Bill 46, CD2, the proposed tax on empty homes, is on the agenda for the City Council’s regular meeting on Wednesday, December 11 for third and final reading. This means that the council is expected to vote the bill up or down at this meeting. Their action will have consequences that will reverberate through the community for years.
I’m opposed to this measure, although the idea that we can magically solve the housing crisis by finding and filling homes left empty for one reason or another is appealing. It just isn’t realistic.
Many supporters of the bill believe that it targets those homes bought by out-of-state or foreign investors, who flaunt their wealth by casually buying and holding these empty properties.
In fact, the bill targets a wide range of residential properties, and it creates an assumption that the dwelling units are empty unless the owner can prove they were actually occupied at least six months out of the year.
As critics have raised issue after issue, the bill has been amended to create numerous exclusions or exceptions. A bewildering number of hard-to-understand exceptions, including a broad exception for properties owned by people who live and work in Hawaii, including their empty second homes.
The exceptions, obviously necessitated by the need to make the bill acceptable, dramatically reduce it’s breadth and scope, along with any hope that it will make any dent in the housing crisis.
Several things need to be underscored.
1–The proposed “tax” is not really meant to produce income. It isn’t like a surcharge on existing property tax rates. It is, simply, an incredibly high penalty that will have to be paid not only by outside investors, but by local people who find themselves unable to meet the complex bureaucratic requirements to obtain exemptions they are otherwise entitled to. With median home prices hovering around $1 million, property owners will be paying $30,000 and up for homes declared “empty” because they miss a deadline, can’t meet the demands for documentation that haven’t been defined yet, and have to pay approximately 10 times their normal real property tax payment. It’s hard to call that a simple “tax” with a straight face. It’s a punishment, a penalty.
2–The burden of proof is flipped against the individual homeowner. As a property owner, you won’t be “innocent until proven guilty.” The city will assume your home is empty and subject to the penalty unless you prove to their satisfaction that it is not empty, using as-yet-undetermined paperwork to support your claim within the short time periods called for by the bill.
3–I doubt this point is understood. This isn’t a one-time application for an exemption. It is an application process that will have to be repeated every single year for every property. Remember what a pain it was to renew your drivers license after Honolulu moved to a “Read ID” requirement, where you had to prove your residence, dig out utility bills, tax returns, or other items to prove you live where you say you live. That was bad, but you only have to do it once. The empty home application dance will have to be repeated each and every year. And, if you’re late or make a mistake, the hammer of that huge penalty will come crashing down.
That’s an annual burden for any homeowner, and an annual nightmare for those employees tasked with sorting through all the claims.
4–We know that most city offices and departments are understaffed and barely able to keep up with their current workloads, and often fall behind, like the now notorious Department of Planning and Permitting. How is the tiny real property tax office and its small group of staff and appraisers going to cope with an annual inundation of paperwork? Not well, is my prediction. And, in the process, there’s going to be a lot of collateral damage. Some people will lose their homes in the process, or their situations will cause new rounds of scandal.
Take a simple example. There is an exemption for property owned by someone undergoing medical care or being cared for in a location other than their home for more than six months in a tax year. But is that owner in a nursing home or convalencent hospital going to be able to submit their annual application to claim their exception? It’s more likely they will get out of the hospital or facility and find that they now owe the city and additional $30,000+ for leaving their home empty, and either pay it or else. It’s not a pretty picture. And similar scenarios involving other exceptions are not difficult to foresee.
5–The bill is modeled after a similar empty home tax in Vancouver, Canada. There experience has been mixed. Vacancy rates have declined modestly, although how much is due to the tax isn’t clear. But rental costs have not gone down. Housing is no more affordable than it was without the tax. The same thing is likely to happen here.
Public interest advocate Natalie Iwasa spelled out some of her opposition to Bill 46 in a Civil Beat commentary (“A Vacant Homes Tax Is Not Good Public Policy“).
It’s an intriguing idea with far too many real world problems to work efficiently and fairly.
It’s time for the council to step back from the brink and rethink how to make housing more affordable and available. This tax bludgeon isn’t the way.
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A dumb bill for sure! Must be dropped. Respect to you and Natalie!
The bill is unconstitutional.
Absolutely! But, unfortunately, it will take someone with standing who can afford the legal fees to challenge constitutionality.
