HB 2359
In CommitteeHouse
Affordable housing funding
Modifying requirements and allowed uses for certain funding related to providing and maintaining affordable housing and related services.
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 expands local and state tools to fund and support affordable housing and related services in Washington. It authorizes new local sales and use taxes, increases the document recording surcharge, and creates new real estate excise tax exemptions — all dedicated to building, operating, and maintaining affordable housing and behavioral health services for low-income and vulnerable populations.
- Allows counties and cities to impose a local sales and use tax of up to 0.1% for affordable housing, behavioral health facilities, and related services — either by voter approval or without a vote (in most cases).
- Requires at least 60% of tax revenue to be used for constructing, acquiring, or maintaining affordable housing and behavioral health facilities serving households at or below 60% of county median income in priority groups (e.g., seniors, veterans, people with disabilities, homeless youth).
- Increases the document recording surcharge to $183 per instrument, with funds distributed to state accounts for affordable housing (e.g., the *Home Security Fund* and *Affordable Housing for All Account*), local homelessness programs, and landlord mitigation.
- Expands real estate excise tax exemptions for transfers of affordable housing developments, residential property for people with developmental disabilities, and qualified community spaces — provided the property remains in qualifying use for a set period.
- Requires annual reporting to the Department of Commerce on tax collection and use, and establishes a 20-year sunset on the sales and use tax authority (unless reauthorized).
Who is affected
- Low-income residents and vulnerable populations — Residents with incomes at or below 60% (or 80% for owner-occupied units) of county median income who need affordable housing, behavioral health services, or housing-related support — including people experiencing homelessness, seniors, veterans, people with disabilities, domestic violence survivors, and youth at risk of homelessness.
- Local governments (counties and cities) — Counties and cities that choose to impose the affordable housing sales and use tax or real estate excise tax exemptions; they gain new authority to raise dedicated revenue for housing and services, but must follow strict usage rules and reporting requirements.
- Nonprofit and public housing providers — Nonprofit housing providers, community development organizations, and public housing authorities that may receive grants or bonds to build, operate, or maintain affordable housing and supportive services.
- Property owners and developers of affordable housing — Homebuyers and property owners who transfer qualifying low-income housing developments or residential property for people with developmental disabilities — they may be exempt from real estate excise tax under specific conditions.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The bill creates two new dedicated revenue streams (local 0.1% sales tax and $183 document recording surcharge) with ≥60% of funds legally required for affordable housing and behavioral health facilities for households at or below 60% of county median income—including priority groups like seniors, veterans, and people experiencing homelessness—directly targeting the state’s worst housing insecurity.
HousingPeopleRef: Sec. 1(2)(a)(i)-(iv), Sec. 2(6)(a)(i)-(iii)At least 90% of funds deposited in the Home Security Fund and Affordable Housing for All Account must support permanent supportive housing, eviction prevention, rapid rehousing, and resident services (e.g., mental health, case management, substance use treatment), directly linking housing stability to health outcomes for high-need populations.
HealthcarePeopleRef: Sec. 3(4)(b), Sec. 3(5)(b)(ii)The bill mandates that at least 75% of county-level surcharge funds be used for local homeless housing plans, and at least 15% for housing serving extremely low-income households (≤30% AMI), with priority given to those most at risk—reducing reliance on emergency shelters and criminal justice responses.
HousingPeopleRef: Sec. 3(3)(b)(ii), Sec. 3(3)(c)The bill expands multiple real estate excise tax exemptions for transfers of low-income housing developments, residential property for people with developmental disabilities, self-help housing, and qualifying nonprofit grantees—reducing acquisition costs for providers and enabling more units to be built or preserved at lower cost.
HousingPeopleRef: Sec. 4(3)(s), Sec. 4(3)(t), Sec. 4(3)(u), Sec. 4(3)(v), Sec. 4(3)(w)The bill authorizes counties and cities to issue bonds using up to 50% of tax revenue to front-load housing investments—accelerating project timelines and enabling earlier impact for vulnerable populations without requiring upfront state capital investment.
HousingPeopleRef: Sec. 1(5), Sec. 2(9)
Potential Concerns (5)
The 15% set-aside for eligible housing activities serving extremely low- and very low-income households may be insufficient to offset broader market pressures, and counties retain discretion over interlocal agreements with cities, which could dilute benefits for the most vulnerable if cities prioritize their own programs over county-level coordination.
HousingPeopleRef: Sec. 3(2)(c)While cities that operate their own homeless housing programs receive direct funding, the requirement to combine administrative allocations (10%) with housing funds (75%) and distribute them proportionally based on real estate excise tax collection may disadvantage smaller or less affluent cities that generate less tax revenue but have high need.
Local GovernmentLean peopleRef: Sec. 3(3)(b)(ii)The bill allows grant funds to be used for “essential case management and other resources with demonstrable connection to resident well-being,” but lacks strict caps on administrative or overhead spending (permits up to 15% per Sec. 5(5)(a)), raising concerns about resource diversion from direct housing services to program administration—especially for grantees with high overhead costs or weak oversight.
HousingPeopleRef: Sec. 3(5)(b)(ii)(E)The bill’s complex funding distribution formula—linking city allocations to their share of real estate excise tax collection—may create perverse incentives where cities with higher property values (and thus higher tax collections) receive disproportionately larger shares, potentially marginalizing rural or lower-value jurisdictions with high need.
Local GovernmentLean peopleRef: Sec. 3(3)(b)(ii)The 10% administrative cap for counties and cities may be insufficient to cover rising costs of program administration in high-demand urban areas, potentially forcing jurisdictions to reduce direct service delivery or rely on under-resourced local staff.
Local GovernmentLean peopleRef: Sec. 3(3)(a)
Who Is Most Affected
Low-income residents and vulnerable populations (e.g., seniors, veterans, people experiencing homelessness) are the primary intended beneficiaries: the bill creates new dedicated revenue streams for affordable housing and behavioral health services with strict income and population eligibility thresholds, and prioritizes services for those most at risk. The $183 surcharge and local sales tax are dedicated to housing and services for households at or below 60% of county median income—directly improving housing stability and access to care.
Nonprofit and public housing providers benefit significantly from expanded tax exemptions (e.g., for low-income housing developments, residential property for people with developmental disabilities, self-help housing) and guaranteed access to state and county grant funds (e.g., 90% of Home Security Fund must go to homelessness assistance grants). These provisions reduce acquisition and development costs, enabling more units to be built or preserved.
Local governments gain new authority to raise dedicated revenue (0.1% sales tax, document recording surcharge) for housing and behavioral health services, with flexible use rules and bond-issuing authority. However, they must comply with strict reporting, spending caps (e.g., 10% admin), and interlocal coordination requirements, and may face administrative strain in high-demand areas.
Property owners and developers of affordable housing benefit from expanded real estate excise tax exemptions (e.g., for qualified low-income housing developments, residential property for people with developmental disabilities, self-help housing), reducing transfer costs and improving project economics. However, these exemptions are conditional on long-term affordability covenants (e.g., 50-year use restrictions for developmental disabilities housing), limiting short-term profit potential.
State government (e.g., Department of Commerce) gains new administrative responsibilities (annual reporting, rulemaking, grant oversight) but avoids direct funding obligations—the bill relies on dedicated local and state revenue streams, not general fund appropriations. The 20-year sunset on the sales tax and reporting requirements ensure accountability, but oversight capacity may be strained by increased demand for technical assistance and compliance monitoring.