The Washington Legislature is again considering empowering local governments to tax short-term housing rentals, much to the irritation of homeowners who rent out their properties on platforms like Airbnb and Vrbo.

House Bill 2559 would allow cities and counties, starting in April 2027, to impose a tax up to 4% on short-term rentals to raise money for affordable housing. Uses of the revenue include building new housing, maintaining existing units and providing rental assistance. 

If the bill moves forward, the fight over the proposal could be fierce.

Over the past year, Airbnb has pumped nearly $4 million into a political action committee opposing the idea in Washington. The company gave $1 million to the committee in late November. The PAC’s ads appear often on TVW, the state’s public affairs network.

State law defines short-term rentals as those provided for fewer than 30 consecutive nights, but doesn’t cover units in the same home where the owner lives, so long as fewer than three rooms are rented at a time. These rentals have exploded as an option for travelers in recent years. 

Similar legislation passed the state Senate last year without Republican support before dying in the House. Initially, that bill called for a statewide tax, but was amended to instead give local governments the option to enact the tax. A fiscal analysis of last year’s bill estimated the new tax would raise about $21 million per year for local governments.

Cities in other states, including New York City, have banned whole-home short-term rentals entirely. 

Research on the issue has been mixed.

In Irvine, California, rents decreased 3% after the city effectively banned short-term rentals, researchers found. A 2019 Harvard Business Review study concluded a 1% increase in Airbnb listings resulted in a 0.018% growth in rental rates and 0.026% uptick in home prices.

A Congressional Research Service report last year noted the economic effects of short-term rentals can be overshadowed by other forces, like zoning laws and other regulations.

In a committee hearing this week, numerous Airbnb operators urged lawmakers to oppose the legislation. 

Some were older Washingtonians who said they need the income to support themselves in their retirement. And they say most of their guests who would pay the tax are Washington residents vacationing, traveling for work or families of college students. 

Thousands come for medical treatment, says Allison Moser, president of the Washington Hosts Collaborative Alliance. Moser, who owns a duplex with her husband as a short-term rental, says the collaborative represents 16,000 short-term rental operators in the state.

“They paid 30% less than for a hotel, but had the comfort and quiet of a home-like atmosphere,” she told the House Finance Committee. “Rentals invest in our community’s healthy economic environment, and we want to continue to do so.”

Counties love the idea, says Brian Enslow, policy consultant at the Washington Association of Counties. With limited options to raise affordable housing funding, they would be open to an even higher rate tax above 4%.

City leaders in tourist towns say short-term rentals are pushing up housing costs for residents, including those who work in the tourism economy. 

“Leavenworth is losing its community,” says Leavenworth Mayor Carl Florea. “Every one of these short-term rentals could be, and many of them have been, permanent housing. And now, because of the popularity, they’re used as second homes, and it takes away stock.”

“And if we don’t get a significant tool to begin to address it, we’re going to lose the community completely,” he says.

Sean Lynn, the secretary of the hosts collaborative, manages short-term rentals in Leavenworth. He suggests a smaller across-the-board tax on all lodging types.

“A broad-based approach would avoid singling out one segment and reduce incentives to shift demand between lodging options,” Lynn says.

Local governments can currently levy a tax up to 2% on lodging, including in hotels, motels and short-term rentals. The revenue is mostly used for promoting tourism. Except in Seattle, various lodging taxes currently cannot exceed a total of 12%. Seattle can’t go over 15.2%.

The committee hasn’t scheduled a vote to move the measure forward.

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