Seattle Faces $175 Million Budget Deficit + Lawsuit Challenges Washington's Rent Control Laws

[00:00:05]Welcome to Washington in Focus Daily. It is Wednesday, July 22nd, 2026. I'm Carlen Johnson, the Center Square, Washington's state government reporter.

[00:00:15]And in today's episode, a little more than a year after Washington's rent control law took effect, we have a lawsuit, a hearing today in Spokane County Superior Court, from manufactured housing advocates who basically argue capping rent, and for them it's a 5% annual cap, is unconstitutional. They believe they are being unfairly targeted by this rent cap law. And I had a discussion with Kevin Schilling, the government affairs and advocacy director for the rental housing association of Washington ahead of that hearing. So we'll share that with you. Again, he says it's u only going to worsen exacerbate what already is a critical housing shortage in the state of Washington by driving more of these property owners that have these manufactured housing um you know lots out of business. He said if they can't make any money, if they can't even break even, they're going to uh, you know, get out of the business. And then Seattle City Councilman Bob Kettle has sent a pretty dramatic letter to Seattle Mayor Katie Wilson urging her to consider some budget reforms now ahead of when the fall budgeting really kicks in. He says now is the time um to address what is projected to be a $175 million budget deficit for 2027.

[00:01:46]Even though general fund revenue uh primarily coming in from property sales taxes, utility taxes, business payroll taxes in the city have been growing dramatically. So interesting conversation with council member Kettle.

[00:02:01]We'll share that in today's episode of Washington in Focus Daily. So, a hearing being held today in Spokane County Superior Court uh is in a lawsuit over Washington's recently enacted rent control law. This is the law that was passed in the um 2025 session capping rent increases in traditional rental housing units at 7% plus inflation. So up to a maximum of 10%. So if you are a renter in an apartment, um these are pretty much guaranteed mandatory 10%. Uh they're going to go to the max of 10%.

[00:02:43]And if you are in a manufactured housing setting, that rent cap is 5%. So they can only raise it 5% annually. And manufactured housing park owners filed this lawsuit uh at the beginning of this year arguing that the rent cap is unconstitutional and really unworkable.

[00:03:04]Now, this came with uh House Bill 1217.

[00:03:08]I was covering the legislature of course in 2025. This was a bill that got a hearing on the first day of the legislative session in 2025 and opponents were none too happy about that because they got very little notice literally within a matter of hours. Um although folks that were supporting this, lots of union groups uh backing the rent cap, they were there in droves.

[00:03:35]They were all over the capital that day.

[00:03:36]I remember the first day of that session going, "Who are all these people in the red shirts? what did what why are there dozens of people in red shirts? Those were the advocates for uh this bill 1217. So they filled the hearing rooms uh that day and in subsequent public hearings. So um Kevin Schilling is the government affairs and advocacy director for the rental housing association of Washington. They're one of the groups behind this lawsuit saying that this is an unconstitutional um cap on manufactured housing. Um and he told me that they're not being treated fairly by the law. Manufactured homes are of course owned by, you know, the person owns the home, but they have to rent the piece of land that they're sitting on. And so that's what's being capped at 5% a year. He laid out the gist of their legal argument here.

[00:04:36]>> Well, ultimately the question is not only constitutional. It's a question of treating housing in a uniform way or treating different types of housing in different with different standards. And ultimately, you cannot create an affordable housing environment in the state of Washington if you are establishing rules for the most naturally occurring housing option to be handcuffed in a more difficult way than all the other housing is already through the rent control bill. So that is our concern. The main concern for manufactured housing in the state of Washington is that not only do we have an uncon an unconstitutional law, but that uh they're treating manufactured housing in a more um stringent way when at the same time nationally uh national leaders are saying manufactured housing is the best path forward for more affordability.

[00:05:36]uh with the passage of the 21st century road to housing act where they made it easier, less expensive, and faster to build manufactured housing. It's going to be a lot harder to do any of that in the state of Washington when the limit for uh manufactured housing is way less than the limit for rental housing in the uh unconstitutional rent control bill.

[00:06:02]Key supporters of the new rent cap law included the lowincome housing alliance and state legislators including Senator Emily Alvarado who championed the law to protect renters from uh price hikes and displacement. And this was uh Emily Alvarado during the May 7th, 2025 bill signing for uh this bill 1217.

[00:06:27]>> Housing is not a luxury. It is a basic human need and everyone in this state deserves a stable and affordable home.

