A proposal that was introduced last session to provide local jurisdictions with a sales tax credit on the construction of affordable workforce housing is back and on the move.

HB 1938, sponsored by Rep. Mike Steele (R–Chelan), provides that an eligible city or county may establish a local infrastructure investment program to support affordable workforce housing or revitalization efforts within a revitalization district. Here’s how the program would work:

• To initiate a program, an eligible city or county must adopt an ordinance containing the local definition of revitalization efforts and the geographic boundaries of the revitalization district.
• Once established, the local jurisdiction may receive 4.37 percent of the sales or use tax on the construction of the housing developed in the district.
• The tax remittance is credited against the state sales tax due on the same sales and may be claimed once per project.
• A local jurisdiction must apply to the Department of Revenue (DOR) before construction is initiated on the eligible project, and DOR must determine eligibility within 60 days.
• DOR may not approve any application that exceeds $750,000 per fiscal year plus any excess amounts available from prior fiscal years.
• DOR may not approve any applications after June 30, 2027.

An eligible city or county is any county located east of the Cascade mountains with a population greater than 40,000 but no more than 125,000, and the cities within those counties. HB 1938 defines "affordable workforce housing" as housing rented or owned by a person or household whose income is at or below 110 percent of the median income for the county in which the housing is located.

By November 1, 2026, HB 1938 directs DOR to submit a report to the Legislature.

AWC testified in support of this proposal.