If a long legislative session is analogous to a marathon, the bill that would create new real estate excise tax (REET) revenue for affordable housing has just passed mile 2. This makes it an underdog, with 24.2 miles to go in just one week, especially given the strong attack by Washington REALTORS®; but one that AWC stands strongly behind given the high stakes.

Legislators have made significant progress on their housing agenda to address the affordability crises this session. However, they have not passed any policy proposals to address the state’s target to deliver 500,000 homes for low and very low-income households in the next twenty years. We know that housing for the lowest income levels cannot be provided without sustained and dedicated investments from state and local government. In this legislative session focused on housing, adjourning without addressing the funding needs would be shortsighted and ineffective.

HB 1628, has been amended and voted out of the House Finance committee. Here are the latest key provisions:

• State REET changes – Beginning January 1, 2025, increases the “ceiling” for the Tier 1 1.1% state REET tax from $525,000 to $750,000.
• As a result, Tier 2 (1.28%) will be $750,000 to $1.525 million.
• Tier 3 is unchanged from current law at 3% for sales over $3 million.
• Beginning January 1, 2025, increases the state REET rate for Tier 4 (selling price over $3.025 million) from 3% to 3.5% except for commercial property. The bill also defines commercial property to exclude residential structures.
• Commercial property will pay 3% on selling price over $3.025 million through December 31, 2026. The new 3.5% will take effect for commercial property beginning January 1, 2027.
• Removes the creation of Tier 5 for selling prices above $5 million.
• Local REET changes: The .25% councilmanic local option REET (REET 3) stays the same but the breakdown in how the revenue can be spent changed, but ultimately the population served – 60% AMI and below for rentals and 80% and below for ownership—stays the same and supports affordable rentals, affordable home ownership, housing-related programs, and infrastructure to support housing.

What impact will HB 1628 have on homebuyers?

HB 1628 will have a nominal impact on the selling of property, not on the purchase of it. REET is paid by the seller, not the buyer. The value of property is determined by factors including market demand, interest rates, zoning, and other nuanced factors. Buyers determine market value, not sellers. What a seller wants or owes, doesn’t determine market value or the final sale price. Additionally, the state REET change is a tax cut for many housing sales in the state. It recognizes that many—if not a majority of—residential sales in this state will be for property of $750,000. And importantly, the bill creates funding at the state and local levels, to invest in homeownership for the many households who can’t afford to purchase a home without assistance.

What impact will HB 1628 have on rents?

HB 1628 will reduce rents for the many households provided opportunity to live in the affordable homes it will build and will otherwise not increase or decrease rents on the for-profit market. The REETS in HB 1628 are paid by the seller. The REET increases in HB 1628 are nominal as well. Further, HB 1628 has excluded residential structures from “commercial property” under the bill, lowering the tax rate paid under REET. Landlords in these mega-million sales are already pricing rents at the rates the market “can bear” and the nominal increased REET will not show up on the tenant’s rent ledger.

Skyrocketing housing prices over the last several years is a reason we have a housing crisis. Taxing those increased profits is an appropriate source to fund investments in low-income housing.

Tell your legislators to:

• Advocate for funding of affordable housing, specifically ask them to support HB 1628.
• Contact their leadership and tell them that this is a priority.

Search legislators by district and by city.

Additional talking points:

• This will create the first permanent dedicated funding for the state’s preeminent housing investment program the Housing Trust Fund, including dedicated funding for housing people with developmental disabilities. It will also create a local revenue option for cities to levy a third quarter percent of REET for affordable housing purposes.
• Additionally, the state REET change is a tax cut for many housing sales in the state. It recognizes that many—if not a majority of—residential sales in this state will be for property of $750,000.
• Having dedicated Housing Trust Fund dollars stabilizes the state’s ability to support housing needs in the short term and long run without having to trade housing for other essential community benefits. It’s transformational. New dedicated local options allow cities to partner to address local priorities.
• Selling the property for affordable housing exempts the seller altogether from REET.
• Let your representatives know that cities support HB 1628—the Affordable Homes Act. Include the letter of support when you urge them to move the bill forward.
• Let legislators know how much a new REET option, if passed by your council, could raise for affordable housing in your city each year.