Ernst and Young presents Honolulu's empty homes tax feasibility analysis

The Honolulu City Council meeting on May 1, 2025, focused on the proposed empty homes tax (EHT) under Bill 46, aimed at addressing homelessness and the shortage of affordable housing in the city. Representatives from Ernst and Young presented their findings from the first phase of their study, which assessed the feasibility of implementing the tax.

The presentation highlighted that the EHT would impose a tax on homes deemed empty, with the intention of encouraging property owners to either rent or sell their vacant properties. Ernst and Young estimated that the tax could generate significant revenue, with projections indicating an average net revenue of approximately $29 million over ten years under a medium scenario. The tax rate is proposed to start at 1% and increase to 3% in subsequent years.

Key components of the tax include a system for homeowners to declare the occupancy status of their properties, with various exemptions available for legitimate reasons for vacancy, such as renovations or temporary relocations. The bill currently outlines 16 exemptions, which Ernst and Young noted are aligned with practices in other jurisdictions.

During the meeting, council members expressed concerns about the potential impact of the tax on property owners, particularly regarding compliance and the administrative burden of verifying occupancy statuses. Some members questioned the effectiveness of the tax in actually increasing housing availability, given the estimated low number of properties expected to return to the market annually.

Public testimony revealed mixed opinions on the proposed tax. Some community members supported the initiative as a necessary step to combat the housing crisis, while others raised concerns about its fairness and potential legal challenges, referencing ongoing litigation related to similar taxes in other cities.

The council is expected to continue discussions on the bill, weighing the potential benefits of the EHT against the concerns raised by both the public and city officials. The next steps will involve further analysis and refinement of the tax's implementation strategy, as well as ongoing public engagement to clarify the bill's provisions and address community concerns.