REALTOR® wins and losses in Olympia this year

In a year of playing defense in the Washington State Legislature, the real estate industry recorded some impressive wins for housing, despite an anticipated loss on rent control.

"Overall, this session was a win for REALTORS® and their clients," said Mary Hull-Drury, Government Affairs Director for Washington REALTORS®. "Housing affordability remains an important issue to legislators. We will continue to work with them on ways to make homeownership more accessible in Washington."

Hull-Drury, along with Nathan Gorton, Washington REALTORS® CEO, gave a summary of key REALTOR® issues acted on by lawmakers in Olympia this year at a recent meeting of Seattle King County REALTORS®.

Lot Splitting

A significant win this year was the passage of HB 1096, sponsored by Representative Barkis. The bill allows cities to adopt regulations allowing the splitting of a single-family housing lot into two lots through an administrative process. This holds the promise of producing many more affordable housing units within urban areas that contain supporting infrastructure. Coupled with the past approval of accessory swelling units (ADUs) and new mandates on cities to allow a diversity of middle housing options by 2025, the lot splitting bill is a significant step on the path to more housing inventory. In a study by the State Department of Commerce in 2022, Washington state ranks last in the nation in the number of housing units per household—the clearest measure of a significant housing deficit.

Tax Proposals

In a year in which the legislature forecast a budget shortfall between $10 and $20 billion, virtually every revenue option was examined for increases. In the end, the Governor and legislature settled on a new revenue package of $9.4 billion. The proposal under consideration included a wealth tax, an employment tax, an increase in the new capitol gains tax, an increase in the Business and Occupation tax (B & O), a broadening of the tax on services, a real estate excise tax increase (REET), and a bump in property taxes.

Thanks to the efforts of REALTOR® staff and dedicated volunteers who met with legislators, the Association was able to avoid any dramatic new taxes on the industry:

• Real estate sales continue to be exempt from the capital gains tax.
• The application of an employment tax and tax on services leaves real estate largely untouched.
• The B&O rate on real estate remains the same.
• The legislature did raise the property tax limit to accommodate local jurisdictions who wish to levy a higher rate through voter approval. This is not a blanket property tax increase.

Rent Stabilization

Despite the best efforts many industry partners, the legislature adopted a rent control bill, imposing a 7% limit, plus inflation (max 10%), on annual rent increases. At one point, the state Senate exempted single-family residences and properties up to four units from the increase cap. However, the final bill negotiated with the House removed that exemption, fulfilling Lieutenant Governor Denny Heck’s warning to REALTORS® in January that progressive legislators in the House had the votes to pass a rent “stabilization” bill.