The Honolulu City Council Budget committee narrowly advanced a measure that would tax properties left vacant by up to 3%.
A study by Hawaiʻi Appleseed estimated that 35,000 units are sitting vacant on Oʻahu.
The median sales price of a single-family home on Oʻahu was $1.1 million in October, according to data from real estate company Locations. Under this measure, if it was left vacant, the owner would have to pay up to $33,000 in property taxes.
Council Chair Tommy Waters pushed members and the city administration to support the measure which he thinks will help with Oʻahu’s housing shortage.
“It's not going to be the silver bullet everybody. It’s not. But it's one tool that we can use to fill these empty homes. By the way, people want to invest their money here because we have the lowest property tax rate in the country,” he said.
“Can you imagine rich people coming in, they buy these houses, they don't care if people are renting it out or not. They don't care. They're parking it here for a couple years, they're going to sell them and make money. And guess what happens to the local people?”
Twenty percent of the revenue would go toward building affordable housing for those earning less than 140% of the annual median income — which would be about a $118,000 salary for a single person.
Ten percent of the revenue would be used to address homelessness. The rest would go into the general fund and towards administering the new tax program.
But Honolulu Budget and Fiscal Services Director Andy Kawano wanted a study completed taking into account the 15 exemptions that are now baked into the measure.
“The number of exemptions that have been added to the bill that I believe could extremely water down the amount of homes that are, quote, empty, based on what we can actually [be] validated what can actually be supported,” he said.
“So I suggest strongly that we allow this study to at least get through phase one.”
The study would cost the city about $500,000.
The University of Hawaiʻi Economic Research Organization Associate Professor Justin Tyndall explained that certain exemptions in the bill would impact more properties than others.
“The big one is whether you're trying to sell your home or rent it. You get a full exemption for a full year. So that is about a quarter of the vacancies [that] would just be exempt because the person is actively trying to sell it or rent it,” he said.
“The other ones, my guess is that they'll have a much smaller effect. They'll cover far fewer homes. But as the Council considers other exemptions, the more homes that are exempted, the less impactful the policy will be,” Tyndall said.
In a blog post Tyndall wrote that if Honolulu’s results were similar to the city of Vancouver, which already implemented an empty homes tax, the policy could open up 14,000 more housing units and generate $144 million of additional property tax revenue for the city.
However, that number will vary as the city looks at the true vacancy rate of homes on Oʻahu, how willing homeowners will be to convert their empty units and the average duration of vacancy for units.
The measure passed out of committee in a 3-2 vote with Councilmembers Esther Kiaʻaina and Augie Tulba voting against.
The bill will next be heard on final reading by the full Council.
