Put "empty homes" tax proposal on pause

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

I’ve written in the past about how a so-called empty homes tax would be highly unlikely to solve Oahu’s housing crisis.

Twice in the past few years, bills to impose such a tax have been introduced at the Honolulu City Council, and twice those bills failed to gain traction.

But the idea keeps coming back, so today I’m here to say that I hope the third time won’t be the charm for this deceptively attractive idea.

As the Grassroot Institute of Hawaii made clear in its May 2023 study “The ‘empty homes theory of Hawaii’s housing crisis,” there is a chance that an empty homes tax might increase rental occupancies and generate taxes, but not without a cost.

Perhaps most concerning, at least at this point in the process, is that the bill continues to lumber forward despite the fact that the Council is still awaiting the results of a half-million-dollar study study it commissioned to look into the feasibility of an empty homes tax.

Half a million dollars!

And talk about putting the cart before the horse. The study isn’t expected to be completed until June 2025, so why the rush to pass the bill now?

The point of the study is to figure out if an empty homes tax would work for Honolulu, and if so, what would be the best way to implement it. This seems like useful information to have before moving forward with such a bill.

Moreover, the evidence in favor of an empty homes tax continues to erode. Proponents like to point to Vancouver as proof that an empty homes tax works, but they ignore the fact that there is not enough post-pandemic data to make a full determination.

Even Vancouver officials acknowledge that “isolating the effect of a single policy like the [empty homes tax] in Vancouver’s dynamic housing market is challenging.”

In addition, administering the tax has led to untold headaches for Vancouver, with developers being charged for unsold homes, families charged for homes that were waiting for permits, and homeowners charged for gardens that had been designated vacant lots.

In the run-up to the tax being implemented in 2017, Vancouver’s mayor implied that the empty homes tax would induce thousands of units to enter the rental market. But between 2017 and 2018, only 117 formerly vacant properties were turned into rentals. Between 2021 and 2022, that number was only 242.

Meanwhile, Vancouver’s highly restrictive housing policies in general have made it one of the priciest cities in Canada to rent or buy a home.

All things considered, it doesn’t seem to me that we should be taking housing policy advice from our friends in Vancouver.

Instead of wasting time and resources on pursuing an empty homes tax, Honolulu policymakers should focus on zoning and permitting reforms that have proven to increase housing stock.

A good place to start for ideas would be Grassroot’s recent reports “How to facilitate more housing in Hawaii” and “Seven low-cost ways to speed up permitting in Hawaii.”

Honolulu lawmakers need to realize that we can't tax our way out of the housing crisis, but we can build our way out of it.

E hana kākou! (Let's work together!)