Latest “Empty Homes” Tax Proposal Not Worth Pursuing

by Joe Kent 

Some ideas are like zombies, reviving again and again, even though they should be laid to rest for good. 

Such is the case with the empty homes tax, which is being proposed again at the Honolulu City Council via Bill 46 as a way to encourage the owners of so-called empty homes to sell or rent out their properties.

Measures similar to Bill 46 were proposed and shelved in 2022 and 2020, but like a zombie, the idea of taxing so-called empty homes keeps coming back.

It is clear that enforcing such a law would take a great deal of government oversight. Tens of thousands of Oahu property owners would be required to file a legal declaration every year regarding whether their homes are “empty,” and the Honolulu Department of Budget and Fiscal Services would be tasked with managing and verifying all those submissions.

Thus, it is very possible that the cost of adding such a complicated layer of bureaucracy to our tax system would be more than the potential revenues collected from the tax. 

Additionally, homeowners who do not properly file their declarations could be exposed to higher property taxes and possible egregious invasions of their privacy in their efforts to prove that they are wrongly being assessed.

As it’s written, the bill proposes requiring, under threat of steep fines or even property foreclosures, that owners provide private information as proof of their occupancy, such as military deployment orders, occupancy agreements, death certificates, utilities records or any number of other personal documents.

Another critical issue with the bill is that there is little to no evidence that an empty homes tax would even work.

A Grassroot Institute of Hawaii report released in May 2023, “The ’empty homes’ theory of Hawaii’s housing crisis,” found that there is no good evidence from the United States or around the world that these taxes are successful at increasing rental occupancy rates.

Yet a recent report from the Hawaiʻi Appleseed Center for Law and Economic Justice supports the idea of an empty homes tax on the grounds that Washington, D.C., and Vancouver, Canada, both have similar taxes that have generated substantial revenue. 

To be fair, the Appleseed report is correct that an empty homes tax could bring in tax dollars for the city to spend on affordable housing. But it is hard to tell how much or at what expense.

Meanwhile, other policies have been proven to provide much-needed housing at little or no taxpayer cost. 

As described in Grassroot’s December 2023 report “How to facilitate more homebuilding in Hawaii,” those policies include reducing lot-sizes, setback requirements and floor area ratios; reducing or abolishing parking minimums; allowing more multifamily homes and accessory dwelling units; and repurposing commercial buildings for residential use.

State lawmakers have already shown great leadership by requiring the counties to adopt some of those policies, and in September, Hawaii County legalized three accessory dwellings per lot in most of the county’s urban areas. 

It is long overdue that our lawmakers abandon the idea of taxing so-called empty homes. Residents in dire need of housing would be better served by policies that are proven to boost housing stock — not ones that simply target popular scapegoats. 

JOE KENT is the executive vice president of the Grassroot Institute of Hawaii.

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