WALeg Wednesday Gets Wonky with Wealth Taxes and Rent Stabilization

The bills we have been tracking from previous weeks did not see a lot of movement. Design review reform made it out of its first committee and the Evergreen Basic Income Pilot survived a flurry of amendments. But really, the big news this week is a few big new bills that dropped, including one aimed at dense transit-oriented development (as we detailed this morning), some consideration of a wealth tax in Washington, and three rent stabilization bills (see our focus at the end).

• Wealth Tax proposals gear up in both houses
• Important Bills at a Glance
  • HB 1110 – Missing Middle
  • HB 1181 – GMA Climate Change provisions
  • HB 1045 – Evergreen Basic Income pilot
  • HB 1026 – Local Government Design Review Reform
  • HB 1131 – WRAP Act (bottle deposit and packaging reform)
  • HB 1040 – Aviation and Aerospace Advisory Committee
  • SB 5466 – Promoting Transit Oriented Development
  • SB 5383 – Concerning Pedestrians Crossing and Moving Along Roadways
  • HB 1124 – Protecting Tenants from Excessive Rent and Related Fees
  • HB 1388 – Protecting Tenants By Prohibiting Predatory Residential Rent Practices
  • HB 1389 – Residential Rent Increases Under the Landlord Tenant Act
• The Week’s Focus: Rent stabilization or rent control debate begins anew

Wealth tax proposals gear up in both houses

Late last week, Sen. Noel Frame (D – Seattle) and Rep. My-Linh Thai (D – Bellevue) announced legislation to create a Washington State Wealth Tax. They filed companion bills – SB 5486 and HB 1473 – that would . No dates for public hearings have been set for either bill.

As structured, the wealth tax skirts the long standing state prohibition on a progressive income tax by skipping earned income to tax all financial assets like stocks, savings, and bonds equally at 1%, then exempting everything less than $250,000,000. The measure is expected to impact 700 taxpayers statewide, raising $3 billion per year.

Frame, in her first year in the Senate after three terms leading on tax issues in the House, considers the bill a fix for the state’s regressive tax code. “This is a commonsense bill that ensures that some of the richest people in the world, some of whom live right here in Washington state, pay property taxes on their assets just like middle-class families who own a home pay taxes on theirs,” she said.

The proposals direct revenue towards education and housing as well as a new fund that will pay for services to those with disabilities and another that offsets taxes paid disproportionately by low- and middle-income families. Rep. Thai touted the four funds that will benefit from the increased funds. “Through this bill, we can make transformative investments in our communities and address our upside-down tax code.”

The legislation comes as part of a wave of wealth taxes introduced simultaneously at a half-dozen other legislatures across the country, all of which have both chambers controlled by Democrats. While many have questioned the viability of the wealth tax in Olympia this year, the state is among good company in trying.

It does appear to be Tax Week in Olympia, as last year’s progressive victory of a capital gains tax goes before the state Supreme Court on Thursday. The measure was ruled unconstitutional by a Douglas County Superior Court judge last March, but will bypass the Court of Appeals. The Supreme Court has permitted the state to collect the tax starting January 1 as the constitutionality is decided.

Important Bills at a Glance

HB 1110/SB 5190 – Increasing Middle Housing In Areas Traditionally Dedicated to Single Family Detached Housing

• Lead Sponsors: Rep. Jessica Bateman (D – Olympia) and Sen. Yasmin Trudeau (D – Tacoma)
• Link: the House Bill, the Senate Bill
• Description and Notes: Missing middle housing legislation allowing fourplexes everywhere zoned single family and sixplexes near transit
• Current Status – HB1110:  No change since Jan. 17 – Public hearing in the House Committee on Housing at 4pm
• Current Status – SB5190: Jan. 12 – Executive action taken in the Senate Committee on Local Government, Land Use & Tribal Affairs. Referred to housing with no recommendation. 
• Jan. 25 – Scheduled for public hearing in the Senate Committee on Housing at 1:30pm
• Resources: Check out The Urbanist’s team breakdown of this very important legislation.

HB 1181/ SB 5203 – Improving the State’s Response to Climate Change by Updating the State’s Planning Framework

• Lead Sponsor: Rep. Davina Duerr (D – Bothell) and Sen. Liz Lovelett (D – Anacortes)
• Link: the House Bill, the Senate Bill
• Description and Notes: Reintroduction of last session’s HB 1099, a bill to compel jurisdictions to put climate change provisions in their Comprehensive Plans.
• Current Status – HB1181: No change since Jan. 20 – Scheduled for executive session in the House Committee on Local Government at 10:30am.
• Current Status – SB5203: No change since Jan. 17 – Public hearing in the Senate Committee on Local Government, Land Use & Tribal Affairs at 8:00am.
• Resources: Please see December’s Meetup with Futurewise and Futurewise’s campaign page.