[00:06:38]And we all do better when everyone has a stable, affordable home. Children have a chance to succeed in school. Working people have a chance to save and have financial stability. People can retire with dignity. We have improved health outcomes. We can boost our economy. and we can build that state where everyone has a stable home. But we also know that the foundation is rocky right now and far too many Washingtonians are struggling to keep up with housing costs that keep rising. Rent goes up faster than wages. Seniors see rent go up faster than social security. A record number of families in this state are paying more than half of their income on rent. That's not okay. And we've seen that there are excessive rent increases, 10, 20, 30% that are having devastating impacts across our state. But today, today we put common sense guard rails on our rental housing market so that hardworking families and older adults don't get unchecked excessive rent increases.

[00:07:50]>> This law is a good beginning. It's long overdue and it's urgently needed. 40% of the people in the state of Washington are renters or manufactured homeowners.

[00:08:02]And before today, they had no protections over how high the rent can go, leading to pain and to devastating destabilization of families and communities.

[00:08:16]>> I should note that the cap does not apply to all uh rental housing. New construction is for now not subject to the cap for the first 12 years. Uh public housing authorities and lowincome developments are also exempt. And I'm pretty sure that uh duplexes, triplexes are also exempt from rent caps. But Schilling argues that ultimately this is going to hurt tenants as well because then the property owner for these manufactured lots um they don't have additional money to do improvements to do retrofits to uh you know do regular maintenance on the property and upkeep for the landscaping. and he believes that ultimately many will leave the market and then not provide this, you know, more affordable housing option anymore. And he says that um he's convinced rent control is ultimately, he said, about advancing socialism. And this is the unintended consequence or potentially intended unintended consequence by uh by folks in Olympia who who just ultimately at the end of the day view ownership of property and ownership of housing as being antithetical to their political opinion, which is that we shouldn't have private property ownership. And that is the concern of housing providers everywhere.

[00:09:42]And also kind of the tension of where we're at in sort of the grander political conversation with socialists.

[00:09:48]uh moving in and dominating the Democratic party where we're having uh elected officials at all levels of government decide that the path forward should be this this direction towards socialism um and public ownership of private property. And that just that's the tension right now in the future right now where we're constantly pushing back and saying no no no that is not what the law allows. And you are pushing out good actors from an industry that are housing people that are providing a service that are providing opportunity for people to have housing pay for housing. that if you continue down this pathway of decisions that establish a policy environment of unintended consequences of increased regulatory burdens, you are just going to make it harder for anybody to operate in that space. And then you will have less housing. You will have the opposite of your goal, which is which is more housing and lower rents.

[00:10:55]you will have the opposite of that goal because there will be fewer providers in the market.

[00:11:01]>> Now, there have been dozens of landlords accused of violating the rent caps since that law took effect. It went into effect the day it was signed into law, so May 7th of last year. and I reached out to the office of the attorney general and Mike Faulk in the AG's office responded to me via email um to say they have entered into 57 court ordered uh resolutions with landlords regarding violations of 127.

[00:11:31]So in most cases those property owners have been spared of the fines because they've said okay I didn't know that I was out of compliance. I didn't know, you know, that I couldn't go higher than 5% or 10%. Uh, and so then they've agreed to either pay back the tenants if they overcharge them. Um, but they have been on the hook for legal fees at 2500 bucks a pop for each of those violations. That's the landlord has to pay the AG's office when the AG's office comes after them and says, "You're out of compliance." So, 2500 bucks a pop.

[00:12:10]Um, there were about 260,000 manufactured homes in Washington in 2024. That was the year I could find the most recent statistics for. That's 8% of the state's housing stock. So, not an insignificant number of housing units that are impacted by this. Uh, those numbers come from the Office of Financial Management. Again, the most recent are about two years old. those stats are uh and these are manufactured homes today, not like the old school ones. I have some family members um that have, you know, new newer models of manufactured homes. And some of these are super nice and very wellbuilt um and at a fraction of the cost of, you know, building a home on site. These of course are built in controlled environments and on a much larger scale and then of course you know trucked across to wherever that uh lot is going to be located. So um interesting conversation again that hearing taking place today in Spokane County Superior Court. We'll keep you posted on the outcome of that legal uh proceeding. Now to Seattle and her budget woes.

[00:13:22]Councilman Bob Kettle, Seattle City Councilman Bob Kettle sent a letter on Tuesday to Seattle Mayor Katie Wilson and other budget leads on the council and other uh budget employees in her office concerning proposed budget reforms and addressing the structural budget deficit. That was kind of the title of his letter, if you will. And in that letter, um Kettle wrote this. He said Seattle's projected budget deficit has ballooned to 175 million for next year even though general fund revenue primarily property sales utility business payroll taxes have grown dramatically to over 2 billion. He points out that's up 17% from 1.72 billion in 2024 and up 40% from 1.44 billion in 2019.

