2025 Legislative Session Information & Resources

TOP TAKEAWAYS...

1. REALTORS® support easing restrictions on lot splitting to:
1. Offer existing homeowners the opportunity to maintain homeownership in changing life circumstances.
2. ​Facilitate the development of middle housing, which can provide more affordable ownership opportunities for homebuyers, including first-time homebuyers.
3. ​Create a streamlined, integrated process for lot splitting and residential building permit applications, helping both homeowners and cities.
2. ​Overall, Washington needs expanded housing options and to make homeownership more accessible and affordable.

BACKGROUND AND MORE INFORMATION...

In the 2023 and 2024 Session, the House passed lot splitting legislation that did not make it out of the Senate. The major concern was if a “lot split” would result in a buildable lot – or unbuildable lots that would be hard to finance, sell, or buy.

A new lot splitting bill has been prepared for 2025 (HB 1096, Rep. Barkis) that attempts to address these concerns. Rather than amending the GMA (as done in the 2023 and 2024 bills), the new draft amends the state subdivision act and provides that a city must review the lot split to ensure that the new lot will be a buildable lot  (i.e., it has water supply, sewer, legal access, complies with setback, meets minimum lot size, meets GMA critical areas buffer requirements, etc.).

This new bill would apply to cities required to implement the Middle Housing bill and would require cities to have a lot split process that includes both creating a new lot and issuing a residential building permit. This converts two permitting processes (lot creation + building permit) into a single administrative function.

In addition, subdivision reform proposals including expanding the use of Unit Lot Subdivisions, may provide another mechanism to achieve the same outcome as lotsplitting – a simplified process to create more lots for housing supply and homeownership.

Finally, the bill is structured to allow the same levels of housing density as the Middle Housing and ADU laws. That is, lot splitting will not increase housing density (a major concern of cities) but will increase the number of new, separate buildable lots to implement the Middle Housing and ADU laws and increase ownership opportunities.

TOP TAKEAWAY...

1. The policy aims to create affordable housing options by allowing detached ADUs in rural areas, which can be built quickly and help toward relieving housing demand pressures.

BACKGROUND AND MORE INFORMATION...

Allowing detached ADUs outside of Urban Growth Areas provides a framework for increasing housing availability in rural areas while ensuring environmental and infrastructure considerations are met. 

ADUs can be built quickly and help toward relieving housing demand pressures.​ 

Proposed regulations for Detached ADUs:

1. Only one ADU per parcel. 
2. ADUs must comply with water supply and sewage system requirements.
3. ADUs cannot encroach on critical areas or agricultural/forest lands.
4. Maximum floor area is 1,296 square feet.
5. ADUs must match the primary dwelling's exterior design and use the same driveway.
6. Parcels cannot be subdivided to bypass these regulations.

TOP TAKEAWAYS...

1. New condominium supply in Washington State has been extremely limited due to the State’s condominium liability law. This law, which is a statutory “implied warranty,” often leaves developers vulnerable to litigation and very few incentives to build condominiums in Washington.
2. WR supports exempting small condominium buildings and ADUs converted to condominiums from the statutory implied warranty. As an alternative, require an express warranty modeled on the 2-10 Warranty commonly used in single-family home construction. This concept intends to incentivize Middle Housing, ADUs, and small infill multifamily construction for homeownership, not rentals.

BACKGROUND AND MORE INFORMATION...

For the past decade, new condominium supply in Washington State has been extremely limited. Moreover, existing new condominium construction has been at price levels that are unaffordable to most homebuyers.

The lack of new condominium supply is attributed to the State’s condominium liability law, which is a statutory “implied warranty” that does not exist for any other type of residential or commercial construction.

A 2022 study from the Department of Commerce on condominium supply issues included the following conclusions:

1. The [implied warranty] has been interpreted broadly by attorneys and courts, often leaving developers vulnerable to litigation. Rather than imposing specific construction standards, implied warranties impose product liability standards that require expert testimony.
2. In total, stakeholders emphasized there are currently very few incentives to build condos in Washington, particularly in comparison to other types of housing such as single detached or multifamily apartments.

