Honolulu City Council’s Bill 9 creates an empty homes tax. That seems like a no-brainer: Tax properties that sit vacant more than six months a year at a higher rate, so that owners will be discouraged from leaving homes empty.
When homes suitable for residence are left empty, it exacerbates Honolulu’s housing shortage, and that’s a pattern often connected to investment property holdings by nonresidents. A vacant property tax is an idea whose time has come, and the city needs to consider it with urgency.
Such a tax would encourage owners to sell or rent vacant housing stock for use as homes for local residents, thus creating more available housing. That in turn would have a dampening effect against spiking market values caused by investors. And perhaps most importantly, the tax is conceived as a source of funding for affordable housing of various kinds — a welcome resource, given the 4,028 unhoused people on Oahu counted in January’s Point in Time Count.
Bill 9, first introduced in 2022, proposes that 95% of the money generated by the tax would support housing for homeless people, with 5% for administration.
As the bill notes, pressing empty homes to become actual live-in residences is an efficient way to add to the housing stock — no permitting, construction or development required. The 2020 U.S. Census recorded 34,253 empty housing units in Honolulu County, out of 370,665 total units recorded.
A new Grassroot Institute of Hawaii study on a vacant properties tax, while not supportive, found that it could well result in an increase in rental availabilities, along with increased tax revenue. Sounds good. If the vacant property tax is hefty, as it should be, it also will have some beneficial effect on pricing.
Hawaii has extremely low property tax rates in comparison to other affluent parts of the country, including California’s Bay Area and New York City, giving investors living there an incentive to buy and hold here, and perhaps visit their “home” during the holidays.
The purchase of Hawaii homes for investment or getaway properties puts upward pressure on prices, as do the housing shortage and over-regulation. Honolulu and the state must act on all of these fronts to provide kamaaina buyers with some relief.
A 2020 study of the Vancouver housing market, subject to a flood of purchases by buyers from outside Canada, found that “out-of-town buyers significantly raise local house price growth.” Rather than tax outside buyers, as Vancouver did, this vacant property tax is more targeted — it simply disadvantages the purchase of homes that won’t be lived in, and asks these buyers to be part of the solution, by either converting the property to a residence or contributing toward affordable housing costs. Bill 9, as currently written, would penalize those who violate the empty-home tax law with a civil fine of up to $25,000 per day, per offense, and give the city authority to foreclose on residential properties if taxes or fines go unpaid.
“There really needs to be bold action,” stated Bill 9 supporter Betty Lou Larson of Catholic Charities Hawaii. “We have such a crisis that slow steps will take too long.”
Agreed. A measure that incentivizes more housing creation and provides funds to address Honolulu’s homelessness and affordability crises should be put into play.
While agreeing that the need is there, Mayor Rick Blangiardi’s administration is so far cautious on a vacancy tax.
Andrew Kawano, the city’s Department of Budget and Fiscal Services director, told a City Council panel that the city is developing a “procurement” to study what’s required to implement a vacant property tax. Let’s see this study carried out expeditiously — with hopes that it can help shape support for a practical, beneficial vacancy tax.
