Joe Kent: Honolulu’s ’empty house’ tax proposal is mostly an empty promise
If there had ever been a bill that attempted to address the symptoms of a problem rather than its causes, it would be Bill 9.
Currently being considered by the Honolulu City Council, the bill aims to create more affordable housing on Oahu by taxing “empty homes,” which the bill estimates are about 34,000.
It may sound like a good idea. However, not only is the bill unlikely to achieve its goal, it would impose extraordinary burdens on existing owners through exorbitant taxes, a demand that they cede virtually all of their privacy rights to investigators. of the city and severe and potentially unconstitutional penalties if the owners were found in violation of the proposed law.
A supreme irony of the “empty house tax” bill is that it actually acknowledges the underlying causes of Oahu’s housing shortage when it states:
“An empty home tax can help convert existing investment properties into housing for local residents without requiring costly construction, lengthy development and permitting delays, and taking more land for development.”
In other words, why should the city raise taxes on homeowners and threaten them with stiff fines and invasions of privacy when it could simply direct its efforts towards removing the barriers that are, as the bill admits, at the root of the housing shortage: “expensive construction, long development and permitting times, and [not making available] more land to develop? »
In particular, Bill 9 would implement a 3% property surcharge on Oahu homes that are vacant or “empty” for at least six months a year, up from the current tax of 0.35%. To put that into context, the property tax on an “empty house” valued at $600,000 would be $18,000, compared to $2,100 currently.
More importantly, an “empty house” tax would not necessarily free up affordable housing. The homes targeted by this bill — those owned by wealthy mainland individuals — are often not the homes average Oahu residents can afford anyway.
A. Kam Napier, editor of Pacific Business News, addressed this point when a similar measure was proposed in 2019. He wrote: $6,000 or even $8,000 per month. I don’t think that meets anyone’s desire for more affordable housing.
“Empty house” taxes were imposed in 2017 in Vancouver, Canada, but Canada’s CBC News reported in 2018 that “in its first year of implementation, the tax appears to do little to achieve its stated goal” .
In November 2021, the Vancouver Sun noted that the tax’s effect on rental housing availability was difficult to determine amid other taxes, housing regulations, and broader economic changes.
Last month, Quartz reporter Camille Squires wrote, “Even when successful, vacancy taxes have not been enough to significantly lower prices in one city. To keep up with demand, cities need more new construction.
As for the issue of privacy, Bill 9 proposes a very invasive enforcement mechanism to determine if a house is vacant six months or more per year. This would likely require increasing the workload of existing city employees or hiring additional city employees, as well as allowing the city to demand all kinds of personal information from Oahu property owners.
According to the bill, this could include vehicle registrations, government ID cards, driver’s licenses, utility records, mailing addresses used for personal bank and credit accounts, rental agreements, occupancy contracts, proof of income and general excise taxes paid for rental income, proof of receiving or providing medical treatment by the landlord or tenant that prevented occupancy of the property, proof of sale or transfer of ownership, sales activity efforts, court orders and proceedings, proof of military deployment orders, building permits and applications – and more.
This would likely require increasing the workload of existing municipal employees.
Violations of the rules would result in hefty fines — $25,000 a day for each violation — and even possible seizure.
As an added selling point, Bill 9 aims to bring more housing to market by dedicating all of its revenue to the city’s Affordable Housing Fund – with 5% skimmed off for “administrative costs”. But that would only perpetuate the city’s habit of overspending on housing development, which makes little difference to Oahu’s affordable housing shortage.
As Bill 9 acknowledges, the underlying causes of Hawaii’s housing shortage are “expensive construction, long development and permitting times, and [not making available] more land for development.
Instead of Bill 9, the Council should consider bills that would address these issues.