The first week of session will see early action on several bills that aim to increase affordable housing, including addressing preservation, a new revenue source, accessory dwelling units (ADUs), and condominiums.

Providing options to local governments for preservation of affordable housing

HB 1035, sponsored by Rep. Shelley Kloba (D–Kirkland), brings back a proposal presented to the Legislature several years ago. The bill would authorize cities and counties to provide six-year property tax exemptions to preserve existing affordable housing.

There are many provisions within the proposal, the core of which is that cities would be authorized to provide a tax exemption to properties that meet each of these standards:

• Housing units or mobile homes that are rented below market;
• For multifamily dwellings, they must be affordable to households making at or below 50 percent of the area median income and part of a building that is at least 25 years old; if owner-occupied single-family structures or ADUs, they must be affordable to households making at or below 80 percent of the area median income.

Cities would be authorized to adopt alternative income or rent thresholds where it determines that an adjustment is needed to serve renters making at or below 50 percent of the area median income in either mobile homes or multifamily units.

In addition to the provisions above, properties must also comply with the following requirements throughout the entire exemption period:

• A minimum of 25 percent of the residential units in a multifamily property must be affordable.
• Qualifying units must be comparable to market rate units in the building.
• The building must be at least 90 percent occupied at time of application.
• Mixed use properties must dedicate at least 50 percent of the space to residential occupancy.

Please provide any comments to Shannon McClelland before January 14.

New local option tax on short term rentals

SB 5012 provides a new local option, short term rental tax with revenues authorized for operating and capital costs of affordable housing programs. The bill is sponsored by Sen. Liz Lovelett (D–Bellingham).

The proposal includes the following provisions:

• Authorizes local governments to levy and collect excise tax on short-term lodging through an internet-based short-term rental platform (like Airbnb)
  • The rate may not exceed 10 percent.
  • If a county authorizes the tax, cities/towns also imposing tax are allowed credit against the county tax.
• Revenue must be used exclusively for operating and capital costs of affordable housing programs, including homeless housing assistance, temporary shelters, and other related services.
• Cities can use revenue for contracts, loans, or grants to nonprofit organizations or public housing authorities for affordable housing projects and programs. Local governments can retain up to 5 percent of revenue each calendar year for any direct/indirect costs of administering tax.
• Exempt from current municipal lodging tax cap of 2 percent.
• Exempt from combined local tax cap of 12 percent.

Please share any thoughts—especially if this tool would be useful in your community—with Shannon McClelland before January 13.

Limiting the property tax incentive for improvements to single family homes to the construction of ADUs

The state has previously provided a three-year property tax exemption for improvements and renovations to single-family dwellings where that improvement represents 30 percent or less of the value of the original structure. In 2020, this law was amended to provide the tax exemption for the construction of an ADU.

SB 5033 from Sen. Patty Kuderer (D–Kirkland) proposes to remove the property tax exemption for improvements and renovations, leaving only a tax exemption for the construction of ADUs.

If this is problematic, please share your concerns with Shannon McClelland before January 13.

Facilitating condo construction

Following upon several years of effort to address unintended consequences of the state’s laws governing condominium construction and liability, SB 5024 from Sen. Mike Padden (R–Spokane Valley) looks to fine tune recent changes to these statutes.

This proposal has two major features:

1. It brings buildings of ten or fewer units with no more than two stories into the statute governing construction defect disputes. This will allow such buildings to benefit from policy work in the future. Secondly,
2. It authorizes purchase agreements whereby deposited funds can be used for construction costs so long as surety bond is required.

The development community indicates that these changes would be helpful adjustments to current law.

If you have thoughts or concerns, please share them with Shannon McClelland before January 12.

New housing data source

The University of Washington Center for Real Estate Research (WCRER) recently published a Housing Market Data Toolkit with funding associated with HB 1923 (2019). The Housing Market Data Toolkit is provided for all Washington cities over 10,000 population and for all counties in the state. A webinar is expected to be scheduled in February. The WCRER will share the data and how cities can use it.

Dates to remember

HB 1035 is scheduled for a public hearing in the House Housing, Human Services & Veterans Committee on Thursday, January 14 at 1:30 pm.

SB 5012 & SB 5033 are scheduled to be heard in the Senate Housing & Local Government Committee on Wednesday, January 13 at 10:30 am.

SB 5094 is scheduled to be heard in the Senate Law & Justice Committee at 10:30 am on Tuesday, January 12 and voted on at the same time on Thursday, January 14.