In recent years, the Legislature has passed some modest reforms on condominium liability, including:  2019: SB 5334 (Pedersen); 2023: SB 5258 (Shewmake); 2023: SB 5792 (Padden). However, these bills were modest in scope and effect and have not substantially changed the litigation risk that drives insurance costs and developer reluctance.

Rep. Taylor convened a stakeholder group that is developing legislation to include at least the following proposals:

1. Clarification of the statutory implied warranty in RCW 64.90.670;
2. Requiring arbitration of certain condominium construction defect claims;
3. Improving “right to cure process” by allowing recovery of attorney’s fees for substantially prevailing party; 
4. Exempt small condominium buildings and ADUs converted to condominiums from the statutory implied warranty. As an alternative, require an express warranty modeled on the 2-10 Warranty commonly used in single-family home construction. This concept intends to incentivize Middle Housing, ADUs, and small infill multifamily construction for homeownership, not rentals.

TOP TAKEAWAYS...

1. Increasing housing supply in Transit Oriented Development station areas will be critical to addressing the housing supply and affordability crisis. WR supports TOD proposals that will incentivize more development in TOD station areas and increase housing density in station areas.
2. WR believes that increasing supply of both market-rate and affordable units can be achieved through programs like the Multifamily Tax Exemption (MFTE) program which has a proven record of success.

BACKGROUND AND MORE INFORMATION...

The state is investing billions of dollars into TOD stations for light rail, bus rapid transit, and commuter rail and these areas must be locations for increased housing supply. The current multifamily development market has slowed down, due to interest rates and materials costs that the Legislature cannot control. However, the Legislature can stimulate TOD housing in station areas by creating incentives for new housing in these areas.

The Multifamily Tax Exemption (MFTE) program has a proven track record of creating both market rate and affordable units in a number of cities, and should be expanded to become a mechanism used in all TOD station areas. If an MFTE program is locally tailored to the housing market, it will reflect both market rate and affordable housing needs – so that mandating affordability is not needed.

One-size-fits-all affordability mandates for TOD station areas can result in housing being more expensive in those areas, which result in housing being more expensive in those areas, causing development to occur in areas outside the TOD station area where affordability mandates would not apply.

In addition to the MFTE, WR supports additional incentives to reduce the cost of transportation impact fees, the Real Estate Excise Tax, and sales tax on construction.

TOP TAKEAWAYS...

1. REALTORS® oppose an increase to the current Real Estate Excise Tax rate for its impact on the cost of real estate and downstream impacts, e.g., building equity and reduced inventory.

BACKGROUND AND MORE INFORMATION...

The Legislature has authorized a state graduated real estate excise tax (REET) on the sale price of every residential and commercial real estate transaction. Washington’s REET is one of the highest in the nation, and negatively affects housing affordability, workforce mobility, home ownership, commercial real estate, and land development.

The REET increases the cost of housing for buyers and is paid directly from the equity of sellers. Move-up buyers lose valuable equity needed to reinvest in a newer or larger home affecting the decision and/or ability to change housing status. A decision not to move up results in a reduced inventory of older, smaller, more affordable homes available for first time buyers. Reduced inventory drives up the price of the existing housing stock causing it to be used less efficiently.

REET places a higher burden on people with lower incomes and disproportionately burdens those who move often. On average, 5% of existing homes are sold each year placing a burden on the population who pay the tax, even though the proceeds of the REET benefit society at large. Additionally, REET creates a ripple effect in commercial real estate transactions and land for housing development.

REET is an unreliable source of revenue as it fluctuates with the cyclical housing market and thus is an inappropriate source of funding for general operating fund uses.

REALTORS® support the reduction, or elimination, of REET and will oppose any increase in the current rate.

TOP TAKEAWAY...

1. B&O taxes place a burden on businesses big and small. Specific to the real estate industry, REALTORS® do not benefit from the state’s small business B&O tax credit and therefore oppose proposals to increase the tax on real estate and other professional services. 

BACKGROUND AND MORE INFORMATION...

The current base business and occupation tax (“B&O tax”) rate for real estate brokerage services is 1.5%. However, because of the structure of the real estate industry, individual REALTORS® do not benefit from the state’s small business B&O tax credit that is available to many other service businesses. The B&O tax is a significant disincentive for new businesses to move to Washington State, and for existing businesses to expand operations. 

