Mark Harmsworth of the Washington Policy Center believes House Bill 1628 will, in the long term, only continue to increase the cost of housing, products and services
Mark Harmsworth
Washington Policy Center
House Bill 1628 (HB 1628), currently in rules in the House of Representatives, is one of the largest tax increases on Real Estate seen in Washington history. Realtors, industry groups and pretty much everyone who owns a home in Washington have voiced their opposition to the increase that HB 1628 would impose on an already stressed housing market. The bill appears to have stalled, but it’s not over until the legislature convenes next week.
HB 1628 creates a new real estate tax category of 4% on property valued at over $5 million. It also provides authority to counties and cities to increase their local Real Estate and Excise Tax (REET), without a vote of the people, from 0.5 percent to 0.75 percent. That’s a 50 percent increase in the taxes you will pay to buy and sell a home.
Proponents of HB 1628 argue that a property owner that sells property that is valued at over $5 million can afford to pay the additional tax rate. The majority of properties, however, that are sold valued over $5 million, are multi-unit housing, apartments, duplexes, retail and commercial properties which provide homes, products and services for every Washington resident.
Simple demand and supply economics show that by redistributing taxes (and in the case of House Bill 1628, increasing taxes) will not decrease prices. In fact, the latest (3/14) forecast from the state’s Economic and Revenue Forecast Council shows a significant drop in projected REET collections in the next 2 years and HB 1628 will not improve the situation.
The legislature needs to pass legislation that promotes the availability of new housing rather than subsidizing the housing that is already built. Simple changes to the Growth Management Act (GMA), by modifying the arbitrary growth boundaries and population density goals set by the Puget Sound Regional Council (PSRC) will increase available land and the ability for more affordable housing to be built.
House Bill 1628 will not solve housing affordability in either the ownership, rental or commercial real estate markets. It will, in the long term, only continue to increase the cost of housing, products and services.
For WPC’s recommendations on how to increase housing affordability and availability, without increasing fees and taxes, click here.
Mark Harmsworth is the director of the Small Business Center at the Washington Policy Center.
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