Empty homes tax haunts us again

by Keli'i Akina, Ph.D., President / CEO, Grassroot Institute of Hawaii

In politics, it’s important to differentiate between good intentions and good policy. Otherwise, you could be just wasting time and possibly also making things worse.

Consider, for example, Bill 46, the latest “empty homes” tax proposal being considered by the Honolulu City Council. This is far from a new idea. We saw similar proposals in 2020 and 2022.

The well-intended belief behind this idea is that a property tax surcharge would encourage the owners of so-called empty homes to sell or rent their properties to people who need housing.

It would be like a "sin" tax, but instead of trying to discourage tobacco or alcohol use, the tax would be aimed at people who leave their residential properties unoccupied for at least six months a year.

And how would county officials know that a particular home is empty?

Well, the current proposal would require Oahu’s 280,000 residential property owners to file a “property status declaration” every year stating that their homes either are or are not “empty.”

There would be 14 official reasons the homes could remain empty without the owners being penalized — up from 10 in the 2022 proposal. But it would still be up to the property owners to fess up every year about the status of their properties.

And how would the county know whether the homeowners are telling the truth?

By requiring under threat of steep fines or even property foreclosures that the owners provide private information as proof, such as military deployment orders, occupancy agreements, death certificates, utilities records or any number of other personal documents.

This reminds me of folks who say that if you aren’t doing anything wrong, then you have nothing to worry about when it comes to invasions of your privacy.

I’m thinking, however, that it’s actually quite reasonable to be concerned about how much personal information you might have to give to city investigators in order to qualify each year for the empty homes tax exemption.

Another concern is whether the county department charged with enforcing the tax, the Honolulu Department of Budget and Fiscal Services, could even handle this level of oversight.

Processing more than a quarter-million forms each year — and trying to check for false statements — clearly could have serious budget implications, and any potential revenues could be offset by the currently unknown costs of enforcement.

In short, Bill 46 raises many questions about privacy and the administrative burdens it would create.

Some people might argue the tax would be worth it if it were to persuade some homeowners to rent or sell their properties to people who need housing. But unfortunately, there is no reason to believe that would happen in any meaningful way.

According to the Grassroot Institute of Hawaii’s excellent May 2023 report “The ’empty homes’ theory of Hawaii’s housing crisis,” an empty homes tax might increase rental occupancy rates, but it might not.

There is data suggesting that the proposed tax could generate county revenue. But even if that were so, we don't know how much money it would bring in when weighed against the costs of administering it.

As far as using any of the revenues to fund affordable housing, I have pointed out many times that there are better ways to spur homebuilding than relying on taxpayers to foot the bill. For more information about that, see Grassroot’s also excellent report “How to facilitate more homebuilding in Hawaii," issued this past December.

Like everyone else, I want to see more housing for our friends, family and neighbors who out of desperation have been moving to the mainland. But an empty homes tax would not be the best way to accomplish that, no matter how well-meaning its proponents might be.

E hana kākou! (Let's work together!)