HB 1045 – Creating the Evergreen Basic Income Pilot Program

• Lead Sponsor: Liz Berry (D – Seattle)
• Link: the House Bill
• Description and Notes: Monthly payment equal to the county’s fair market rent at the time of application for 7,500 pilot recipients. Kicks off July 1, 2024. Eligible: adults with income less than 200% of the federal poverty level with transitions or conditions associated with high economic instability: pregnant, kid under five, homeless, immigrant, refugee, asylee, exiting foster care or justice system, domestic violence, disability, or behavioral health disorder.
• Current Status: Jan. 24 – Executive action taken in the House Committee on Human Services, Youth, & Early Learning. 10 amendments to gut or narrow the bill failed. One amendment to require data collection passed.
• Resources: We have a South Park pilot of Guaranteed Basic Income, and Scientific American’s recent look at Universal Basic Income. 

HB 1026 – Local Government Design Review Reform

• Lead Sponsor: Amy Walen (D – Kirkland)
• Link: the House Bill
• Description and Notes: Limits design review for housing to administrative design review and drops public meetings by external boards. Has the potential to overcome predatory delays by removing the local power to require public meeting design review for housing.
• Current Status: Jan. 19 – House Committee on Housing, majority recommends passing substitute bill that carves out an exemption, allowing design review for historic districts.
• Jan. 23 – Referred to Rules 2 Review.
• Jan. 24 – Rules Committee relieved of further consideration. Placed on second reading.
• Resources: The Urbanist’s coverage of Seattle’s need to overhaul design review and the first tacit steps.

HB 1131 – Improving Washington’s Solid Waste Outcomes (WRAP Act)

• Lead Sponsor: Berry
• Link: the House Bill
• Description and Notes: Producer responsibility for packaging and paper products, postconsumer recycled content requirements, bottle deposit standards, and amendments to solid waste management.
• Current Status: No change since Jan. 17 – Public hearing in the House Committee on Environment & Energy at 4:00pm.
• Resources: Check out Ashli Blow’s article introducing us to the Washington Recycling and Packaging Act (WRAP Act) and the need for it now.

HB 1040 – Aviation and Aerospace Advisory Committee

• Lead Sponsor: Walen
• Link: the House Bill
• Description and Notes: Aerospace and aviation advisory committee putting together a list of the industry’s strengths and needs for the Secretary of Transportation. Lots of representation on the committee from aerospace and aviation, but only one rep from a “statewide environmental organization.” The committee’s consideration of greenhouse gases is item F after expansions and tech considerations.
• Current Status: No change since Jan. 11 – Scheduled for public hearing in the House Committee on Innovation, Community & Economic Development, & Veterans at 8:00am.
• Resources: A very extensive article from the Journal of Air Transport Management about the outsize impact that aircraft have on greenhouse gases and the possibility of net-zero business models, should that be a higher-than-F level priority.

SB 5466 / HB 1517 – Promoting Transit Oriented Development

• Lead Sponsors: Marko Liias (D – Edmonds) and Rep. Julia Reed (D – Seattle)
• Link: the Senate Bill, the House Bill
• Description and Notes: A bill requested by the Governor’s Office that acts as a complement to HB 1110’s missing middle push. Encourages denser housing near rapid transit.
• Current Status: Jan 19 – First reading, referred to Local Government, Land Use & Tribal Affairs.
• Resources: The Urbanist has done a little coverage of transit-oriented development (TOD) in the past. And some good info on this TOD bill from Sightline Institute. Oh, and here’s a big breakdown of the bill from earlier today.

SB 5383 / HB 1428 – Concerning Pedestrians Crossing and Moving Along Roadways

• Lead Sponsors: Sen. Rebecca Saldaña (D – Seattle) and Rep. Emily Alvarado (D – Seattle)
• Link: the Senate Bill, the House Bill
• Description and Notes: Concise and to the point. “A pedestrian may cross a roadway at any point unless a reasonably careful person would realize there is an immediate danger of a collision with a moving vehicle, a person operating a bicycle, or personal delivery device.” Then it supersedes all local rules to the contrary.
• Current Status: Jan. 16 – First reading, referred to Transportation.
• Resources: See WALeg Week 2 – Weekly Focus with the troubling origins of “jaywalking” and the ways removing these laws makes the streets safer.

HB 1124 – Protecting Tenants from Excessive Rent and Related Fees

• Lead Sponsor: Strom Peterson (D – Lynnwood)
• Link: the House Bill
• Description and Notes: A landlord may not increase the rent paid by a tenant in an amount greater than 5% above the base rent without providing written notice between 180 and 220 days before the increase takes effect. First month and security deposit fees may not exceed one month’s rent. Brings the state in line with Seattle’s 180 day notice requirement.
• Current Status: Jan. 12 – Public hearing in the House Committee on Housing at 8:00am
• Jan. 26 – Scheduled for executive session in the House Committee on Housing at 8:00am
• Resources: See below!

