Empty Homes Tax Won’t Go Away

by Tom Yamachika, President, Tax Foundation Hawaii

The idea behind an empty homes tax is to impose an outrageously high cost on residential property that is unoccupied, to force owners to either live in the property or rent it out.  The theory is that this would alleviate the housing shortage here in Honolulu.

We have written about such a tax on several occasions before, most recently here.

The Honolulu City Council considered different versions of this tax in Bill 6 (2020), Bill 9 (2022), and Bill 46 (2024).  On each occasion it failed to pass.

But that hasn’t stopped proponents of the idea.  They have brought the matter to the Honolulu Charter Commission, the folks charged with proposing amendments to the Honolulu City Charter to be voted on at the November general election.  The City Charter, of course, is the foundational document for city government, much like the Hawaii Constitution is for our state.  These documents generally can’t be changed by the legislative bodies; any amendments need to go before the voters to be approved.

Recently, a Charter Commission committee shortlisted the empty homes tax proposal, known as P170.

P170 directs that the tax be imposed at no less than 2%, or $20.00 per $1,000 of taxable value, for any home that is “empty” for more than six months in a taxable year.  This is many times the current residential property tax rate of $3.50 per $1,000 of taxable value.

One hang-up with the proposal is how the concept of “empty” is defined.  There may be good reasons why a home is empty. Even the proponent of P170 has asked for exemptions to be written in to the charter provision:  “Exempt from this surcharge shall be properties that: have a valid homeowner exemption; are the principal residence of an Oahu resident more than 180 days a year; have owners on military deployment or absent due to ongoing medical care, or where the property is the subject of probate court proceedings.”  Bill 46 (2024) had even more exemptions, around 15, including that the dwelling on the property is “not fit to live in,” the owner is making “active efforts” to sell or rent the property, or there is renovation work ongoing that “reasonably requires” the owner to live elsewhere.  And how does one even enforce the tax in the first place?  How does the city government verify that a home is “empty” without looking inside, which would be a violation of privacy laws?  And how is a person accused of having an empty home prove that the home was not, in fact, empty?

Also telling is the fact that the Department of Budget and Finance, which would have to enforce this tax somehow, complained in 2024 that Bill 46 “may not fully recognize the required staffing, resources and timetable to properly implement this type of program.”  In other words, they had doubts that they could enforce the new tax with the staff they had.

It’s also worth repeating that county governments only have the authority to impose real property tax.  This power was given to the counties by the 1978 constitutional convention, which basically transferred the then-state real property tax over to the counties.  An empty homes tax doesn’t look or feel like the real property tax as it existed in 1978, so there may be some question as to whether the county can enact the tax, whether by ordinance or charter amendment.

In any event, this issue isn’t going to go away soon.

We hope that wise and cool heads prevail in the end.