Empty homes tax just empty promises

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

When it became apparent earlier this month that the Honolulu Charter Commission was seriously considering approving a ballot measure asking Honolulu voters whether the City Council should be required to tax so-called empty homes, my colleagues at the Grassroot Institute of Hawaii sprang into action.

Thankfully, Grassroot’s advocacy prevailed, and the Commission ultimately rejected putting the issue on the ballot.

But it is a shame that the Commission, which is formed only once a decade to consider amendments to the city Charter, squandered some of its limited time to debate a poorly formulated proposal that would not have delivered on its lofty promises.

The Commission should have instead embraced two Grassroot proposals to help address the housing crisis — one to reform the rules on zoning variances and the other to create civil service exemptions for county permitting employees.

Grassroot also submitted a proposed Charter amendment to establish a Cost of Government Commission and another to require fiscal impact assessments for all county bills. Neither of those made it through the vetting process either.

Since supporters of an empty homes tax continue pushing the issue, it’s worth remembering why it is important to keep opposing it.

First, and most important, is the matter of property rights. We’ve long had zoning laws and other rules dictating how we are allowed to use our land. Imposing a tax on so-called empty homes to achieve certain social goals would be yet another example of our government going too far to regulate what we can and cannot do with our homes.

Supporters of the tax say it would free up more housing for locals while lowering housing costs. The evidence for that, however, is shaky.

Two studies from France reached contradictory conclusions. One study on Vancouver’s empty homes tax found it freed up units to be used as rentals but also distorted the incentives for homebuilders to construct owner-occupied homes.

And an in-depth study published by the Grassroot Institute in 2023 found that an empty homes tax might bring in some revenue but is not guaranteed to have a significant impact on housing availability, home prices or rents.

In other words, such a tax would further burden homeowners without making a meaningful dent in our housing crisis.

What’s more, administering and enforcing an empty homes tax would also be a significant burden on the city’s Department of Budget and Fiscal Services, whose chief has publicly explained many times why it would be difficult and expensive to manage.

There is also the question of whether the measure would stand up in court. A similar tax approved by San Francisco voters in 2022 was declared unenforceable for violating state law and the U.S. Constitution, and that ruling is still under appeal.

All in all, I am relieved that the Charter Commission rejected the proposed empty homes tax. But it is unfortunate that it also failed to advance policies known to increase housing availability.

E hana kākou! (Let’s work together!)