Oppose HB 1044 – Raising the REET Fee

Lakewood Chamber of Commerce
Board of Directors Policy Position
Opposes HB 1044 – Raising the REET Fee
January 28, 2025

House Bill 1044 seeks to raise the real estate excise tax (REET) administrative fee from $5 to $20 per transaction, with additional increases every four years tied to the Consumer Price Index (CPI) for shelter growth. While the bill is intended to generate approximately $7.8 million in revenue for local governments, it imposes an unnecessary and disproportionate burden on property buyers and sellers, with negative implications for housing affordability and market stability.

Key Concerns:

1. Increased Costs for Property Buyers and Sellers:
HB 1044 would quadruple the REET administrative fee, further inflating the cost of real estate transactions for buyers and sellers. This fee applies regardless of transaction size or tax liability, disproportionately impacting smaller transactions, first-time homebuyers, and individuals with modest incomes. At a time when housing affordability is a pressing issue, adding to these costs is counterproductive.

2. Automatic Fee Increases Create Uncertainty:
Linking future fee increases to CPI shelter growth removes transparency and predictability, creating an ever-increasing financial burden without clear accountability or oversight. Homebuyers and sellers deserve stability in transaction costs, not open-ended increases tied to fluctuating economic indicators.

3. Disproportionate Impact on Low-Income and Rural Communities:
The flat nature of this fee means it affects low-value transactions as much as high-value ones. This disproportionately harms buyers and sellers in rural areas and low-income communities, where property values are lower and every dollar matters.

4. Potential Negative Impact on the Housing Market:
Increasing transaction costs may discourage real estate activity, particularly in more price-sensitive segments of the market. This could slow sales and reduce housing inventory, exacerbating the already significant challenges of Washington’s housing market.

5. No Clear Justification for the Increase:
The administrative burden of processing REET transactions does not appear to have grown significantly to justify a 300% fee increase. Local governments should explore other, more equitable funding mechanisms rather than disproportionately targeting real estate transactions.

Recommendations:

* Maintain the Current $5 Fee: The existing fee structure is fair and proportional to the administrative costs of processing REET transactions.

* Evaluate Alternative Funding Sources: Local governments should identify alternative, broad-based revenue options to support their fiscal needs without overburdening a single sector or activity.

* Reject Automatic CPI Increases: Fee increases tied to CPI growth undermine transparency and accountability. Legislators should retain oversight of any future adjustments.

Conclusion:
HB 1044 imposes unnecessary and inequitable costs on property buyers and sellers, harms housing affordability, and introduces unpredictable fee increases. At a time when policymakers should focus on alleviating housing challenges, this bill takes a step in the wrong direction. We strongly urge legislators to reject HB 1044 and pursue solutions that prioritize fairness, transparency, and the health of Washington’s housing market.