Washington State Multifamily Update 1/27/26
Washington State Update: Washington’s 2026 legislative session is in full swing with a strong focus on housing. Lawmakers introduced a slate of bills to boost housing construction and affordability. Notably, one proposal (SB 6026) would override local zoning to allow residential development in areas currently limited to commercial use – a big shift to open up more land for apartments or condos.
Other bills would pour new funding into affordable housing (including a $225 million Housing Trust Fund boost championed by Gov. Ferguson) and streamline development rules (for example, easing requirements for mixed-use projects and encouraging innovative building methods)[13][31]. This pro-housing agenda has support from the private sector: top Amazon and Microsoft executives penned a Seattle Times op-ed urging lawmakers to cut red tape and “build our way out” of the housing crisis, backing ideas like SB 6026 and quicker permitting processes[12][13].
In other news, Washington’s new law capping rent increases at 5% for manufactured home park tenants is facing pushback. A state landlords’ group filed a lawsuit this week calling the cap unconstitutional and claiming it deprives park owners of fair revenue with no emergency exceptions[4][6]. The Attorney General is confident the law will be upheld, but the case will be an important test for rent control measures in the state.
Here are the details:
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SB 5496 – Would prohibit large investor entities (those owning >25 single-family homes) from acquiring additional houses, with exceptions for nonprofits or if adding units (to curb bulk home purchases by institutional buyers).
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SB 5647 – Expands the Real Estate Excise Tax exemption for self-help affordable housing programs (e.g. Habitat for Humanity-style projects) to all affordable homeownership facilitators.
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SB 6026 – (Governor-requested) Bars cities/counties >30,000 people from excluding residential development in areas zoned for commercial or mixed-use; also forbids requiring ground-floor commercial space in mixed-use zones as a condition of housing development.
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SB 6027 – Requires at least 60% of local housing & related services sales tax revenues be dedicated to constructing or acquiring affordable housing, behavioral health facilities, or related operations.
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SB 6028 – Creates a state revolving loan fund (via Dept. of Commerce) to finance mixed-income affordable housing developments, with a portion of each project’s units permanently reserved for low-income households.
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SB 6069 – Mandates that cities allow supportive, transitional, and emergency housing (and shelters) in any zoning district inside urban growth areas (except industrial zones), preventing local zoning from blocking these housing types.
Legal Challenge to Rent Cap for Manufactured Homes:
An organization representing manufactured home park owners (Manufactured Housing Communities of WA) filed a lawsuit on Jan. 23 to block Washington’s new rent increase cap (House Bill 1217)[4]. The law, which took effect in May 2025, limits annual rent hikes to 5% for tenants who own their mobile home but rent the lot, and prohibits any rent increase in the first year of tenancy[5]. The plaintiffs argue the cap violates state and federal constitutions – claiming it provides no emergency exception or due process for park owners facing rising costs, thus amounting to an unconstitutional taking and impairment of contracts[6][7]. The eight-page suit (filed in Spokane County Superior Court) seeks to halt enforcement of the law, alleging it’s “unworkable” and creates a two-tier system since public housing authorities are exempt[8][9]. The state Attorney General’s office, which has already fined several park owners for violating the cap, insists the law is on solid legal ground and will defend it in court[10][11].
Why it matters: This is the first major legal test of Washington’s new rent control measure. The outcome could set an important precedent: if the 5% cap is struck down or weakened, it might discourage lawmakers from pursuing similar rent control policies, whereas if upheld, it reinforces Washington’s willingness to regulate rents. For apartment owners and investors, the case underscores how rent control and tenant protections are expanding beyond traditional multifamily rentals into other housing types. It’s a reminder to closely monitor regulatory shifts – and their judicial scrutiny – as they can impact property revenues and valuation. While this lawsuit is specific to manufactured home communities, any precedent on rent regulation could influence broader housing policy debates in Washington state.
Tech Giants Urge Easing Housing Barriers:
In a Seattle Times op-ed titled “WA must make it easier to build our way out of the housing crisis,” two prominent executives – Brad Smith (Vice Chair, Microsoft) and David Zapolsky (General Counsel, Amazon) – called for urgent action to boost housing production[12][13].
