HONOLULU (KHON2) — Creating tens of thousands more local rental units while raising lots of money for the City – it sounds like a win-win but it could come at the expense of folks who own empty homes and condos.
A tax on vacant units was proposed at the Honolulu City Council in fall 2020.
It was studied by the previous administration and is still being considered thanks to the Real Property Tax Commission process.
Empty homes and condos blanket the island while locals struggle to keep up with Honolulu’s cost of living; nearly 40,000 units are vacant at any given time, according to a UCLA study the City commissioned in 2020.
“The idea is to get folks who have vacant homes to rent them out, or the sell them, hopefully to other local people,” said Honolulu City Council chair and presiding officer Tommy Waters.
A measure introduced in fall 2020 (Bill 76, 2020) made it through the first hoops at Council but was postponed in Committee. Lawmakers and advocates now want to take another crack at it after getting renewed attention from the latest round of the Real Property Tax Commission process.
“It’s incredibly sad to think that people are getting priced out a paradise,” Waters said, “and if we can encourage vacant homes to be rented out to local people through the use of tax policy, I think it’s worth exploring.”
Here is how it could work: Taxing units that just sit empty an additional 1& to 7% could generate nearly $1 billion dollars in property taxes, according to the UCLA study. But more than money, the bill is meant to motivate landlords to just rent it out long-term instead. It is an idea that has worked elsewhere.
“Vancouver has it. Melbourne, Australia, has it. Washington, DC, has a form of it,” said Ellen Godbey Carson, spokesperson for Church of the Crossroads, an organization advocating for a similar plan in Hawaii. “So other jurisdictions with extremely high-priced housing have also needed to find new solutions.”
According to the study, even just a 1% tax would create tens of thousands of rental units without building anything new and it would also bring in about $40 million in extra revenue. That is based on the idea some owners would start renting their homes while others would pay the tax.
“We don’t want to penalize anybody, but tax is certainly a way to influence policy,” Waters said. “Here, the idea would be to tax folks who don’t live here. But I’d also like to look at that extra revenue that we gain to give back to local people somehow, either through a larger homeowner’s exemption or by cutting taxes in one way or another.”
“We’re seeking to change our tax policy in a way that much better meets our needs toward affordable housing, increasing our housing supply, and providing some funds that can go toward that as well as toward homelessness,” Carson said.
Waters said the empty House bill is likely to get moving again soon, along with other property tax bills aimed at recognizing the impact of the soaring housing market on local owners and renters — like the second-home tax category.
“Bill 20 (2021) would raise the residential a category from $1 million to $1.3 million,” Waters said. “As you know, if you own a second home that’s worth $1 million or more, you pay a slightly higher tax rate. Well guess what? Almost all homes on Oahu are $1 million now, and the landlords are passing on that tax to their tenants. So the idea really is to give these folks have break and hopefully they pass it on to their tenants.”
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Always Investigating will follow up as the owner and renter tax bills move through Council.