HB 1694
In CommitteeHouse
City & county REET revenues
Concerning revenues from the excise tax on real estate transactions imposed by cities and counties under RCW 82.46.035.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
HB 1694 clarifies and updates rules for how cities and counties in Washington can use revenue from the 0.25% real estate excise tax (REET) on property sales. It tightens reporting requirements, expands allowable uses to include more homeless housing and supportive facilities, and adds safeguards to ensure funds are used for approved capital projects. The bill also sets new limits on using REET funds for operations and maintenance, and ties continued tax authority to compliance with state planning laws.
- Local governments (cities and counties) must now specify in their adopted budget which capital projects are funded with REET revenue and confirm the tax is in addition to other available funds.
- The 0.25% real estate excise tax (REET) can only be imposed in unincorporated county areas or city limits if the local governing body adopts an ordinance, and only after voter approval in a general or special election.
- REET revenues must be used solely for capital projects in the local government’s comprehensive plan (e.g., roads, water systems, parks), with flexibility starting May 13, 2021, to use up to the greater of $100,000 or 25% of funds (capped at $1,000,000/year) for operations and maintenance of existing capital projects.
- Starting January 1, 2026, REET funds can be used for homeless housing and supportive facilities, and interlocal housing collaborations (under chapter 39.34 RCW) are explicitly allowed as eligible uses.
- REET revenues must be deposited into a separate account after December 31, 2023, to ensure tracking and accountability.
- If the governor issues a notice of noncompliance with state planning laws, the local government’s authority to impose the REET is temporarily suspended until the issue is resolved.
Who is affected
- Cities and counties in Washington State — Local governments (cities and counties) that impose or may impose the real estate excise tax (REET) on property sales in unincorporated areas or city limits, and must now follow new reporting and use restrictions.
- Property buyers and sellers — Residents and businesses in areas where the REET is imposed, as property sale costs may increase due to the tax, and community investments (e.g., infrastructure, housing) may change based on how local governments use the revenue.
- People experiencing homelessness and affordable housing applicants — People experiencing homelessness and low-income households, as the bill expands and clarifies how REET revenue can be used to fund housing and supportive facilities.
- Local government staff and officials — Local government planners and budget officers, who must now follow new documentation and reporting requirements when adopting budgets and capital plans that use REET funds.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The bill explicitly authorizes REET funds to be used for homeless housing and supportive facilities—including interlocal collaborations—starting January 1, 2026. This provides a dedicated, locally controlled revenue stream for housing, directly benefiting people experiencing homelessness and low-income households in communities where local governments prioritize such use. The $1M annual cap is modest, but the *explicit authorization* is a major policy shift enabling scalable local action.
HousingPeopleRef: Sec. 1(5)(c), Sec. 1(6), Sec. 1(7)Requiring REET revenues to be deposited in a *separate account* after December 31, 2023, improves transparency and accountability, reducing the risk of fund diversion into general budgets. This strengthens public trust and ensures that residents see tangible returns from the tax—particularly in infrastructure and housing—benefiting all taxpayers, especially those in underserved neighborhoods.
Local GovernmentPeopleRef: Sec. 1(4)The requirement to specify in the adopted budget which capital projects are funded by REET—and to confirm the tax is *in addition* to other available funds—helps prevent substitution of REET for existing general fund spending. This strengthens fiscal discipline and ensures new investment, benefiting residents who rely on improved infrastructure (e.g., roads, water systems) without tax substitution.
Local GovernmentLean peopleRef: Sec. 1(1)Mandating voter approval for the REET enhances democratic legitimacy and public buy-in, especially for a local tax that directly affects property transactions. While it adds a procedural hurdle, it also builds community ownership of projects—benefiting residents who value participatory governance and accountability.
Local GovernmentLean peopleRef: Sec. 1(2)The $100,000 or 25% (capped at $1M) annual O&M allowance for capital projects—including housing—provides flexibility for jurisdictions to maintain facilities they build, preventing decay and ensuring long-term viability of investments. This supports sustainability of housing projects, especially for communities that already had pre-2019 homelessness spending authority.
HousingLean peopleRef: Sec. 1(7)
Potential Concerns (5)
While the bill expands REET use to include homeless housing and supportive facilities, it imposes a strict annual cap of $1,000,000 (or 25% of funds, whichever is greater, capped at $1M) for such use—limiting scalability and disproportionately constraining mid-sized and rural jurisdictions that lack prior homelessness spending history to exceed the cap. This caps housing investment at levels insufficient to meet regional need, especially in fast-growing areas like Snohomish or Clark counties where demand exceeds current capacity.
HousingPeopleRef: Sec. 1(3), as amended by Sec. 1(6)The automatic suspension of REET authority upon a governor’s notice of noncompliance with state planning laws creates administrative uncertainty and political risk for local governments, especially smaller jurisdictions lacking legal resources to contest or quickly resolve disputes. This may deter communities from pursuing the tax or delay critical infrastructure projects due to fear of losing revenue authority.
Local GovernmentLean peopleRef: Sec. 1(9)The requirement that REET funds be used *solely* for capital projects (with limited O&M flexibility until 2023, and now only for existing infrastructure) restricts local governments’ ability to fund workforce development, job training, or small business support—services that indirectly aid economic resilience but are now excluded from REET use. This limits local economic diversification strategies, especially in communities reliant on REET for broader community development.
Business & EmploymentLean peopleRef: Sec. 1(3), as amended by Sec. 1(6)The new budget documentation requirement—mandating that local governments certify the REET is “in addition to other funds reasonably available”—adds administrative burden to small-town budget offices and may discourage adoption of the tax where staff capacity is limited, even if the tax would meaningfully improve infrastructure or housing.
Local GovernmentRef: Sec. 1(1)Requiring voter approval for the 0.25% REET (in addition to local ordinance adoption) raises the political bar for implementation, especially in jurisdictions where voter turnout is low or where opposition to new taxes is strong—even when the tax is purely local and dedicated to essential services. This may disproportionately affect rural counties with lower population density and fewer electoral resources.
Local GovernmentRef: Sec. 1(2)
Who Is Most Affected
People experiencing homelessness benefit significantly from the explicit authorization of REET funds for supportive housing and interlocal collaborations. While the $1M cap limits scale, the policy shift enables new local investment where none existed before—especially in high-cost regions like King and Pierce counties.
Low- and moderate-income households benefit indirectly through improved infrastructure (e.g., water, roads, parks) and directly through access to affordable housing. However, they may face higher transaction costs if REET is imposed, though the tax is narrowly targeted and dedicated to public benefit.
Local governments gain clearer authority and accountability mechanisms, but face new administrative burdens and political risks (e.g., governor’s noncompliance notice). Smaller jurisdictions may struggle with compliance costs, while larger cities stand to gain more due to higher REET revenue volume.
Property buyers and sellers face a small additional cost (0.25% of sale price) in jurisdictions that adopt the tax, but benefit from improved infrastructure and housing stability. The tax is regressive in incidence but dedicated to public goods, partially offsetting equity concerns.
Local government staff (planners, budget officers) face increased documentation and compliance demands, but gain clearer legal authority to pursue housing and infrastructure projects. The bill does not provide new funding for staffing, creating a modest operational strain.