sell a property rather than leave it sitting vacant, that boosts the economy, and the housing market. And if an owner perceives that even with a bigger tax bite, an Oahu home is a valuable investment, the higher tax this owner pays bulks up city coffers, providing some measure of additional cash flow that can in turn be used for rental assistance or building affordable housing.
There’s no need to set an earnings or home sales target, aside from ensuring that revenues raised will cover city costs of administration, because each individual transaction has some benefit. For that reason, the suggestion by some bill opponents that Honolulu stall for a while longer is unnecessary.
As state and city officials agree, the lack of affordable housing has reached emergency levels. Vital members of our community are leaving Honolulu, driven away because they cannot afford to stay. The housing crisis has a ripple effect, causing worker shortages and draining money that might otherwise be spent here.
Further, as homelessness and the threat of homelessness grow for the city’s most vulnerable, costs both tangible and intangible are imposed, from downgrading of Oahu’s appeal as a tourist destination to the destructive effects on residents’ health and welfare that accompany poverty and lack of shelter.
Bottom line: An empty homes tax is far preferable to allowing Honolulu to be drained of its vitality and local character, especially by investors who have little stake or involvement in the quality of life for communities or kamaaina.
