HB 2227
In CommitteeHouse
Affordable housing/REET
Providing a real estate excise tax exemption for the sale of qualified affordable housing.
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
This bill adds several new exemptions to Washington’s real estate excise tax for transfers related to affordable and low-income housing, including sales to low-income homebuyers, transfers for community services in affordable developments, and property transfers for adults with developmental disabilities. It also updates rules for when a controlling interest transfer triggers the tax and requires data collection and legislative review of the exemptions’ impact.
- Adds multiple new exemptions to the real estate excise tax for transfers involving affordable housing, including sales by affordable homeownership facilitators to low-income households, transfers of qualified low-income housing developments, and sales of space in affordable developments for exempt community purposes.
- Exempts transfers of residential property by legal representatives of adults with developmental disabilities to qualified nonprofits, provided the property remains in use for supported living for at least 50 years.
- Exempts transfers of manufactured/mobile home communities, unless the seller is subject to recapture of federal low-income housing tax credits within four years prior to the transfer.
- Exempts transfers to qualifying grantees (e.g., nonprofits, housing authorities) that use the property for low-income housing and obtain required property tax exemptions, with deadlines and compliance requirements.
- Sets an expiration date of January 1, 2030, for the new exemptions, and requires a legislative review of the tax preference’s effectiveness in 2033.
- Clarifies how 'controlling interest' transfers are treated under the tax, including rules for aggregating purchases by persons acting in concert and timing rules for options.
Who is affected
- Affordable housing developers and providers — Nonprofit organizations, housing authorities, and public corporations that acquire or develop low-income housing may avoid paying real estate excise tax if they meet specific conditions, such as using the property for low-income housing and obtaining applicable property tax exemptions.
- Families and legal representatives of adults with developmental disabilities — Legal representatives of adults with developmental disabilities can transfer residential property to qualified nonprofits without paying real estate excise tax, provided the property remains in use for supported living for 50 years.
- Manufactured home park owners — Manufactured/mobile home community owners may benefit from an exemption when selling their communities, potentially lowering transfer costs and supporting housing stability.
- Low-income homebuyers — Low-income households purchasing self-help ownership housing through qualifying nonprofits may benefit from reduced acquisition costs due to the tax exemption.
- State agencies and legislative oversight bodies — The Washington State Housing Finance Commission must collect and report data on the impact of the low-income housing tax credit exemption, and the Joint Legislative Audit and Review Committee must evaluate the policy's effectiveness.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Exempting sales of self-help ownership housing to low-income households reduces acquisition costs for first-time, low-income homebuyers — especially those participating in sweat-equity or labor-participation programs — making homeownership more attainable and reducing long-term housing cost burdens.
HousingPeopleRef: Sec. 1(3)(u)(i)The exemption for transfers of residential property by legal representatives of adults with developmental disabilities to qualified nonprofits ensures continuity of supported living arrangements and prevents a large, unexpected tax liability that could force sale or displacement of vulnerable adults.
HousingPeopleRef: Sec. 1(3)(t)(i)Exempting transfers of qualified space in affordable developments for exempt community purposes (e.g., health clinics, food banks, senior day care) supports integrated service delivery and strengthens community infrastructure in low-income neighborhoods — improving access to essential services for residents.
HousingPeopleRef: Sec. 1(3)(w)The exemption for transfers to qualifying grantees (nonprofits, housing authorities, public corporations) that use property for low-income housing and obtain property tax exemptions directly supports the preservation and expansion of affordable housing stock — especially critical in Washington’s high-cost housing market.
HousingPeopleRef: Sec. 1(3)(v)(i)Exempting transfers of manufactured/mobile home communities (unless recapture applies) helps preserve affordable housing units and reduces transaction costs for park owners — supporting housing stability for low- and moderate-income residents in mobile home parks, a key source of affordable housing in rural and suburban areas.
HousingPeopleRef: Sec. 1(3)(r)
Potential Concerns (5)
The bill reduces state real estate excise tax revenue by exempting transfers of low-income housing developments, with no clear offsetting revenue increase; the fiscal impact depends on volume of qualifying transfers, but given Washington’s reliance on real estate transfer taxes for local governments and housing trust funds, this could strain public budgets over time.
FinancialRef: Sec. 1(3)(s)(iv)The bill imposes a backstop tax liability if qualifying grantees fail to meet housing or tax-exemption deadlines, but the interest accrues from the *original* transfer date — meaning a delay in compliance could generate large retroactive tax bills, potentially penalizing nonprofits and housing authorities that face administrative or funding delays.
FinancialRef: Sec. 1(3)(v)(ii)The requirement that the Department of Social and Health Services (DSHS) determine whether a property remains suitable for supported living introduces subjectivity and potential inconsistency in enforcement, and may lead to abrupt tax liability triggers if DSHS finds noncompliance — creating instability for long-term residential placements.
Public SafetyLean peopleRef: Sec. 1(3)(t)(i)(D)The 2035 sunset on the low-income housing tax credit exemption (for developments originally receiving federal credits) may discourage long-term investment in affordable housing beyond that date, as buyers may anticipate future tax liability and reduce demand for such properties.
HousingLean peopleRef: Sec. 1(3)(s)(iii)The 3-year deadline for substantial rehabilitation to qualify for the exemption may be unrealistic for projects facing permitting delays, environmental reviews, or funding shortfalls — potentially disqualifying projects that are otherwise viable and in need of public support.
HousingPeopleRef: Sec. 1(3)(v)(i)(C)
Who Is Most Affected
Low-income homebuyers benefit significantly from reduced acquisition costs and increased access to homeownership, especially through self-help housing programs. However, benefits are limited to households earning ≤80% AMI, excluding those in greatest need (≤50% AMI) unless additional local programs apply.
Adults with developmental disabilities and their families benefit from continuity of supported living and avoidance of large tax liabilities that could force displacement. However, the 50-year use requirement and DSHS oversight may limit flexibility for families seeking alternative arrangements later.
Nonprofit housing providers and housing authorities gain ability to acquire property without upfront excise tax, improving capital efficiency for affordable housing development. However, compliance burdens (e.g., tax-exemption certification, timelines) may disproportionately burden small nonprofits.
Manufactured home park owners benefit from reduced transfer costs and increased liquidity in the market, supporting housing stability. However, the exemption does not apply if the seller was subject to federal LIHTC recapture — meaning only owners of non-federally-subsidized parks benefit fully.
Local governments and state agencies (e.g., DOR, SHF) face reduced revenue from real estate excise taxes, which fund housing trust funds, transportation, and local services. This may require budget reallocations or cuts to other programs — disproportionately affecting communities reliant on those services.