Reject empty homes tax proposal

RE: P170 — RELATING TO AN EMPTY HOMES TAX

Aloha Chair Szewczyk, Vice-Chair Yamamoto and other members of the Commission,

The Grassroot Institute of Hawaii opposes proposed charter amendment P170, which would create an empty homes tax mechanism to create revenue for affordable housing construction.

An empty homes tax could be unconstitutional and risk embroiling the city in expensive lawsuits; would create administrative headaches for the city Department of Budget and Fiscal Services; and could cause negative effects to Honolulu’s broader economy.

In San Francisco, an empty home tax due to go into effect this year was overturned in late 2024 on constitutional and state law grounds. In his order granting summary judgment, state Superior Court Judge Joseph Quinn found that San Francisco’s empty homes tax violated the U.S. Constitution’s due process and equal protection clauses, as well as California’s own constitutional right to privacy.

Given the similarities between the San Francisco law and this Honolulu proposal, it seems likely that adopting P170 would be vulnerable to a similar challenge.^[1]

Regarding administrative headaches, the city Department of Budget and Fiscal Services has expressed concerns about previous attempts to create an empty homes tax. It is also hard to know just how much work the proposal would require from the department’s staff or from property owners trying to comply. But the magnitude of all this required paperwork, investigation and enforcement would be enormous.

There is also research indicating that empty homes taxes can increase housing prices in the long-run. For example, economist Mariona Segu examined France’s national vacancy tax in 2020 and found that the tax reduced the number of vacancies by 13% over four years, which coincided with many of the vacant units being converted to primary residences.

Her study also noted that as rental affordability improved in the short term, housing prices increased in the long term.^[2]

Economists Lu Han, Derek Stacey and Hong Chen reached a similar conclusion in 2023. Vacancy taxes can reduce vacancies, they found, but they also can distort the home sales market, increasing housing prices and lowering homeownership rates.^[3] Some sellers might be more reluctant to leave their properties on the market for long periods of time, as doing so risks being subject to the tax.

Please consider, too, that an implicit empty homes tax already exists as a function of the housing market. The fact is that anyone who chooses to leave their home empty for more than six months out of the year is already forgoing close to $12,000 in rental income, based on average rents.^[4]

This suggests that anyone who leaves their home empty has good reason to do so, and that an empty homes tax surcharge might not motivate them to act otherwise.

Thank you for the opportunity to testify.

Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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^[1] Caitlin Connell and Jessica Wilson, “UPDATE: San Francisco Empty Homes Tax – Superior Court Judge Strikes Down San Francisco Empty Homes Tax, Grants Challengers’ Motion for Summary Judgment,” Coblentz Patch Duffy & Bass LLP, Nov. 18, 2024.
^[2] Mariona Segu, “The impact of taxing vacancy on housing markets: Evidence from France,” Journal of Public Economics, Vol. 185, May 2020, p. 10.
^[3]  Derek Stacey, Lu Han and Hong Cheng, “Frictional and Speculative Vacancies: The Effects of an Empty Homes Tax,” Asian Bureau of Finance and Economic Research, May 2023, pp. 22-23.
^[4] “What is the average rent in Honolulu, HI?” Apartments.com, accessed Dec. 10, 2025.