Only in Olympia would someone try to make something more affordable by making it more expensive.
That’s exactly what House Bill 1628 would do. It would increase the real estate excise tax (REET) in two ways. First, it would raise the state REET up to 3.5 percent on any transactions over $3.025 million. The bill would also allow cities and counties to raise their local REET by another .25 percent, which they certainly would do.
The combined rates would make Washington state’s real estate excise tax, which is already tied for the highest REET in the nation, the highest in the country by far.
All this would be done in the name of making housing “more affordable.”
Proponents want to take the funds generated by these higher taxes and pump them into government programs to provide “affordable housing,” despite the fact that higher real estate taxes would make all housing more expensive in the process. It’s another case of thinking that the state government knows best, and if we just give them more of our hard-earned money, they’ll take care of everything.
Officials in Lewis County, Centralia, Chehalis and other area cities already impose a local REET and if they raised their rates under HB 1628, the new tax would increase housing transaction costs by an estimated $3.15 million across Lewis County.
Unfortunately, there would not be a local option when it comes to higher state REET on the large transactions. In our region, most of these sales are either commercial where people work or multi-family apartment buildings or manufactured home parks which offer tenants important housing options.
Washington’s progressive REET rate schedule already punishes the sale of multi-unit residential properties. Because of the tiered rate structure, when someone sells a $400,000 single-family residence, they pay a lower REET than what is assessed on each apartment in a 20-unit, $8,000,000 building, even though each unit has the same market value Under HB 1628, the tax on the apartment would be approximately 2.7 times higher than on the house. Naturally, those higher costs get passed on to tenants in the form of higher rents — which defeats the whole purpose.
It’s another example of the unintended consequences that can occur as a result of Olympia’s insatiable appetite for tax dollars and new programs.
We all know that housing prices are going up, and so are interest rates, making it harder for families to find homes they can afford. Funding homeless programs in downtown Seattle by raising the cost of housing for families in Lewis County just doesn’t make sense.
The way to make housing less expensive is through policies that reduce regulatory burdens and encourage builders to increase the supply of affordable housing. Instead of proposing new taxes, lawmakers in Olympia should be taking a long, hard look at harmful and costly state policies, state and local land use regulations, zoning, and permitting. Time is money in the construction world, and eliminating red tape and delays can help reduce the price of development by tens of thousands of dollars per home. Plus, any boost in housing construction has the added benefit of creating good-paying jobs.
HB 1628 would burden Washington state with the highest combined state and local REET tax in the country. Fortunately for us, our Lewis County legislators understand that we cannot continue making housing more expensive in the middle of a housing affordability crisis. Let’s hope that other lawmakers in Olympia join them in working toward broader policies to increase housing supply.
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Mike Wallin is a managing real estate broker with Keller Williams Premier Partners STAR TEAM and the government affairs director of the Lower Columbia Association of Realtors.
