Understanding Bill 46: What It Means for Real Estate in Honolulu

Understanding Bill 46: What It Means for Real Estate in Honolulu

In the ever-changing landscape of Honolulu’s real estate market, staying informed about legislative developments is crucial. One such development stirring discussions is Bill 46, a proposal that could significantly impact property owners, potential buyers, and the overall housing market on O‘ahu. Whether you’re a homeowner, investor, or prospective buyer, understanding this bill is essential for making informed decisions.

What Is Bill 46?

Bill 46 is a legislative proposal aimed at increasing property taxes on homes deemed “vacant” or underutilized. The goal is to encourage better utilization of housing stock and generate additional tax revenue. On the surface, the bill seeks to address the challenges of housing scarcity and affordability by targeting non-resident owners or those who leave properties vacant for extended periods.

Key Details of the Proposal

1. Definition of a Vacant Home
   The bill categorizes a property as “vacant” if it is unoccupied for a specified number of days per year (exact parameters are pending). This definition excludes owner-occupied homes, rentals, and certain exemptions.
2. Increased Tax Rates
   Owners of vacant homes would face a higher property tax rate compared to those under standard residential classifications, such as Resi-A. This could mean paying significantly more annually for properties that remain unoccupied.
3. Exemptions
   Bill 46 includes exemptions for:
   • Owners facing financial or medical hardships.
   • Properties undergoing renovations.
   • Certain vacation homes used consistently within the limits defined by the bill.
4. Revenue Allocation
   The revenue generated would be allocated to affordable housing initiatives, infrastructure improvements, or other community programs aimed at addressing O‘ahu’s housing crisis.

What Problem Is the Bill Trying to Solve?

Honolulu is grappling with two pressing issues: housing affordability and availability. Many residents face skyrocketing rents and a lack of accessible housing options, while a significant number of homes on the island remain vacant, often owned by out-of-state or international investors.

Supporters of Bill 46 argue that these vacant homes contribute to the housing crisis by taking inventory off the market, inflating prices, and creating “ghost neighborhoods.” By imposing a financial penalty on vacant properties, the bill aims to incentivize owners to sell, rent, or better utilize their homes.

Concerns About the Bill

While the intent of Bill 46 may be noble, critics have raised valid concerns:

1. Impact on Non-Resident Owners
   Many non-resident owners contribute positively to the local economy by visiting frequently, employing local services, and maintaining their properties. Higher taxes might discourage such investments.
2. Administrative Challenges
   Determining whether a home is truly “vacant” can be complicated. How will the city track and enforce this? Will there be unintended consequences or loopholes?
3. Market Implications
   Opponents worry the bill could dampen investor interest in Honolulu real estate, potentially slowing market growth and impacting property values.
4. Effectiveness of Tax Revenue
   How effectively will the additional tax revenue be used to address the housing crisis? Ensuring transparency and accountability will be crucial to the bill’s success.

How This Affects You as a Property Owner or Buyer

For Homeowners:

• If you’re a non-resident or have a second home in Honolulu, it’s essential to evaluate your property’s usage to determine if it might fall under the “vacant” classification.
• Consider renting or selling if holding onto the property becomes financially burdensome under the new tax structure.

For Buyers:

• The bill could create opportunities as more vacant homes enter the market, potentially increasing inventory. However, it’s important to monitor how these changes affect property values and tax rates.

For Investors:

• Real estate investors may need to reassess the profitability of holding properties in Honolulu, especially if they aren’t actively generating income through rentals.

The Bigger Picture: Moving Toward Solutions

Bill 46 is part of a broader effort to address housing challenges on O‘ahu, but it’s clear that no single measure will solve the issue. Sustainable solutions require collaboration between the government, developers, nonprofits, and the community.

As real estate professionals, it’s our responsibility to stay ahead of these changes and help clients navigate their options. Whether you’re a homeowner, buyer, or investor, being proactive and informed will help you make the best decisions in this evolving market.

What’s Next?

The bill has been deferred for now, pending further analysis, including a report from Ernst & Young. While this is a temporary pause, the issue is far from over. We’ll likely see Bill 46 or similar measures resurface as Honolulu continues to explore ways to address its housing crisis.

Have Questions? Let’s Talk!

If you’re concerned about how Bill 46 could affect your property or are considering buying or selling in this market, I’m here to help. Let’s schedule a time to discuss your goals and create a plan tailored to your needs.

Together, we can navigate these changes and make the most of the opportunities ahead.

Honolulu Civil Beat: Bill 46 Could Shift Honolulu’s Market To Affordable Housing

Bill 46: Testimony