The Honolulu City Council is considering Bill 46, known as the "Empty Homes Tax," aimed at addressing Oʻahu's housing affordability crisis by taxing residential properties that remain vacant for more than six months annually. The proposed tax would be phased in over three years: 1% of the property's assessed value in the first year, 2% in the second, and 3% in the third year and thereafter.

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Purpose and Rationale

The primary objective of this tax is to incentivize property owners to either rent or sell unoccupied homes, thereby increasing the availability of housing for local residents. Supporters point to Vancouver, Canada's implementation of a similar tax, which reportedly led to a 54% reduction in vacant homes and generated over $142 million for affordable housing initiatives.

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Exemptions and Implementation

Bill 46 includes several exemptions to accommodate various circumstances, such as:

• Properties with a homeowner's exemption.

• Accessory dwelling or ohana units.

• State-licensed homes for seniors or individuals with medical or mental disabilities.

• Properties owned by active military members on deployment.

• Homes undergoing construction or pending sale.

The tax is slated to take effect on July 1, 2026, allowing time for system updates and public education.

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Support and Opposition

Proponents argue that the tax could free up thousands of housing units and generate substantial revenue for affordable housing projects. However, critics express concerns about administrative challenges, potential legal issues, and the fairness of imposing additional taxes on property owners. Some suggest that the tax could lead to unintended consequences, such as forcing owners to sell properties held for personal or family use.

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Current Status

As of December 5, 2024, Bill 46 is scheduled for a final reading on December 11. If passed, it would establish a new "Residential E" tax classification targeting vacant or underused residential properties, with at least 20% of the generated revenue directed toward affordable housing programs.

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Considerations

While the Empty Homes Tax aims to alleviate housing shortages, its success depends on effective implementation and enforcement. If you own a vacant Hawaiian Home and are looking for management, our Property Management Arm Hawaii Coastal Property Management can be an excellent resource for placing your property under management to help ensure this tax is avoided.