The City Affairs Committee recognizes that many of you have questions and concerns regarding Bill 46 - aka “Empty Homes Tax”. We are diligently working to educate the City Council, but WE NEED YOUR HELP! Below is an explanation of Bill 46, its impact, and how members can assist with our next steps!
Summary of Bill 46 (2024)
The Honolulu City Council introduced Bill 46 (2024), which proposes an "Empty Homes Tax" targeting vacant residential properties in the City and County of Honolulu. This supplemental real property tax aims to help alleviate Honolulu's housing affordability crisis and homelessness by encouraging property owners to either rent or sell homes that are sitting vacant.
The bill would impose a substantial additional tax (on top of Res A) on homes deemed “empty” for more than 6 months of the year. The tax would be phased in over three years: 1% of the assessed property value in the first year, rising to 3% by the third year. An indicator of how challenging this bill will be to administer are the 15 qualifying exemptions, including homes undergoing construction, probate cases, medical absences, and military deployments.
For a homeowner who owns a second property on O'ahu but does not use it as a rental or have it occupied, and simply keeps it for personal use (such as a local family vacation home), the proposed Empty Homes Tax in Bill 46 (2024) would have significant financial and practical impacts.
It’s essential that we, as REALTORS®, engage in discussions with our clients about this bill, ensuring that the voices of property owners and industry professionals are heard.
IF YOU HAVE LOCAL RESIDENT CLIENTS WHO WOULD BE NEGATIVELY IMPACTED BY BILL 46 AND HAVE A COMPELLING STORY, please email us at [email protected] with your name, and we will follow up with the next steps.
NO TESTIMONY IS NEEDED AT THIS TIME. There is no formal hearing scheduled yet and no testimony is needed right now. However, HBR's City Affairs Committee is gathering compelling client stories (or member stories if you have one) to share in our one-on-one meetings with Councilmembers. COMPELLING STORIES FROM LOCAL RESIDENTS ARE MAKING A DIFFERENCE, AND WE NEED MORE OF THEM prior to the public hearing.
Stay tuned for updates, and when testimony is needed, rest assured that we will let you know and make it simple for you to submit.
Here’s how it could affect property owners:
- Administrative Burden / Filing for Exemptions
All residential property owners must provide documentation ANNUALLY by declaring and attesting that the home is owner-occupied, being used as a long-term rental, or qualifies for one of the bill’s 15 exemptions. This would include filing documents EVERY YEAR to the City proving occupancy (like homeowner exemptions, rental agreements, or utility bills). Since the City only allows you to change your home status once a year, if you miss the deadline, you would be responsible for the additional tax for an entire year until the next filing deadline, even if you were eligible for the exemption.
- Significant Double Taxation
If the home is vacant for more than six months of the year, the property could be classified as an "empty home" and subject to the Empty Homes Tax. The tax will be applied as follows:
For example, on a Res A property with an assessed value of $1 million, the property owners would pay $4,000 Res A property tax plus an additional Empty Homes Tax of $10,000 in the first year, rising to $30,000 by the third year. This is a substantial cost, especially for those using the property infrequently or holding it as an investment.
- Pressure to Rent, Sell, Occupy, or Pay Enormous Taxes
The tax is designed to incentivize homeowners to either rent, sell, or occupy their vacant properties to quickly increase the inventory of housing for our residents. If a homeowner prefers to keep the property empty for personal use or as an occasional vacation home, they will be hit with this escalating tax burden. The financial strain may force some homeowners into selling their properties at less favorable terms to avoid the ongoing tax liability and lose their legacy properties that have been in the family for generations. Additionally, there is no assurance that the new buyer will be a local resident.
- Erosion of the Benefits of Second Homewnership
Many homeowners purchase second homes as long-term investments, holding it for future generations, or as personal getaways. The Empty Homes Tax would erode the financial appeal of maintaining a second home that is not generating income and is structured with an untenable tax burden. This added cost on top of Res A taxes (double taxation) will make it less viable to keep a property strictly for personal enjoyment.
- Allocation of Revenues Collected
The intent of the bill is to increase inventory for long-term rentals or generate revenue to be used for affordable housing and homeless solutions. The current version of the bill appears to allocate less than 50% of the revenue toward housing solutions. This does not align with the purported purpose of the bill.
- Potential Resentment or Discontent
Many homeowners feel that this Empty Homes Tax is unfairly punitive to those who maintain a second home for personal reasons without necessarily renting it out. Some may view it as a penalty for wanting to hold onto a property for private use, leading to possible discontent with local government policies.
HBR supports a Real Property Tax structure rooted in sound economic principles, emphasizing fairness, equity, and diverse needs of property owners. Bill 46 (2024) does not balance the fiscal needs of the county with property owners’ ability to contribute proportionately to those needs.
Mahalo for your kokua,
 |
Jody Libed, REALTOR® (S), |
