WA already lacks affordable housing. Hiking real estate excise tax would make it worse | Opinion

Olympia’s insatiable appetite for more of our hard-earned money seemingly has no limits. The latest example is House Bill 1628, a proposal to raise the real estate excise tax (REET) to the highest rate in the country. Washington is already tied for the top spot, and if HB 1628 is adopted we would stand alone as the most confiscatory state in the nation, with a top state and local rate of 4.75%.

Most states charge a REET of 1% or less, and 15 charge no state REET at all.

Kennewick, Pasco, Richland and many other Washington cities already assess a 1/2 percent local REET for parks and sidewalks. HB 1628 would authorize them to increase the local REET to 3/4 percent to generate funds for low-income housing. The REET for a Washington couple selling their $500,000 home would be $9,250 — the equivalent of five months’ worth of social security payments.

But that’s not all. HB 1628 would increase the state REET to 4% on sale values over $5 million. This has virtually no impact on single-family homes, but impacts almost every apartment community of 20 units or larger.

The tax on the sale of a typical 100-unit apartment community would be $1.8 million, or $18,000 per unit! Over time, this extremely high tax on almost all apartments in Washington state will get baked into the rent, meaning apartment renters will have to pay more than they are already paying.

Add this to the unending list of taxes and regulations that increase the cost of our housing. And then they wonder why housing is unaffordable.

The new taxes would create pots of money to enable nonprofit housing developers to build low-income housing across the state. Such funding is lacking, but the federal government is continuing to increase its funding sources, and the state could provide more by allocating some of the billions they are receiving from existing taxes, including the existing REET.

Imposing even more taxes on Washington homeowners is unnecessary and unreasonable.

The current state of the economy makes this one of the worst times imaginable to impose another tax on housing. Many homeowners are unable to sell their homes because the interest rate for a loan on a new home is so much higher than their existing loan.

In addition, higher interest rates and construction costs are hindering new construction of both single and multi-family homes, eliminating construction jobs in the process. Tacking on even more excise tax will only make the problem worse, reducing the inventory of homes and apartments, causing pent-up demand and making housing costs rise even further.

Solving the housing crisis requires the government to collaborate with housing providers, not penalize them even more.

Washington needs to find ways to increase the supply of buildable land, reduce the time it takes to get a permit and decrease the amount it costs to build a home. HB 1628 would, once again, take us in the opposite direction.

Kevin Wallace is President of Wallace Properties, a diversified real estate investment, development, and management firm that owns several properties in the Tri-Cities.