Washington’s 2025 Housing Reforms Unlock New Multifamily Potential
Washington’s 2025 Housing Reforms
Housing Supply Bills Boost Zoning & Tax Incentives. The 2025 WA Legislature passed a suite of pro-housing bills to tackle supply constraints.
- SB 5184 (Parking Reform) reduces parking minimums in many cities. For larger cities (≥50k population by 2027), it eliminates the requirement for more than 0.5 parking spaces per multifamily unit and eliminates parking mandates near transit for affordable housing, ADUs, and small units. This reduces development costs and encourages transit-oriented projects.
- HB 1491 (Transit-Oriented Development) now requires cities to upzone areas around major transit stops for higher-density housing, essentially mandating “station area” zoning that favors apartments.
- In affordable housing finance, HB 1494 expanded the state’s Multi-Family Tax Exemption program, providing cities with more flexibility and longer tax abatement periods to incentivize mixed-income and affordable multifamily projects.
All these laws took effect July 27, 2025, so cities across Washington are updating codes. Developers can look forward to less red tape on parking and more opportunities for tax-exempt projects, while cities gain new tools (and requirements) to accommodate growth.
New Housing & Infrastructure Projects
- $212M State Funding Boosts Affordable Housing Across the State. Washington State allocated a major infusion of capital for affordable housing projects this summer. In August, officials announced $212 million in grants to build and preserve affordable rentals across the state. This is part of the Legislature’s record $419 million two-year housing investment in the 2023–25 budget. The funds will support dozens of developments, from new low-income apartments in Seattle and Spokane to rural workforce housing. For example, projects in the pipeline include supportive housing for seniors and those exiting homelessness and the preservation of aging subsidized complexes.
- Developers partnered with public housing authorities and nonprofits are the big winners, as this money often fills critical financing gaps. The impact will be significant: the Department of Commerce estimates these grants will create roughly 2,300 affordable units statewide over the next couple of years. For multifamily stakeholders, this surge in public funding presents opportunities—whether through low-interest loans, partnerships on mixed-income developments, or general contractors bidding on upcoming construction projects.
- Seattle Accelerates Permitting & Office Conversions. Seattle is taking local action to address housing and downtown recovery. Mayor Bruce Harrell announced in late July an expedited permitting initiative for housing projects, deploying additional staff and resources to clear permit backlogs (Seattle has had thousands of units stuck awaiting permits).
- The city is also leveraging state legislation from 2023 that made it easier to convert underused commercial space. Downtown Seattle is actively courting developers to undertake office-to-residential conversions, similar to Portland’s approach. One high-profile project is the 50-story Smith Tower conversion proposal, which could bring over 300 apartments into the historic building (pending feasibility studies). Moreover, Seattle’s Office of Housing committed $108 million in new affordable housing investments in early August, supporting 655 affordable units (including 204 permanent supportive housing units for the homeless) through the city’s housing levy funds and federal dollars. These local efforts, combined with state and federal support, aim to address Seattle’s housing shortage and simultaneously revitalize areas affected by remote work and pandemic-era closures.
Sustainability & Energy Efficiency
- Clean Buildings Law Deadlines Approach. Washington’s Clean Buildings Performance Standard is now in effect for many commercial buildings, and multifamily properties are next. As of 2025, owners of buildings exceeding 50,000 sq. ft. should be well into compliance preparation—the first mandatory energy performance reports are due by June 2026. More relevant to multifamily, Tier 2 buildings (20,000–50,000 sq. ft.), including large apartment complexes, have a later deadline (2027 for final compliance), but early compliance reporting opened on July 1, 2025. This means owners can voluntarily submit energy data now and potentially receive incentives or extended compliance timelines. The Clean Buildings law requires meeting specific energy use intensity (EUI) targets or implementing all cost-effective energy efficiency measures. Many multifamily owners are now scrambling to schedule energy audits, upgrade aging heating systems, and add insulation or smart controls to improve efficiency. Utilities like Seattle City Light and Puget Sound Energy are offering enhanced rebates and technical assistance to help with these upgrades. Bottom line: energy performance is a regulated requirement, not just good practice. Failing to comply with the deadlines could result in penalties of up to $0.30 per square foot per year, making it a priority for asset managers statewide.
- Seattle’s Climate Push: Gas Bans and Green Building. Seattle continues to lead the way in green building policies. A city ordinance that bans natural gas heating in new commercial and multifamily construction (passed in 2021) fully took effect this year—meaning all new apartment projects must be all-electric. (Note: this law has been paused and is not being enforced for key portions while the city is adjusting the energy code to align with a 9th Circuit Court ruling.) The city is also developing a building emissions performance standard of its own (distinct from the state law), which would require large buildings to gradually reduce carbon emissions starting later this decade, with the end goal of net-zero emissions by 2045. Although details are still being hashed out, Seattle’s standard may include interim targets (2030, 2040) and go beyond energy efficiency to target the carbon intensity of buildings (pushing electrification of existing gas systems). Additionally, in the sustainability innovation sphere, the Port of Seattle and local developers are exploring mass timber high-rises as a low-carbon construction method, with one 12-story mass timber multifamily project in Capitol Hill receiving fast-track permitting. All these efforts underscore that in Washington, especially Seattle, sustainability isn’t just about new tech—it’s increasingly mandated. Owners who embrace high-efficiency systems, solar panels, heat pumps, and greener materials will not only see lower utilities but also stay ahead of regulations (and possibly benefit from any remaining or future tax credits for energy-efficient buildings).
