Affordable housing could get boost after lawmakers expand use of real estate excise tax

Affordable housing could get boost after lawmakers expand use of real estate excise tax

OLYMPIA, Wash. — Legislation to give cities and counties the option to spend real estate excise taxes on affordable housing projects is close to final approval.

“It is one in many tools that we can use to address housing affordability and homelessness,” said the bill’s lead sponsor, Rep. Amy Walen, a Kirkland Democrat whose city has used the expanded authority to help develop a homeless shelter for women and families.

Since 2011, cities and counties have been able to charge a 0.25 percent real estate excise tax that property sellers pay. If cities and counties are required to use the state Growth Management Act — designed to regulate sprawl and protect environmentally-sensitive lands — they can levy an additional 0.25 percent, referred to as REET 2. The local taxes are on top of the state’s real estate excise tax, which has a 1.28 percent rate.

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The law said cities and counties could use a chunk of the excise tax for capital projects, including streets, parks, traffic signals and stormwater and sanitary sewer systems.

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Two years ago, the Legislature revised the law to allow cities and counties to use some of the REET 2 dollars to help provide housing for the homeless. The amount was the higher of $100,000 or 25 percent of REET 2 revenue — not to exceed $1 million. That law expires June 30.

A bill passed by the Senate on Wednesday says cities and counties also can spend REET 2 dollars on affordable housing projects and extends the law until Jan. 1, 2026. The House passed the bill on March 5.

“We have in our state right now a crisis with respect to housing affordability and as a result, we have a lot of homelessness and housing instability,” said Sen. Patty Kuderer, D-Bellevue. “This will be another incentive and tool in the tool box for cities to use as they plan going forward for their communities.”

Sen. Hans Zeiger, R-Puyallup, who voted in favor of the bill, said it was the right call to make the revised law expire in 2026.

Zeiger noted that cities and counties must show there is sufficient funding to complete projects before they spend part of the funds raised by the tax on affordable housing or homeless shelters.

“I think it is appropriate to allow some flexibility for use of these real estate excise tax funds. That said, I think there are some legitimate concerns that we could spread that funding source too thin,” Zeiger said, as the Senate voted 34-13 to approve the bill.