REALTORS® oppose further increases in the B&O tax rate on real estate and other professional services.

TOP TAKEAWAY...

1. REALTORS® oppose applying sales tax to real estate services and other professional services. Real estate already pays high B&O and real estate excise taxes.

BACKGROUND AND MORE INFORMATION...

Washington’s tax code relies heavily on the 6.5% general state sales tax to fund state government. Items not subject to sales tax include sales of food and groceries, gas, and professional services like real estate, accounting, and legal services. The exemption from sales tax for certain services is based in part on the fact that service businesses like real estate already pay the highest B&O tax rate in the state, and that Washington State has one of highest B&O tax rates and real estate excise tax rates and in the country.

Applying the sales tax to real estate services will reduce the demand for housing by effectively increasing the cost to buy a home. The sales tax will be passed on to homebuyers and sellers, increasing the costs of housing. A sales tax on real estate services will also increase closing costs on both residential and commercial property, will increase the costs of running a real estate business, and will increase the construction costs for new homes.

REALTORS® oppose applying sales tax to real estate services and other professional services.

TOP TAKEAWAYS...

1. REALTORS® continue to support the exemption of real estate from capital gains.
2. Washington State’s general fund relies primarily on retail sales tax, property tax, business, and occupation tax, use tax, cigarette tax, and real estate excise tax (REET). Of these six funding mechanisms, real estate either contributes, or fully funds, three of these sources.

BACKGROUND AND MORE INFORMATION...

Washington State’s general fund revenue relies primarily on retail sales tax, property tax, business, and occupation tax, use tax, cigarette tax, and real estate excise tax (REET).

Washington State does not have a state income tax; however, Washington does impose a 7% capital gains tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets.

REALTORS® continue to support the exemption of real estate from capital gains.

TOP TAKEAWAY...

1. Property tax is the largest source of revenue for government. REALTORS® support the existing limits on property tax increases, and the ability of voters to increase property tax revenue beyond the 1% limit through a 60% vote.

BACKGROUND AND MORE INFORMATION...

Property tax is the largest source of revenue for local governments5. Local governments with property tax authority include hundreds of separate taxing districts, including counties, cities, fire districts, emergency medical districts, ports, libraries, and numerous other local taxing entities.

The State Constitution includes a 1% property tax limit ($10 per $1,000 of assessed value), which may only be exceeded by approval of 60% of the taxing district’s voters. Of this $10 per $1,000 rate, up to $3.60 is provided to the state, while the remaining $6.40 is available for local taxing districts. Of this $6.40, $5.90 per $1,000 is available for local taxing districts, and senior taxing districts (counties, cities, and roads) have priority in levying this $5.90. Any remainder is then allocated to junior taxing districts. An additional $.50 per $1,000 is available for six different local purposes: open space, emergency medical, affordable housing, metropolitan parks, criminal justice, and ferries.

Like the state, local taxing districts are subject to a property tax increase of the lesser of inflation, or one percent. This limit is on the taxes collected and not on the growing value of the property. Thus, a local government taxing district could collect only one percent more than the previous year’s cumulative total of property taxes assessed within its jurisdiction.

REALTORS® support the existing limits on property tax increases, and the ability of voters to increase property tax revenue beyond the 1% limit through a 60% vote. REALTORS® recognize that the 1% limit may not reflect the increasing costs of government services driven by population growth, inflation, and citizen demand for more services. REALTORS® support existing property tax exemptions and deferrals for senior and low-income citizens and open space but oppose the creation of additional exemptions that shift property tax burdens from one group to another.

REALTORS® believe that using property tax to fund government projects and services is preferable to using the real estate excise tax (REET), because property tax applies uniformly to all taxpayers within a specific jurisdiction rather than singling out seller’s equity as a source of tax revenue. Further, property tax provides a stable source of revenue compared to the volatility of REET.

TOP TAKEAWAYS...