HB 1388 – Protecting Tenants by Prohibiting Predatory Residential Rent Practices

• Lead Sponsor: Nicole Macri (D – Seattle)
• Link: the House Bill
• Description and Notes: A landlord or trailer park property owner may not: 
  • Increase to an excessive rent
  • Charge more burdensome rent or fees between month-to-month or longer
  • Charge move in fees or security deposits more than one months rent.
• Gives the State AG power to enforce with civil penalties. Excessive rent is defined as the greater of 3% or inflation up to 7%.
• Current Status: No change since Jan. 11 – Scheduled for public hearing in the House Committee on Innovation, Community & Economic Development, & Veterans at 8:00am.
• Resources: See below!

HB 1389 – Residential Rent Increases Under the Landlord Tenant Act

• Lead Sponsors: Alex Ramel (D – Camano Island)
• Link: the House Bill
• Description and Notes: Landlord may not increase rent more than the rate of inflation as measured by the consumer price index or 3%, whichever is greater, up to a maximum of 7% above the existing rent. Exceptions for less than 10-year-old buildings, public housing, improvements beyond maintenance, and a hardship exemption. Also creates a “banked capacity program” where, with notice, the landlord can skip increases and store up to 3% per year. 
• Current Status: Jan. 17 – First reading, referred to Housing.
• Jan. 24 – Public hearing in the House Committee on Housing at 4:00pm
• Resources: See below!

The Week’s Focus: Rent stabilization versus rent control debate begins anew

As many know — and have often commented, commented, or commented upon — rent control is illegal in Washington. On the books since 1981, RCW 32.21.830 states: “No city or town of any class may enact, maintain, or enforce ordinances or other provisions which regulate the amount of rent to be charged.” There are currently no bills proposed in the legislature to change this part of the state code.

However, feeling some impetus from the soaring cost to rent across Washington, the legislature has three bills moving to limit rent increases at the state level. As outlined above, HB 1124 protects tenants from excessive rent and related fees by establishing a 180 day statewide notice requirement to increase rent more than 5%.

Macri’s HB 1388 creates a standard for “excessive rent” based on the greater of 3% increase or inflation, then gives the state attorney general the authority to enforce it with civil penalties.

Ramel’s HB 1389 repeats many of the requirements of 1388 and institutes enforcement mechanisms under the courts through the state’s Landlord-Tenant Act. The latter two bills also apply to property owners for trailer park sites who lease land to manufactured homes. Importantly, Ramel’s bill exempts new buildings for their first 10 years of occupancy, which will make it harder to argue that rent stabilization would make new housing infeasible or have a major chilling effect (at least based on market imperatives rather than a capital strike). The first 10 years is when buildings are at their most profitable and builders recoup a big chunk of their construction costs.

Just to clear things up for those who might be confused, rent control is not the same as rent stabilization, which is being proposed in HB 1388 and HB 1389. Under these bills, rents can still rise year over year and between tenancies.

— WA Housing Alliance (@WLIHA) January 25, 2023

So, do these violate the state’s rule against rent control? No, because that rule applies only to local jurisdictions and the state can do what it wants. But that doesn’t stop industry groups from decrying the measures as heavy-handed government. As Rep. Nicole Macri has heard each year she has introduced a circuit-breaker on hiking rents, any attempt to slightly curtail even the most extractive rent practices will be called rent control.

So, are these bills rent control or rent stabilization? Perhaps the best measure of the difference is New York City, whose famous succession rights to rent controlled apartments have been the basis for episodes of Seinfeld and 30 Rock. (Also see our primer on rent control and stabilization research.)

The City uses the term “rent regulated” to cover both rent control and rent stabilization. Currently, rent control operates under the Maximum Base Rent (MBR) system where MBR is established for each apartment and adjusted every two years to reflect operating costs. Tenants can challenge the increase on the basis that the owner’s expenses do not warrant an increase. This affects approximately 16,000 apartments in the city, all pre-1947 buildings with the leaseholder occupying the place continuously since 1971.

Rent stabilized apartments are those which used to be rent controlled. Each year, the NYC Rent Guideline Board sets a cap on rent increases, currently 3.25% for a one-year lease regardless of the operating expenses of the building. Notice of rent increases are a minimum of 60 days and increases are still capped following major renovations. There are approximately 1,040,000 rent stabilized apartments in New York City. Together, rent regulated apartments comprise just under half of the 2.1 million rental apartments in the city.

Washington’s proposed limits on rent increases focus on inflation rather than the actual expenses for operating the building. The recourse to fight the increases is through consumer law in the courts establishing that the increase was excessive past inflation, rather than an administrative process that examines the building operating costs. Together, that would support the Housing Alliance’s statement that these are rent stabilization bills more than rent control. Of course, that is unlikely to convince landlord interest groups from calling it the C-word.

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