The Washington state House Committee on Appropriations on Saturday, April 5, held a public hearing on a proposed bill that would allow cities and counties to tax stays at short-term rentals such as Airbnbs and use that money to fund affordable housing projects.
Engrossed Substitute Senate Bill 5576 allows local governments to levy a 4% tax on sales of lodging at short-term rentals that would be paid by the guests staying there. The change expands smaller taxes that localities can already impose on lodging; however, this is the first to apply specifically to short-term rentals.
Rental units that are occupied for at least six months out of the year by owners would be exempt from the tax. The bill also includes an amendment that would allow localities to exempt rentals in commercial areas or areas zoned specifically for vacation rentals.
The bill's prime sponsor, Sen. Liz Lovelett, D-Anacortes, presented it to the House Finance Committee as a way to support affordable housing in communities that rely on tourism and are seeing more housing stock being used as short-term rentals. She added that the bill is well timed to allow local jurisdictions to profit from an expected increase in tourism expected in the summer of 2026 when the U.S. hosts the Fifa World Cup.
“At the end of the day, hotels and motels don't displace housing,” Lovelett said. “In communities where there are a lot of short-term rentals, there are fewer and fewer long-term rental opportunities for those very same service workers that are needed to make sure that the tourism industry can thrive.”
The bill has now been kicked around the Washington Legislature for seven years, and major supporters have followed it for nearly as long. Mayor of Leavenworth Carl Florea and Port Angeles City Council Member Lindsey Schromen-Wawrin testified in front of the House Finance Committee in support of the bill, claiming that their tourism-dominated communities are losing long-term housing.
“While we have been increasing housing development we have simultaneously been losing housing to Airbnbs,” Schromen-Wawrin said. “Our housing stock is the housing we have plus the housing we develop minus the housing we lose. We found in Port Angeles we were losing housing as fast as we were building it.”
However, opponents of the bill, such as the Washington Hosts Collaborative Alliance, which claims to represent 16,000 short-term rental operators in the state, question whether the bill will be able to make an impact on affordable housing. Opponents argue that many communities that support vacationers with a large number of short-term rentals wouldn’t raise enough money through the tax to make significant contributions to affordable housing and point out that the bill could make things more expensive for Washingtonians that choose to vacation in the state.
“Senate Bill 5576 is an ill conceived bill that will do nothing to solve the problem of affordable housing in Washington,” Richard Moser, treasurer of the Washington Hosts Collaborative Alliance, said. “Instead, it would impose an unfair additional expense.”
Lewis County, for its own part, has been a hot spot for concerns over how the short-term rental market is impacting housing, particularly in the east near the unincorporated community of Packwood. The debate over housing and short-term rentals in Packwood took off in 2020 when the county started the process of creating a subarea plan for needed developments in the community.
Lewis County Commissioner Scott Brummer, who represents District 3, which covers East Lewis County including Packwood and other popular vacation spots, is not convinced that a tax on short-term rentals like the one proposed in the new bill is the correct path toward stable housing for places like Packwood.
“I do not believe the solution to more affordable housing can be achieved by taxing families looking for affordable vacation opportunities,” Brummer said. “The economic value of tourism is important to Packwood and surrounding areas and the constraints to less expensive, multi-family housing revolves around the lack of sewer services in the Packwood corridor.”
Others in the community, such as Gretchen Fritsch, a member of the Livable Packwood organization and the Lewis County Planning Commission, recognize the need for development of infrastructure, such as sewers. But Fritsch also said she could see the short-term rental tax money making a difference. While the county already levies a lodging tax on stays at hotels, motels and short-term rentals, that money is specifically earmarked for spending on tourism dollars and can’t be used to fund affordable housing.
Fritsch, like many supporters of 5576, is worried that if tourism continues to rise without efforts to better develop the area and accommodate year-round residents, there won't be anyone left to clean the houses, teach in the local schools or run the visitor centers.
“It’s nearly impossible for someone like myself or just a working class family to move to Packwood,” Fritsch said. “I think the reality is that people think that lodging tax brings so much money to the community, and it does, but it's so specifically earmarked. It's in this feedback loop where it can only really bring more tourism.”
The bill now waits to be scheduled for a vote on the House floor after being referred out of the House Committee on Appropriations with a “do pass” recommendation. If the bill is passed, it will be sent back to the Senate for another floor vote to approve amendments made in House committees before heading to the governor's desk.