1. The Washington Center for Real Estate Research (WCRER) at the University of Washington provides a range of market data and research reports focusing on housing in Washington State. The center provides credible research, value-added information, education services and project-oriented research.
2. Established by the State Legislature in 1999, WCRER is primarily funded through a $10 fee on real estate broker license renewals. The legislative authorization for the center and the accompanying fee is set to expire in September 2025, and the fee has not been adjusted for inflation for over 20 years.
3. WR supports increasing the license fee to $20 and extending the center’s authorization through 2035.

BACKGROUND AND MORE INFORMATION...

The Washington Center for Real Estate Research (WCRER) at the University of Washington offers a range of market data and research reports focusing on housing in Washington State. The center provides credible research, value-added information, education services and project-oriented research to real estate licensees, real estate consumers, real estate service providers, institutional customers, public agencies, and communities in Washington State and the Pacific Northwest region.

Established by the State Legislature in 1999, WCRER is primarily funded through a $10 fee on real estate broker license renewals. The legislative authorization for the center and the accompanying fee is set to expire in September 2025, and the fee has not been adjusted for inflation for over 20 years.

This legislation would increase the license fee to $20 and extend the center’s authorization through 2035.

WCRER housing market data for cities and counties includes:

• quarterly Housing Market Reports focusing on single-family housing at the county level;
• quarterly Apartment Market Reports providing rents and vacancy rates by county;
• median house prices for cities;
• affordability indexes for renters and buyers by city and county;
• single-family and multifamily building permit and completions statistics for cities and counties;
• an inventory of the stock of subsidized rental housing for cities and counties;
• housing and other data profiles from the American Community Survey;
• optional income limits for jurisdictions taking part in the Multifamily Property Tax Exemption Program.

Much of this data is available on WCRER city and county dashboards, which provide easy access to key statistics as well as the ability to compare different jurisdictions graphically over time. Individual research reports and WCRER’s annual report, The State of the State’s Housing, are also available at wcrer.be.uw.edu. The WCRER has also provided research services as requested by the Legislature on a number of different real estate and housing topics in recent years.

TOP TAKEAWAYS...

1. REALTORS® believe the solution to rental prices is to increase the supply of rental units. Similar to the price of home ownership, the price of rent is influenced by the market. Rental prices increase when vacancy rates are low. The best tool government has for addressing affordable rental rates is to encourage an increased supply of rental units to meet demand through local development regulations. Rent control/ stabilization legislation not only threatens the traditional rights of property owners, but also has the potential to significantly reduces investment in housing.
2. Overall, while the bill aims to protect tenants and seeks stability, it raises serious concerns about potential negative long-term impacts on housing supply and affordability.

BACKGROUND AND MORE INFORMATION...

There is clear agreement that housing supply is the major foundational issue in Washington’s housing crisis. Lack of supply affects affordability at all levels, and is a major cause of homelessness. Protecting tenants from large or sudden rent increases (“rent stabilization”) does not address the housing supply issue. Rather, it is a consumer protection policy to manage, rather than solve, the unaffordability caused by lack of supply.

Washington State competes for housing investment capital against other states and regions. If Washington adopts regulations that are more strict than Oregon or California, then critically needed housing investment capital will flow out of and away from Washington into Oregon, California, as well as to other states with no type of price controls over housing.

TOP TAKEAWAYS...

1. This proposal intends to create a down payment and closing cost assistance program for people who work in targeted professions and meet certain income requirements.
2. REALTORS® support opportunities to increase homeownership.

BACKGROUND AND MORE INFORMATION...

The Department of Commerce must develop a Homes for Heroes pilot program to provide down payment and closing cost assistance loans to people who work in targeted professions and meet income requirements. The loans may only be used for the purchase of a primary residence and may not exceed 5 percent of the first mortgage or $25,000, whichever is less. Loans must be made available with no interest, and a participant may not be required to repay the loan until the first mortgage is paid in full or the property is sold, refinanced, rented, or transferred.

To be eligible, an individual must have a household income below 100% of the state median and be employed in a permanent full-time capacity as: a law enforcement or corrections officer; a firefighter; a 911 communications officer, dispatcher, or operator; an emergency medical technician; a health care professional; a direct care worker; a mental health professional; a social worker; or an owner or employee of a licensed child care home or facility. Service members and veterans of the armed forces are also eligible for the Program.