Washington imposes new real estate transfer tax on high-value residential sales

In a move aimed at addressing the growing housing affordability crisis in Washington, House Bill 2027 was introduced on February 27, 2025. This legislative proposal seeks to impose a new real estate transfer tax on high-value residential property sales, targeting homes sold for $3 million or more. The bill is designed to generate additional revenue that could be allocated towards affordable housing initiatives and other community development projects.

The key provisions of House Bill 2027 outline a tiered tax structure for residential property sales. Sellers will be required to pay a one percent tax on the portion of the selling price between $3,051,000 and $5,026,000, a two percent tax on sales between $5,026,000 and $10,026,000, and a three percent tax on any portion exceeding $10,026,000. This tax will be collected similarly to the existing real estate excise tax, which is already in place for property transactions.

Proponents of the bill argue that it is a necessary step to address the widening gap in housing affordability, particularly in urban areas where housing prices have skyrocketed. They contend that the revenue generated from this tax could significantly bolster funding for affordable housing projects, thereby providing relief to low- and middle-income families struggling to find suitable housing.

However, the bill has sparked notable debate among lawmakers and stakeholders. Critics argue that imposing additional taxes on high-value property sales could deter investment in the housing market and lead to unintended consequences, such as a slowdown in property sales or increased costs for buyers. Some real estate professionals have expressed concerns that the tax could ultimately be passed on to consumers, further exacerbating the affordability crisis.

The economic implications of House Bill 2027 are significant. If passed, the bill could generate millions in revenue, which could be pivotal in funding housing initiatives. However, the potential impact on the luxury housing market and overall real estate activity remains a contentious point of discussion.

As the legislative process unfolds, experts suggest that the bill's future will depend on the ability of its supporters to address concerns raised by opponents and to demonstrate a clear plan for how the generated funds will be utilized. The outcome of House Bill 2027 could set a precedent for how states approach housing affordability and taxation in the coming years, making it a critical issue for both lawmakers and constituents alike.