They note the Puget Sound region’s chronic housing shortage and warn that if a policy “makes housing more costly or takes longer to build, don’t pass it”[12].
The op-ed endorses several proposals on the table in Olympia, applauding Gov. Ferguson’s $225 million Housing Trust Fund plan and supporting bills to unlock more land for development (e.g. SB 6026 allowing residential use in commercial zones)[13], shift impact fee timing to lower upfront costs for builders[14], streamline environmental reviews near transit, and encourage modular construction innovation[15]. The authors praise these steps and emphasize that capital will flow to regions with predictable, less onerous development processes[16] – urging Washington to act “with urgency” so that everyone who works in the region can afford to live there[17][18].
Why it matters: This public push from Microsoft and Amazon leaders signals broad industry support for pro-housing reforms. For brokers and owners, it’s significant that major employers fear housing scarcity is eroding the region’s economic competitiveness[19][20].
When the business community advocates reducing regulatory barriers, it can influence political momentum – potentially improving the climate for development and construction if such policies are adopted. The op-ed essentially aligns with what many in real estate have voiced: accelerating housing production is critical. Their high-profile backing may bolster the chances of reforms (like zoning flexibility and fee deferrals) that enable more apartments to be built faster, benefiting developers and eventually easing pressure on rents.
It also reflects a recognition that housing affordability is a shared problem; solutions with public-private collaboration could open up new partnerships (such as employer investments in housing) that apartment investors should keep an eye on.
National Trends
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Investors Shy Away from Rent-Controlled Markets: According to a new NMHC survey (reported by Bisnow), 75% of multifamily developers are cutting back or outright avoiding investments in rent-controlled markets, a sharp increase from two years ago[21][22]. Only 7% of developers in rent-regulated areas now proceed with “business as usual,” down from 23% in 2022[22]. This shift comes as more cities and states enact rent caps – for example, Los Angeles recently capped rent increases at 4% for most apartments[23]. Developers warn that strict rent regulations make new projects financially unfeasible, and even existing owners face challenges covering rising operating costs when capped on rent growth[24]. The backdrop is a cooling national rental market: a wave of new apartment construction is coming online, which is softening rent growth and pushing up vacancies in many areas[25]. In fact, the average U.S. asking rent fell 0.2% in November – the largest monthly drop in 15 years – with rent declines most pronounced in Sun Belt markets like Austin and Phoenix that saw rapid supply growth[26][27].
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Capital Markets Showing Mixed Signals: Despite softer rents, the financing climate for multifamily might be improving. The NMHC survey of 98 senior executives found 43% felt overall market conditions loosened in the past quarter (only 7% reported further tightening)[28]. Over half said equity financing conditions were flat but stable, with 21% even seeing equity more available now than three months prior[29]. Notably, 53% reported better access to debt financing compared to late 2025, as interest rates and lending terms show slight improvements[30]. Many firms have held off transactions due to high debt costs, so any easing could unlock deals.
Why it matters: Nationally, we’re at an inflection point where policy risks and market fundamentals are both in flux. For apartment owners, the pullback from rent-controlled regions suggests capital will flow toward markets with fewer restrictions – potentially boosting investment (and competition) in more landlord-friendly locales. At the same time, the surge of new supply means competitive leasing conditions: expect pressure on occupancy and rents, especially in high-development markets, until the new units are absorbed. On the upside, if debt becomes cheaper or more accessible, owners might get breathing room to refinance costly loans or pursue acquisitions at improved cap rates. Brokers should advise clients to stay nimble: evaluate portfolio exposure to regulatory changes, prioritize tenant retention and efficient operations in a slower rent growth environment, and be ready to act if financing opportunities arise. Overall, the late-January outlook shows cautious optimism – easier financing and industry advocacy for better housing policy – tempered by short-term challenges in rent growth and regulatory uncertainty.
[4] [5] [6] [7] [8] [9] [10] [11] Manufactured home park owners sue over Washington cap on rent increases News kxly.com
[12] [13] [14] [15] [16] [17] [18] [19] [20] [31] WA must make it easier to build our way out of housing crisis _ The Seattle Times
[21] [22] [23] [24] [25] [26] [27] [28] [29] [30] nMHC Sees investor resistance to rent control
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