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Informative Q&A Regarding the Impact of Middle Housing Legislation on Appraisers

Q:  I have seen information from real estate appraisers that the 2023 state legislation allowing Middle Housing (HB 1110) and Accessory Dwelling Units (HB 1337) will complicate and potentially slow down real estate transactions because of how zoning changes under the legislation relate to real estate appraisal licensing standards.  How are appraisals being impacted by the legislation?
A:  Currently, there is no impact on appraisal practices, as these two bills will not be implemented until 6 months after the deadline for cities and counties to update their Growth Management Act (GMA) Comprehensive Plans.  For King, Pierce, Snohomish, and Kitsap counties, this means that the laws will not be implemented until June 2025.  Cities and counties elsewhere in Washington State have implementation deadlines at the end of 2025 and into 2026.  Under current appraisal licensing, properties with a potential highest and best use of 5 or more residential units are appraised by certified general (commercial) appraisers, while properties with a potential of 4 or fewer residential units can be appraised by both residential and commercial appraisers.
Under HB 1110, certain cities must allow up to 6 dwelling units in areas close to transit, and 2-4 dwelling units in other areas.  HB 1337 requires cities to allow at least 2 ADUs on all residential lots.  These laws mean that cities must allow more housing units to be built – parcels that now could have only one single family detached house could in the future have 5 or more residential dwelling units.  This important change in local zoning to allow more housing will require all sectors of the real estate industry to adjust – this means lenders, appraisers, and REALTORS® as well.  While appraisers did not raise concerns with either bill over the past 3 years, the implementation deadlines will provide the real estate industry the necessary time to prepare for these zoning changes, including necessary industry education, training, and licensing requirements.  REALTORS® do not support reductions in housing supply solely to conform zoning with an existing processional licensing structure.  REALTORS® will keep working with our local associations, industry partners, and local and state government on successful implementation of the broadly supported 2023 housing supply legislation.