I agree this would place a heavy burden on home owners. My husband’s family, all working class, inherited their mother’s home in Kahuku. They leave it vacant for many extended children and grand children who were forced out of Hawaii to make a living wage, to come home for family events and holidays. The house is a 3 bedroom 900 sq ft home and they often sleep 10 family members. Mainland family members could not afford to stay at hotels and there has been a dramatic reduction in VRBO rentals. Their mother’s trust spelled out that the family house would be used to benefit the family.
What a wonderful blessing for your family! It is in the public interest that they can afford to come home to visit because they have a place to stay. Can’t put a price tag on preserving cultural and family ties! They also bring money into the local economy, just like tourists do. It’s a win-win if you ask me. A vacant-property tax would be an unfair burden on your family.
The Mayor must VETO this useless pretence of solving our housing issues.
The Honolulu City Council has been less than inspiring of late and deserves a failing grade, for its inability to meet fundamental responsibility for providing basic services.
The Honolulu Police Departments -450 Police Officers is gross incompetence and The Mayor and Councils failure to enact appropriate solutions is contemptuous.
The Police Officer shortage is so acute it is greatly affecting response times in violent crimes. Even City Parks employees working adjacent a Police sub station who have called 911 when facing violence report response times of over 20 minutes. This is not acceptable.
Noting the -450 positions is an erroneous number, as it only represents patrol coverage at per capita 1980 staffing levels, despite significant population increase. The real number of required Police Officers needed is far greater than -450 it’s in the range of a thousand positions.
This disaster has unfolded while the Council has expanded its City budget for new programs that are not traditional basics of Police, Fire, Ambulance Service, Life Guards, Roads and Sewers and Parks are in a sad state of neglect.
The aged Police Department is comprised of many senior workers who can retire at any time, with 20 years service and no age requirement. Something major must be done and it will be very expensive to resolve, but safety is a right that must not be compromised. I hate to imagine that we have a Fire Department that has not added a single station in urban Honolulu in over 50 years, despite enormous growth in high rises.
We have miles to go to get the City back to 1980 standards.
The Mayor must VETO this useless “smoke and mirrors” pretense of solving our housing issues.
The Honolulu City Council has been less than inspiring of late and deserves a failing grade, for its inability to meet fundamental responsibility for providing basic services.
The Honolulu Police Departments -450 Police Officers is gross incompetence and The Mayor and Councils failure to enact appropriate solutions is contemptuous.
The Police Officer shortage is so acute it is greatly affecting response times to complaints of violent crimes. City Parks employees working adjacent a Police sub station who have called 911 when facing a violence situation report response times of over 20 minutes. This is not acceptable.
Point in fact, the -450 positions is an erroneous number, as it only represents patrol coverage per capita 1980 staffing levels, despite significant population increase.
The real number of required Police Officers is far greater than -450 it’s in the range of a thousand positions.
This disaster has unfolded while the Council has expanded its City budget for new programs that are not traditional basics of Police, Fire, Ambulance Service, Life Guards, Roads and Sewers and Parks are in a sad state of neglect.
The aged Police Department is comprised of many senior workers who can retire at any time, with 20 years service and no age requirement. Something major must be done and it will be very expensive to resolve, but safety is a right that must not be compromised. Other concerns for emergency services is the Fire Department that has not added a single station in urban Honolulu in over 50 years, despite enormous development of hundreds of new high rises. Breaking down the number of Fire Fighters per population, it may make us alarmed and afraid to realize one day, we’re in real trouble with epic shortages as high as 10,000 to 1 service.
We have miles to go to get the City back to 1980 manpower standards. A real hardcore look at the actual need for full service would be shocking at best. Just praying nothing happens is not acceptable in modern society, where we pay some of the nations highest taxes in Honolulu.
You mean you don’t sleep peacefully at night knowing HNL has a Climate Resiliency Office solving nature’s problems for everyone? /s
Knowing HNL city council, I predict they will do the WRONG THING just in order to splash themselves on the headlines as “doing something to alleviate the housing crisis for working class, local families” when it is the furthest thing from the truth and reality.
The council is truly a mish mash of ineptitude and ticket punching for those that are simply taking space for two terms until they can try for higher office.
Yup; and they sure do get paid a lot!
Do Retires “live and work” in Honolulu? Or will they be taxed as well?
The exception for working on Oahu includes retirement pay. An issue is what kind of documentation will be needed. They’re looking for payment addresses on this one, but a lot of retirement payments are electronically transferred these days.
Note that if this bill passes, the rules-making process will be extremely important. That is a public process, so public input will be accepted.
Please note that the Oahu-sourced income exception was removed in the hand-carried floor draft that was approved during the council meeting.