At around 12 percent, urban Honolulu has one of the highest rates of home vacancy in the country. Honolulu’s mayor wants to levy an extra tax on those vacant properties, an idea that has seen some success in one of Canada’s largest cities.
Much like Hawaii’s largest city, Vancouver has experienced a real estate boom in recent years. The average sale price of all categories of residential property has risen steadily since 2000 and peaking in 2016 around $1.4 million U.S. dollars for a detached house.
Canada’s third largest city shares other similarities with Hawaii. It is geographically limited by both water and mountains and has become a magnet for out of town investment.
As in Honolulu, much of the blame for Vancouver’s red-hot real estate market and lack of affordability was laid at the feet of non-residents purchasing property as seasonal homes or investment vehicles.
In response, Vancouver lawmakers approved a suite of taxes aimed at reducing the number of homes left empty. The taxes, passed in 2016, levy a surcharge on properties not occupied or rented out for at least 6 months per year.
University of British Columbia economist Thomas Davidoff, who helped write the speculation tax law, said although it is difficult to attribute market movements to any one policy, the taxes appear to be having the desired effect.
“The Vancouver housing market is considered quite weak and has seen price declines across the board, particularly among high end homes,” Davidoff said.
According to the Real Estate Board of Greater Vancouver, the average sale price for detached homes has been on a generally downward trend since 2017. Condos and apartments began a downward trajectory in 2018.
Davidoff generally gave the policy an A grade based on the initial results in British Columbia.
That caught the attention of Honolulu Mayor Kirk Caldwell, who in his recent State of the City address proposed to adopt a similar program in the City and County of Honolulu.
“Many of our housing units are being bought by folks offshore for speculation or second homes,” Caldwell said. The speech was given at Kewalo Basin Park, in the shadow of half a dozen newly completed luxury condo buildings, many of which appear largely empty.
According to the U.S. Census Bureau, Urban Honolulu has a vacancy rate of around 12 percent, or more than 30,000 units.
It’s unclear whether the idea has the necessary support of the Honolulu City Council, which has a mixed record when it comes to changes in property taxes. In his address, Caldwell indicated that City Council Chair Ikaika Anderson would be introducing a bill covering the vacancy tax.