A proposed Honolulu City Council measure to penalize real-property owners who leave their Oahu residences vacant for extended periods of time has a chance to start moving again following the release of the first phase of
a city-commissioned study.
Bill 46, which was introduced in August by Council Chair Tommy Waters and Council member Radiant Cordero, was formally
deferred in December following blistering public testimony against the empty-
homes tax measure. The third reading of the bill also was temporarily postponed pending completion of a study from Ernst &Young LLP, which the city paid nearly $500,000 to assess the implications of an EHT.
The Council’s Budget Committee at 9 a.m. today is expected to receive an informational briefing on the Ernst &Young third-party feasibility report, which was released April 21, and makes recommendations for the first phase of a two-phase plan for the empty-homes tax.
But a study is not all that is needed to advance Bill 46. It’s going to take votes, too, and it’s still unclear whether the measure will get enough Council support to begin moving again.
Before the Council’s
Dec. 11 vote to defer the measure, four on the nine-member Council —
Esther Kia‘aina, Val Okimoto, Augie Tulba and Andria Tupola — indicated they would not support the bill in its current form, a floor draft.
Waters told the Honolulu Star-Advertiser’s editorial board during a Zoom meeting Thursday, “I’m hoping that through the questions and answers, and possibly amending the bill to get that fifth vote. Right now I don’t even know if we’re even close to getting a fifth vote.
I sure hope so.”
Waters said he is unsure how Scott Nishimoto, the newest Council member, would vote.
If Bill 46 moves forward as drafted, it would ensure residential properties are used as actual homes instead of investments — particularly by those who might live outside the state, whether on the mainland or in a foreign country.
As drafted, the measure would tax vacant real property by as much as 3%. That means a home valued at
$1 million could receive a $30,000 tax bill each year that it remains empty.
The draft version would levy, assess and collect an EHT for each tax year — from July 1 to June 30 — for every parcel on which an empty home is situated.
Bill 46 as drafted also would introduce a new Residential E tax classification in Honolulu.
As proposed, at least 20% of the revenues from the Residential E classification will be directed to affordable-
housing programs overseen by the city’s Office of
Housing.
The remaining funds will support various housing-related issues, including homelessness, cost-of-living increases, rental stability and existing city services, and cover the tax administration costs, Council staff stated.
The effective date for Residential E classification was set for tax years beginning July 1, 2027.
Waters said for him the main reason to support
Bill 46 is to address home shortages by getting “owners of these empty homes to convert to a rental property or to sell it.”
He said the Department of Business, Economic Development and Tourism asserts a 25,000-home shortage, and said it would go a long way “if we could convert most of these to rentals to help deal with that shortage.”
But Waters noted that the city-commissioned study determined “the estimate of conversion (to rentals) is much lower than we were hoping for.”
“They’re estimating that they’re only going to convert 1,000 to 2,000 units,” he said. “Even 1,000 to 2,000 units is great, but I was hoping that it would be a lot more.”
He said estimates from the city-commissioned study are low due to existing exemptions within Bill 46, including properties with a homeowner’s exemption whereby such owners would be eligible for an additional exemption to the EHT for a second property.
“That’s part of the problem,” Waters asserted. “So we’ve got to look at possibly amending that.”
Waters said the city-
commissioned study also differs from a prior University of Hawaii Economic
Research Organization report that determined there were about 18,000 possible vacant homes on Oahu.
“(Ernst &Young) did their study based on water usage,” he related. “They said if you use 50 gallons or less, it’s likely you’re empty.”
Due to this, Waters said the city’s study “revised” the numbers, to say “we’re probably only looking at anywhere from 7,316 to 11,184 properties that would fall into this category — which is a lot less than we thought.”
Since its introduction, Bill 46 has drawn mixed reaction from the community.
Ross Isokane, who is part of a grassroots coalition of residents in support of Bill 46, told the Star-Advertiser that passage of an EHT will benefit Oahu.
“Our impossibly unaffordable housing crisis has been getting worse, not better,” said Isokane, who is also a member of the Downtown-
Chinatown Neighborhood Board. “While building more housing is certainly a necessary step, outside speculative investment diverts our efforts to increase housing supply for local residents.”
Isokane opined that Bill 46 is the “only piece of legislation alive today at the city or state level that will help mitigate outside speculative investment on Oahu.”
But most who spoke on Bill 46 at the Council’s December meeting opposed its passage.
William Deeb, a Kailua homeowner, said the measure is not about housing, “it’s about revenue generation” for the city.
Ted Kefalas, with the Grassroot Institute of
Hawaii, noted there are not any tax rates in Bill 46, a
real-property tax measure.
