Supporters of a state bill that would hike taxes on real estate sales to fund low-income housing are prodding Washington lawmakers to take action and ripping a business group for running a television ad against the bill, which could raise billions of dollars in the coming years.
The Washington Realtors are opposing House Bill 1628, saying it would add costs to the transactions they're involved in. Their ad shows a kitchen table conversation over doughnuts and coffee, with a man and woman discussing how the bill, sponsored by Rep. Frank Chopp, D-Seattle, would "make housing even more expensive" by boosting taxes on home sales.
At a news conference hosted Thursday by the Washington Low Income Housing Alliance, HB 1628 supporters dismissed that argument, asserting the bill's "modest" tax bumps wouldn't drive up rents and home prices, because those are set by what residents are willing and able to pay. They said the funds are desperately needed to create more subsidized housing, describing the bill as a game changer crucial to reducing homelessness.
"We cannot wait, our communities cannot wait and we need the state Legislature to act," Tacoma Mayor Victoria Woodards said.
Many lawmakers promised to address Washington's housing affordability crunch in the current session with a three-pronged approach by strengthening rent regulations, creating more funding for low-income housing and preempting local zoning rules to allow denser development.
While upzoning bills have moved close to adoption — with backing from developers and real estate brokers and agents, among others — proposals to limit rent increases died last month and Senate budget writers have balked at Gov. Jay Inslee's bid for a ballot measure to borrow $4 billion for housing.
The fate of HB 1628, which would authorize higher real estate excise taxes at the state and local level, is uncertain with under three weeks of the session to go, noted Michele Thomas, WLIHA's policy and advocacy director.
Initial biennial budget proposals by the House and Senate include $400 million for the Washington State Housing Trust Fund, a historic amount that could create about 4,000 affordable homes, Thomas said. But that's not enough, she said, given that the state needs to add more than 30,000 subsidized homes annually over the next 20 years to keep up with demand, according to projections by the state Department of Commerce.
Whereas state funding for affordable housing currently relies on biennial budget negotiations by lawmakers, HB 1628 would establish a dedicated revenue stream, Thomas said. The bill would also allow city councils around Washington to raise more money at the local level, Redmond Mayor Angela Birney and Spokane City Council President Breean Beggs pointed out. HB 1628 is backed by the Association of Washington Cities and over 30 mayors.
"We have plenty of land in our city, but the market is not going to build low-income housing without government funding," Beggs said, making the case that HB 1628 would take "just a crumb" from property values that have soared in recent years to "fix the system" for people at risk of becoming homeless.
HB 1628 hasn't seen committee action since February or reached the Senate, but isn't subject to the same voting cutoffs as many other bills, because it's revenue-related. Such bills can be revived and passed at any point.
"That's typical for an issue like this. We still have plenty of time," Chopp said in an interview, citing talks Thursday with House Speaker Laurie Jinkins and House Finance Committee Chair April Berg. "We made progress today."
HB 1628 would add a new tier to Washington's real estate excise tax, applying a 4% rate to the portion of a sales price over $5 million. The top tier is now 3% for the portion of a price over about $3 million. The extra revenue would go to affordable housing, with portions set aside for people leaving homelessness with medical challenges and for people with developmental disabilities.
The bill would also allow cities or counties to tax the entire price of property sales at 0.75%, up from 0.50%, and require the revenue to fund affordable housing, defined as what a household at 60% of the area median income (about $78,000 for a family of four in Seattle) can pay with 30% of its income.
HB 1628's changes would take effect in 2024 and 2025.
For a $25 million sale of a commercial property in a city using the new option, HB 1628 would extract $200,000 for the state and $62,500 for the city, Thomas said. For a $1 million home sale, the bill would collect $2,500 for the city.
The bill could raise about $288 million for the state and $214 million for local governments in 2026's fiscal year, increasing to $443 million for the state and $289 million locally in 2029's fiscal year, according to a fiscal note.
On Thursday, supporters said the funding would benefit low-income renters, people with medical hardships and people experiencing homelessness, in addition to people with developmental disabilities, who struggle to pay for housing on their own using their paltry Supplemental Security Income.
"Consider the 85-year-old father caring for a wife with dementia and a 50-year-old daughter with Down syndrome," and what happens when the father is gone, said Stacy Dim, executive director of The Arc of Washington State.
The Washington Realtors spent $400,000 on their TV ad against HB 1628, said Nathan Gorton, government affairs director with the group for real estate agents. "So wait, their solution for affordable housing is higher taxes, making housing less affordable?" the man in the ad says in an incredulous tone. "What were they thinking?" the woman quips.
At the WLIHA news conference, a Realtor who supports HB 1628, Kim Colaprete of Team Divas Real Estate in Seattle, said home prices are determined by a range of market factors, such as interest rates, inventory and consumer confidence. She said sellers would pay the taxes.
"Buyers determine the market value, not sellers," said the Team Divas managing broker, predicting the bill would have a "minimal impact" on prices compared with the good that the revenue could do. "It's clear that the lobbyists who wrote this ad ... do not have any experience selling real estate."
Added Chopp: "There have been studies done ... Raising the [real estate excise tax] does not increase the rents on these properties."
Gorton countered: "This idea that adding a tax to a product does not make that product more expensive is absurd."
The Washington Realtors recognize the state must create more affordable housing, Gorton said. They're supporting Inslee's $4 billion bond bid and a Chopp bill that would collect a new $100 fee on documents like mortgages to fund help for homebuyers affected by past racial housing discrimination. That bill has passed both chambers. But the group is particularly set against the local option in HB 1628, which would affect sales under $5 million, Gorton said.
"We think it would put homeownership further away for some," he said.
The Washington Realtors tend to fight progressive policies, Thomas said. The Commercial Real Estate Development Association, Association of Washington Business and anti-tax advocate Tim Eyman have also testified against HB 1628.
Inslee has voiced frustration with Senate leaders for not running with his bonding plan, though it's included in the House's budget. He hasn't endorsed HB 1628 but is open to the bill's concept, he told reporters last month.
"I'm not ruling that out at all," he said, warning that "the Evergreen State is going to become the ever-homeless state" without a major surge in spending. "One way or another we have to find a way to finance this."
