Mill Creek rep’s bill to tax expensive real estate sales fails

By Laurel Demkovich / Washington State Standard

OLYMPIA — A tax on real estate sales in Washington over $3 million did not pass in this year’s state legislative session, dealing a blow to advocates who had hoped for a permanent funding stream for affordable housing.

House Bill 2276 would have added the tax beginning in 2026. Revenue from it, about $130 million a year, would have funded housing for low-income people, people with developmental disabilities and people with mental and behavioral health needs.

The 1% real estate transfer tax would have applied to any portion of a sale price over $3,025,000. The bill would have also expanded the lowest tier of the state’s real estate excise tax – which currently covers properties sold at $525,000 or less – to include properties sold at $750,000 or less. This would’ve left most people selling homes in Washington with no change in their tax bill or a decrease.

After passing out of a House committee last month, the proposal never made it to a vote on the House floor.

Bill sponsor Rep. April Berg, D-Mill Creek, said she was heartbroken the bill did not make it through this year but pointed to limited time during a short session.

“We need to see a dedicated revenue for affordable housing,” Berg said. “It’s time.”

Republicans, builders and business groups opposed the bill, arguing it would increase housing costs.

Opponents specifically raised concerns about the effects of the tax on apartment building sales above $3 million. They warned landlords could pass the added cost to their tenants.

“I’m sorry but this does drive up the cost of housing,” said Rep. Ed Orcutt, R-Kalama.

Kris Johnson, president of the Association of Washington Business, said on Friday the group was relieved the real estate tax proposal, along with a bill to cap rent increases and changes to local property taxes, failed this session.

“After making significant progress last year to address the state’s housing crisis, these measures would have taken us backward by making housing more expensive at a time when we need to make it more affordable,” Johnson said in a statement.

Berg pointed out that nonprofit, affordable housing is already exempt from the real estate excise tax and wouldn’t have paid the new transfer tax. She described her tax proposal as progressive because it stood to lower the tax rate for many homeowners in Washington while raising it on the most expensive.

It’s the second year that a proposal like this failed to make it out of the Legislature, but supporters say they aren’t giving up.

Berg said she hopes next year opponents of the bill will come to the table to find compromises, though she didn’t point to specific pieces of the policy that could change.

“The revenue source at some point will happen because we need housing for people with intellectual and developmental disabilities,” said Rep. Frank Chopp, D-Seattle. “We need housing for low wage workers. We need housing for folks who are suffering and dying on the streets.”

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