Washington Senate considers taxation on self-storage units to fund affordable housing

Senate Bill 5711, which proposes to impose business and occupation (BNO) and retail sales taxes on self-service storage unit rentals, has sparked significant debate during a recent Senate Ways & Means meeting. The bill aims to redefine the rental of storage units as a retail sale, thereby subjecting it to taxation. Proponents argue that the revenue generated—estimated at $57.6 million in the upcoming biennium—will support affordable housing initiatives and manufactured home communities.

The bill's supporters, including representatives from the Association of Washington Cities and the Washington State Community Land Trust Coalition, emphasize the need to address the state's housing crisis. They argue that the current tax exemption for storage rentals prioritizes the use of urban land for storage over housing, which is a pressing issue in many communities. They advocate for redirecting the tax revenue to fund affordable housing programs, asserting that this approach will help stabilize housing for low-income families.

However, the bill faces strong opposition from various stakeholders, including small business owners and community advocates. Critics, such as members of the Washington State Self Storage Association, argue that taxing storage rentals will disproportionately affect low-income individuals and families who rely on these services during transitional periods, such as moving or facing personal crises. They highlight that many storage users have household incomes below $50,000 and use storage units as a necessity rather than a luxury.

Testimonies from small business operators reveal concerns about the financial burden the tax would impose, potentially leading to increased rental costs for consumers. Many speakers pointed out that self-storage is often utilized by vulnerable populations, including military personnel and families in crisis, who would be further strained by additional taxes.

The discussion also touched on legal precedents regarding taxation on rental income, with references to past court rulings that have deemed such taxes unconstitutional. The fiscal note accompanying the bill suggests that the State Supreme Court may be inclined to uphold the new tax structure, despite previous rulings that exempted rental income from taxation.

As the committee deliberates, the implications of this bill remain significant. If passed, it could reshape the landscape of self-storage services in Washington, impacting both businesses and the individuals who depend on them. The committee is expected to weigh the potential benefits of increased funding for affordable housing against the risks of burdening those who rely on storage units during challenging times.