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Planning a Washington state vacation? You might want to bring some extra cash after lawmakers advanced a bill on Monday that would impose a 4% tax on short-term rentals like Airbnb.
State law allows municipalities to levy up to a 2% excise tax on short-term rentals, but House Bill 5576 could double that option. Supporters say it would allow local governments to address their housing shortages, but critics argue it could drive tourists to hotels over local rentals.
The proposal comes as Washington faces a shortage of about a million housing units over the next two decades and grapples with increasing rates of homelessness. However, it also coincides with a $16 billion shortfall, which state lawmakers must balance before the session ends on April 27.
As a former bed and breakfast owner, Rep. April Berg, D-Mill Creek, asked the House Finance Committee for support on Monday.
“I had a lot of responsibilities, some of which were taxation,” Berg said, “but I also knew I had a commitment to community because I was taking those beautiful [Craftsman-style homes] ... out of the housing stock.”
Short-term rentals like Airbnb and VRBO, which rent properties for 30 days or less, didn’t cause the statewide housing shortages, but they don’t necessarily help. Other states have also taxed short-term rentals to preserve local long-term options and raise money from tourism.
Berg said small-town mayors are coming to the state for help as their housing stock dwindles and homelessness rises. She called HB 5576 an option for change, with the resulting revenue expanding affordable housing, rental assistance, and services like job training and childcare.
Rep. Michelle Caldier, R-Gig Harbor, said there are winners and losers in every industry and that vacation rental owners compete with large corporate hotel chains. While the tax would fall on consumers, she said it would rob rental owners if people realized a hotel room is cheaper.
“If they can still afford to go on vacation because, quite honestly, we are literally taxing the joy out of people,” Caldier said, “they’re going to choose to go to a hotel.”
Republicans proposed several amendments during the House Finance Committee’s Monday executive session, which Democrats rejected. The majority argued the changes would impact the extent of the local revenue generated while putting additional costs on the state.
The changes would have limited the tax to tourism-dependent jurisdictions, required counties to impose it only in unincorporated areas, allowed it to apply only to owners with at least two rentals, prohibited the tax on rentals within a mile of a college or military base, and included exemptions for disabled veterans and low-income owners.
According to a fiscal note, HB 5576 could generate around $21 million annually. That’s revenue on top of what the state would collect in sales and lodging taxes, with the maximum combined rate capped at 15.2% in Seattle and 12% outside the state’s most populous city.
“We have dumped so much money into homelessness, and we still have more homeless people,” Caldier said. “Why on earth will we continue to tax people over and over again for something that is not working for all of these reasons?”
If passed, local governments could impose the tax starting in April 2026.