Should Oʻahu place a tax on empty homes? That’s something city lawmakers are considering.
Last week, the Honolulu City Council introduced Bill 46 to put a tax on dwelling units that have sat empty for over half of the year.
The proposed empty homes tax would eventually amount to 3% of the property’s value, although it would ramp up from 1% during the first year the tax is applied and 2% during the second year.
The idea behind the proposed tax is that it would encourage homeowners to rent out their empty units to fill the housing shortage.
“ We also need to provide development in homes and on properties that are already built, and there's properties and units, namely in the urban core, that aren't utilized for either affordable housing or just housing for local people in general,” said Councilmember Radiant Cordero, who co-authored the bill with Council Chair Tommy Waters.
The council has considered an empty homes tax before, in the form of Bill 9 in 2022, and opinions were mixed.
Proponents argue that there should be incentives to encourage the use of existing housing, rather than building on undeveloped land that could have other uses.
The Grassroot Institute of Hawaiʻi, a nonprofit think tank, said the bill would set up a “guilty until proven innocent” system in which homeowners have to prove their units aren’t empty. The bill’s current language says all homes are considered empty unless they meet certain exemptions.
The institute said the tax would be difficult and expensive to implement and might not actually lead to more housing.
In principle, the institute said an incentive for homeowners would be better than a punishment, which it believes Bill 46 would be.
“If you take the approach of a stick, people try to get around the stick. They try to go under it or try to hide things. … And some people get whacked by the stick who shouldn't be whacked by the stick,” said Joe Kent, the institute’s executive vice president.
“Carrots often are a good way for people to voluntarily go in a direction that the government wants to incentivize,” he added.
Bill 46 is part of a series of property tax bills introduced last week by councilmembers. Another measure, Bill 48, would provide tax relief for property owners to provide long-term rentals for residents.
The Grassroot Institute of Hawaiʻi is more supportive of that measure, as it falls more in the “carrot” category Kent described.
