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House Finance hears optional short-term rental tax to fund local affordable housing
Summary
Senate Bill 5576 would authorize cities, towns, and counties to impose a local short-term rental excise tax up to 4% (in 1% increments) starting April 1, 2026, with revenues directed to a new local account for affordable workforce and supportive housing. The hearing drew sustained public testimony both for and against the local-option tax.
The House Finance Committee heard extensive public testimony on Senate Bill 5576 on March 18. The engrossed substitute would allow a county, city, or town beginning April 1, 2026, to impose a short-term rental excise tax up to 4% (in 1% increments). Revenues would be deposited into a newly created "essential affordable housing local assistance account" and may be used for acquisition, rehabilitation or construction of affordable workforce or supportive housing, operations and maintenance, rental assistance, or operating support for organizations providing housing-related services. Local taxing authorities may retain up to 15% of revenues to cover administrative costs and must publish an annual report detailing revenue uses.
Rochelle Harris, committee staff, explained how the proposal fits into Washington's existing lodging-tax framework and noted the bill excludes the new short-term rental tax from combined lodging tax caps. Senator Liz Lovett, prime sponsor, framed the bill as a locally driven funding tool: "We are gonna have hundreds of thousands of additional visitors in our state" for the upcoming FIFA World Cup, and local jurisdictions need tools to preserve housing for service workers and residents. She also described an owner-occupancy exemption that was added to address concerns from hosts who rent a room to make ends meet.
Mayors, council members and local housing advocates told the committee local communities face housing loss that short-term rentals can worsen. Leavenworth Mayor Carl Florie said "Almost 40% of our housing stock now is second homes," and urged the committee to provide a local funding tool to preserve workforce housing. Port Angeles Council Member Lindsay Shrumman Warren said city policies to upzone and permit more units had not kept pace with housing lost to short-term rentals: "We were losing residential housing as fast as we were building it because Airbnb made it more profitable for people lucky enough to have more than 1 home to rent short term." Local electeds and affordable-housing developers emphasized flexible uses, including operations and maintenance, which are often the hardest costs to fund.
Opponents included many short-term rental owners and industry representatives who said the tax would raise travel costs and hit local hosts and budget travelers. Allison Moser, president of the Washington Hosts Collaborative Alliance, said her guests include families visiting UW Tacoma or military families at JBLM and warned: "This tax will definitely hurt hosts, it will hurt Washington travelers, and most likely won't raise significant revenue." Industry representatives including Brent Ludeman of Expedia Group supported the substitute version because it is locally optional and limited to 4%, and urged collaboration between local governments and the short-term rental community.
Other stakeholders asked for local flexibility and carve-outs. Seabrook representatives asked that purpose-built resort communities be exempted at the county's discretion; Grays Harbor had already exempted Seabrook under a local ordinance. TechNet and some testifiers questioned whether small jurisdictions can generate significant funds for housing.
The hearing record shows robust, divided testimony; the transcript records the public hearing but no committee vote or formal action on the bill in this session.
