Legislators advance new tax exemption for ADUs

Legislation, which could expand affordable housing and ease tax burdens, was advanced and referred to the review stage by the House Finance Committee on Thursday.

House Bill 1841 could incentivize people to rent out accessory dwelling units as low-income housing. The legislation creates a property tax exemption for ADUs if rented out to a qualifying household.

Grant County Assessor Melissa McKnight said this legislation and others, which create additional property tax exemptions, are not an efficient solution to the housing crisis at hand.

Legislators created a variety of exemptions over the years, including those for affordable housing and improvement to single-family homes. If an owner makes an improvement that qualifies, they are exempted from property taxes for three years, if HB 1841 becomes law.

Constructing an ADU would qualify an owner for the three-year property tax exemption. And the ADUs would continue exemption status as long as it is rented out to low-income households.

McKnight said Grant County does not currently allow multiple single-family residences on a single parcel of land. A few years ago, the decision was made and only grandfathered on a few properties.

She said the proposed solution is designed more for urban cities and likely would not benefit Grant County taxpayers or their districts.

Legislators killed a different bill that might have further incentivized property owners to combat the affordable housing crisis.

From a renter’s perspective, the bill, House Bill 1035, provides more affordable housing options; from a construction and owner’s standpoint, the legislation relieves property tax pressures, said Rep. Shelly Kloba, D-Kirkland, during a public hearing early in January.

“I hope you will join me in supporting this bill,” Kloba said, “to encourage rental housing at affordable rates that work for both landlords and the tenants.”

Now, Kloba plans on reviving the legislation next session. She said legislators shared many times the state is short 250,000 housing units and the housing crisis is no longer unique to western Washington cities.

The legislation would have directed local governments to create an affordable housing incentive program. The program was designed to provide a six-year property tax exemption to qualifying properties with one opportunity to renew for the same period.

McKnight said she believes the issue is with state spending, not revenue. She pushed against ideas that property tax and other exemptions are adequate solutions to the state’s housing crisis if it’s as big as they say.

The lack of affordable housing is no longer confined to Seattle, said John Wilson, assessor in the King County Department of Assessments. Low-income tenants are struggling to find housing across the state, he said and this exemption could help address this insecurity and save lives.

In Grant County, the rise in market prices is attributable to a migration observed during the pandemic from crowded cities to more rural areas, McKnight said. People from King County and the other regions who are used to paying higher prices move to Grant County and pay the same as before, she said.

She also said people who benefit from the higher market prices are taking advantage of the opportunity to earn a larger profit but, in turn, cause financial harm to everyone else. As more homes are bought at above-market rates, the area’s valuation goes up and taxes with it, she said.

McKnight said one manufactured home on a 2-acre plot in Ephrata recently sold for $500,000, which many people consider outrageous.

There are already programs in place to ease tax burdens in Grant County, she said, and the state should focus its efforts on finding housing solutions outside of additional property exemptions.