HB 2559
In CommitteeHouse
Affordable housing funding
Providing a local government option for the funding of essential affordable housing programs.
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 gives Washington counties, cities, and towns the option to impose a local tax of up to 4% on short-term rental lodging to fund affordable housing programs. Revenue must be used for building, maintaining, or assisting with affordable housing and related services, with transparency and reporting requirements.
- Allows counties, cities, and towns to impose a local special excise tax of up to 4% on short-term rental lodging (e.g., Airbnb, VRBO), subject to certain exemptions (e.g., resort communities).
- Requires the tax to be collected by the Washington Department of Revenue at no cost to local governments, and deposited into a new Essential Affordable Housing Local Assistance Account.
- Mandates that at least 85% of revenue be used for affordable or workforce housing—such as building, rehabilitating, or operating units, rental assistance, or housing-related social services.
- Permits local governments to retain up to 15% of revenue for administrative costs, and allows interlocal agreements to jointly manage housing programs.
- Requires annual public reporting by March 1 of each year starting in 2028, detailing how tax revenue was spent in the prior year.
- Prohibits the tax from taking effect before April 1, 2027, and sets rules for when changes (e.g., rate adjustments, annexations) can take effect (only on Jan. 1, Apr. 1, or Jul. 1, with 75-day notice).
Who is affected
- Local governments — Local governments (counties, cities, and towns) gain the option to impose a new local tax on short-term rentals to fund affordable housing programs, with requirements for reporting and spending transparency.
- Short-term rental operators — Operators of short-term rentals (e.g., Airbnb or VRBO hosts) in jurisdictions that opt in will pay an additional local tax of up to 4% on rental income, though some properties (e.g., resort communities) may be exempt.
- Low- and moderate-income residents — Low- and moderate-income households benefit from increased funding for affordable housing construction, rehabilitation, rental assistance, and supportive services.
- Nonprofit and social service organizations — Nonprofit and social service organizations that provide housing-related support (e.g., employment, utilities, child care) may receive funding to expand services.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The bill creates a dedicated revenue stream for affordable and workforce housing — construction, rehabilitation, rental assistance, and housing-adjacent social services — directly targeting the state’s severe housing shortage and enabling scalable, locally responsive solutions where need is greatest.
HousingPeopleRef: Sec. 1(3)(a)(i)-(iv)Funding for rental assistance and supportive services (e.g., employment, utilities, child care) helps stabilize housing for vulnerable populations, reducing emergency room visits, homelessness-related health complications, and family instability — yielding downstream public health and cost savings.
HealthcarePeopleRef: Sec. 1(3)(a)(iii), (3)(a)(iv)The state collects the tax at no cost to local governments, eliminating administrative burden and ensuring efficient revenue flow — a structural advantage over traditional local taxes that require jurisdictions to build costly collection infrastructure.
Local GovernmentPeopleRef: Sec. 1(5), (1)(d)By allowing rental assistance and operations/maintenance funding, the bill supports not just new supply but retention of existing affordable units — critical in a market where displacement and loss of subsidized housing outpace new construction.
HousingPeopleRef: Sec. 1(3)(a)(ii), (3)(a)(iii)Mandatory annual public reporting increases transparency and accountability for how housing funds are used, empowering residents to monitor local spending and strengthening democratic oversight of public resources.
Local GovernmentLean peopleRef: Sec. 1(4)
Potential Concerns (5)
The bill imposes new administrative and reporting obligations on local governments that opt into the tax, including annual public reporting, interlocal coordination, and compliance with state collection procedures — though the state handles actual collection, local jurisdictions must still verify exemptions, manage reporting, and allocate funds per strict requirements, increasing bureaucratic burden without additional staffing or funding.
Local GovernmentRef: Sec. 1(1)(a), (5); Sec. 3(4)Short-term rental operators face a new 4% local tax on gross rental income, which may reduce net income — especially for part-time or small-scale hosts who lack economies of scale; while the tax is capped at 4%, its impact is regressive for low-revenue operators, and jurisdictions may exclude only resort communities, leaving most individual hosts exposed.
Business & EmploymentLean industryRef: Sec. 1(2)(b), (3)(b)Up to 15% of tax revenue may be retained by local governments for administrative costs — a provision that could divert funds from direct housing assistance, especially in smaller or fiscally strained jurisdictions where staffing and capacity are limited, reducing net impact on affordable housing supply.
HousingLean peopleRef: Sec. 1(3)(a)(iv), (3)(b)The tax cannot take effect before April 1, 2027, and changes require 75-day notice and fixed effective dates (Jan/Apr/Jul 1), delaying local responsiveness to urgent housing crises and creating uncertainty for short-term rental operators who must plan ahead but cannot adjust quickly to changing local needs.
Local GovernmentRef: Sec. 1(1)(c), (6)The exemption for “resort, second home, or vacation communities” disproportionately benefits high-value second-home owners and developers in affluent areas (e.g., Lake Washington shore, San Juan Islands), allowing them to avoid the tax while lower-income areas with higher housing stress bear the burden — reinforcing geographic inequity in tax incidence.
HousingLean industryRef: Sec. 1(2)(c)(i)
Who Is Most Affected
Low- and moderate-income households — especially renters in high-cost urban areas (e.g., Seattle, Tacoma, Spokane) — benefit significantly from increased funding for rental assistance, affordable units, and supportive services, reducing housing cost burden and eviction risk.
Short-term rental operators (especially part-time or small-scale hosts outside resort zones) face a new 4% tax on gross income, which may reduce net earnings — though larger operators or those in exempt resort communities may absorb or pass on the cost more easily.
Local governments gain a new funding tool for housing but must comply with state reporting, exemption verification, and interlocal coordination requirements — net benefit depends on local capacity and housing urgency; wealthier jurisdictions may benefit more by leveraging the tax more effectively.
Nonprofits and social service providers can receive funding for housing-adjacent services (e.g., job training, utilities assistance), expanding their capacity — but funding is tied to local government discretion and may be unevenly distributed across regions.
Developers of market-rate short-term rentals (e.g., corporate VRBO portfolios, large property managers) may see reduced demand or lower yields in jurisdictions that opt in — but those in exempt resort communities face no impact, creating a two-tiered effect.