(HONOLULU) KHON2 — People who are paying a lot for rent are not alone. Honolulu’s median rent for two and three-bedroom units is the highest in the nation at $1,528 and $2,408, respectively.
Always Investigating first reported in August about a proposal in the Honolulu City Council that aims to increase available units.
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According to new data from the Honolulu Board of Realtors, median single-family home prices on Oahu are down slightly from $1,050,000 to $1,000,000 but are up 15.6% from a year ago in 2020. Condominiums are up 13.8% from a year ago at $500,000.
This market could push local landlords to sell instead of rent.
“We might start to see real scarcity of the rental market as we’ve been experiencing for quite some time, but just sort of accelerated given where markets are,” said Philip Garboden, a University of Hawaii Professor in Affordable Housing Economics, Policy and Planning. “You’re looking at a really hot housing market, and so it’s very tempting, especially if you’re in the single-family rental, just to sell that property, cash out and take that money, invest elsewhere.”
Oahu has a long-term vacancy rate of 5.3%. Honolulu City Council Chair Tommy Waters hopes Bill 76 in the city council to tax those vacant properties can help increase stock that is being lost.
Waters said a 1% vacancy tax could create approximately 10,000 new rental units on the island or provide around $60,000,000 per year in revenue for affordable housing.
“A truly vacant property — It’s hard to see what that’s doing other than exacerbating our land shortage, exacerbating our housing shortage and making someone wealthier,” Garboden added — and that “someone” is often out of state.
A study commissioned by the city and published by the UCLA Luskin School of Public Affairs found that from 2008 to 2015, almost 30% of all housing units sold in Hawaii were purchased by out-of-state residents.
Garboden also said that Hawaii is unable to stop investment; even if hundreds or thousands of properties are put back in rental or homeownership stock, the tax would be a success.
“Those factors, all combined, make this a place where people are going to want to invest in housing and, at least, the vacancy tax and says that if you’re going to engage in that, that you do something with that property while you’re holding it for investment,” Garboden explained.
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The bill targets units that have been unoccupied for more than 180 consecutive days within the tax year. with exceptions for extraordinary circumstances. It is waiting on a third reading in the council.