[00:14:14]Meanwhile, he says, "We have asked voters to shoulder additional property tax levies for separate programs every year for the past six years. The everinccreasing tax burden funding new and expanded programs layered on top of the ongoing affordability crisis is hampering everyday Seattleites abilities to make ends meet."

[00:14:34]So, I chatted with Councilman Kettle yesterday just ahead of him going into a Seattle city council meeting. He told me he would like to see the city really use some fiscal restraint. And he pointed to King County facing a severe budget deficit of their own which is forced some significant recent structural changes and reductions in some King County department. So he gave some credit to King County and said we here in Seattle maybe need to take an approach of the same kind of fiscal restraint. That is the kind of decision making and leadership that we need here in the city. This is what the council needs to be looking at as we look moved forward. We need to understand do we need to have these offices or departments and much like the county did you much credit to executive sahalai because he did that and um and I think that the county is going to be in much better position moving forward over the next number of years. And so that is kind of like the kind of like a example for us to follow. And uh in some ways we should be leading with that. That's kind of how I've been thinking about this and and really in my letter and in in my blog. Um really looking to push forward with that kind of thinking because if we have that kind of thinking, I believe that we can make some good decisions that allows us to be focused on those things that we need to be taken care of, our charter responsibilities, those main responsibilities. but then maybe freeing up overhead for example and you know there's some high salaries there's some high overhead costs to the city and you know there might be opportunities there.

[00:16:11]>> So he had a couple of specific points in his letter to the mayor urging you know sort of restructuring of budget priorities. He said they need to stop just kind of carrying over. Okay, this was last year's budget. Boom. This is sort of our baseline. We're starting here. Now add in some inflation and a couple of other pet new pet projects and boom, we got to grow from last year's budget to this year's budget by x number of dollars. And and he says that's no longer an approach that they can afford to take. Um not assuming programs that they had last year or 10 years ago or 20 years ago are ones that are serving the city of Seattle and taxpayers well. So he also suggested that there is a lot of money being spent um on programs that might benefit only interest groups. He brought up the office of economic development and noted that they hire consultants at a cost of hundreds of thousands of dollars for things like he mentioned the green economy strategy. So instead he wants the mayor and the council to take a hard look at things like that. that may make some sense since they've got this, you know, growing budget deficit. And he wants the mayor to potentially also consider lowering the high income earners payroll tax in the city, which we've talked about. Some companies have relocated some of their highest earning employees just across the lake over to Belleview and Redmond so they can avoid having to pay this payroll tax. You know, you can maybe work in the city, but you'll live over there. you don't have to pay it. So now Kettle is one of the somewhat more moderate voices on the Seattle City Council. So I asked him straight up in our interview on Tuesday, this is great. This all sounds like it makes a lot of sense. Maybe reign in that crazy budget. Um but is anybody going to listen to you? Is socialist Mayor Katie Wilson going to listen to you? is the very progressive left-leaning rest of the Seattle City Council going to listen to you. And he said he believes that some members are actually kind of waking up to this and that he might have an ear from some other members of the council. I think there's a greater understanding today of um the impacts of like public safety for example and our public safety posture downtown has in has had an impact on commercial properties and that has had an impact now on and with the devaluation on the residential piece because it gets shifted from the commercial side to the residential side.

[00:18:49]So people should not be surprised if they have to put more money into their escrow accounts. You know that is a you know a big pitch. This kind of goes to my affordability u points that I was making in the last piece of legislation related to the Seattle transit measure that we have to look at the um affordability pieces whether it's you know in terms of property taxes you know um and this shows up in escrow it shows up in higher rents we should be looking at the levies uh in those areas too um sales tax we're just going through that process right now and that's a cumulative effect and then and then like utility rates uh people are starting to feel it but this this is going to be a big bite of us you in terms of what's happening. So we have to look at how do we strengthen those revenue sources those traditional revenue sources BNO um real estate excise tax all these kinds of taxes how can we stabilize them and build them because we have these other pressures and I don't see really that kind of thinking going on.

[00:19:45]This is one reason why I put um you know I sent my letter to the to the mayor but then also you know with my blog it's basically a two-page summary of that same piece with a little bit more background to it and making the argument that we cannot do business as we've been doing it thus far.

[00:20:03]I did reach out to the office of Seattle Mayor Katie Wilson for their reaction to this letter and the blog post that went out from Council Member Kettle on Tuesday. As of the time of this podcast, uh I had not received any response from the office, but I will be putting up a more complete article about all of this on our Center Square Washington page later today. And if I receive any response from Mayor Wilson's office, I certainly will include that in my article. So, that's a wrap on today's episode of Washington in Focus Daily for this Wednesday, July the 22nd. As always, we really appreciate you watching and encourage you to uh check out our Center Square Washington page and join us again for another episode on Thursday.