Economic Indicators & Market Trends
- Unemployment Steady, But Job Growth Cooling. Washington’s job market remains relatively strong, with July unemployment holding at 4.4%. However, the state’s Employment Security Department notes that job growth is slowing—July saw an increase of 10,800 jobs, a decent number but indicative of moderation. For multifamily investors, employment trends are a key indicator of demand. The tech sector slowdown (especially in Seattle-Bellevue) earlier this year led to a brief uptick in apartment vacancies and more concessions offered in Class A buildings. Now, with job growth leveling off, we’re seeing moderate rent growth in most metros rather than the exuberant increases of 2021–2022. On the flip side, slower job gains could ease construction labor costs slightly and make it a bit easier to hire for development projects. Economists are watching whether the Fed’s inflation fight will tip the region into a mild recession or just a soft landing. So far, wage growth and in-migration to Washington (and Oregon) remain positive, which bodes well for housing demand stability.
- Tacoma Development on “Pause”—Caution Signs. Tacoma has become a focal point for understanding regional development momentum. A recent report revealed that Tacoma has numerous planned apartment complexes, but many are still under construction or on hold. Market uncertainty—from interest rates to construction costs—is largely to blame. For instance, a 5-story project located downtown, which began construction in 2022, is still only partially completed, as the developer has encountered cost overruns. Despite Tacoma having dozens of projects permitted or under design review, partly due to 2021’s upzoning and tax incentives, developers are taking their time securing construction financing in the current climate. Some are looking to 2026, hoping for interest rate relief. This “holding pattern” is a microcosm of what’s happening in secondary markets around Washington: projects aren’t dead, just delayed. It suggests a pent-up supply that could flood the market in a couple of years. For current owners, this pause might be welcome—less new competition in the short term—but it could also mean a bigger supply wave down the road. Savvy investors are monitoring these pipeline trends city by city. In the meantime, well-located properties in Tacoma and Spokane are enjoying stable occupancy, but rent growth is flattening as renters reach affordability limits.
Regulatory Risk Watchlist
- Seattle Rental Rules Evolving. Seattle landlords should note a recent ordinance awaiting the mayor’s signature that bans the use of rent-setting algorithms by property managers. Prompted by the RealPage antitrust controversy, this law makes it unlawful to use software that analyzes rental market data from multiple landlords to recommend pricing. While most small-scale landlords weren’t using these tools, larger property management firms have had to revert to traditional comps and market surveys. Non-compliance could bring penalties. The law became effective on July 31, 2025. Also on the horizon are the city’s caps on move-in fees and security deposits, along with the recently passed “fair chance” screening rules (which exclude criminal background checks for renters), both of which continue to face legal challenges but remain in effect for now.
- There’s talk that the City Council, after the fall elections, may revisit rent control advocacy. Seattle is currently preempted by state law from enacting local rent caps. Still, with a statewide cap now in place, some council members may push Olympia to allow stricter local measures (though this is speculative and faces an uphill battle).
- Local jurisdictions are testing new ideas. Outside Seattle, several cities are experimenting with their rental regulations—creating a patchwork that landlords must navigate.
- In Bellingham, an ordinance banning so-called “junk fees” took effect on August 1, prohibiting landlords from charging extra for services such as appliance rentals, parking, or online rent payments. It also caps application fees at $50 and late fees at 2% of rent. Nondisclosure of all fees up front can trigger tenant legal remedies.
- Conversely, Burien (just south of Seattle) moved in the opposite direction—this summer its Council repealed several local rental regulations to align with state law, citing concerns that overly strict rules were discouraging investment. Notably, Burien eliminated its own just-cause eviction rules and rental cap (since state law now covers much of that).
- In Olympia, as mentioned, proposals to bar certain screening criteria (criminal/credit history) were floated but haven’t advanced.
- Spokane is considering a program for inspecting the quality of rental housing, similar to Vancouver’s, which could be implemented in 2026 if approved.
- Regulatory risk remains highest in King County (Seattle and, to some extent, Redmond/Bellevue, which are considering tenant protections like winter eviction bans). But as the Burien case shows, there can be pushback. Landlords and investors should stay nimble: engage in local hearings when possible and adapt business practices (fee structures, screening processes, lease terms) to each locality’s rules to avoid fines or lawsuits.
In case you missed it while on vacation:
- Washington Enacted a Statewide Rent Cap. Washington State implemented rent control (for the first time in decades) via House Bill 1217, signed in May 2025. The law caps most residential rent increases at 7% plus inflation, up to a maximum of 10% per year. It took effect immediately, and enforcement is underway—the Attorney General warned that any rent hikes of more than 10% effective after May 7, 2025, are prohibited and must be rolled back. Eight landlords were fined $2,000 each in early August for violating the cap, signaling officials’ serious stance on compliance. HB 1217 also requires longer notice for any rent increase, limits certain fees and deposits, and provides tenants with remedies (such as the right to terminate a lease) if an illegal increase is issued. With this law, Washington joins Oregon in having a statewide rent increase limit—a major development for multifamily owners used to the previous bans on rent control.
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