The Return of Washington’s Short-Term Rental Tax Proposal
In a recurring legislative dance that’s become almost as predictable as seasonal tourism itself, Washington State lawmakers are once again considering a bill to impose taxes on short-term vacation rentals. Senate Bill 5576 has returned to the state legislature for the 2026 session, proposing to grant counties and municipalities the authority to levy up to a 4% tax on bookings made through platforms like Airbnb and Vrbo. The bill, which failed to advance during last year’s legislative session despite clearing the Senate, represents the eighth consecutive attempt by Senator Liz Lovelett (D-Anacortes) to implement such a measure. As the prime sponsor, Lovelett remains committed to creating what she describes as “critical new revenue streams” for communities grappling with housing shortages, particularly in tourism-heavy areas where vacation properties have significantly reduced available housing stock for local residents and workers.
The housing crisis underpinning this legislative push is substantial by any measure. Senator Lovelett has previously estimated that Washington could require up to a million new housing units over the next two decades to meet demand, with approximately 35,000 potential long-term housing units currently tied up in the short-term rental market. The proposed legislation aims to address this imbalance by generating funds specifically earmarked for affordable housing initiatives. For tourism-dependent communities experiencing seasonal population surges, the impact of vacation rentals on local housing availability has been particularly acute, creating scenarios where workers essential to these tourism economies can’t afford to live in the communities they serve—a self-defeating economic cycle the bill seeks to interrupt.
Predictably, Airbnb has mounted significant opposition to the proposal, mobilizing through its Washington-based political action committee ironically named “Airbnb Helps Our State Thrive” (HOST) PAC. The company’s resistance strategy includes a companion website urging residents to “say no to the vacation tax” while framing the legislation as harmful to middle-class homeowners who rely on rental income. Jordan Mitchell, Airbnb’s Public Policy Manager, claims the bill “will make it more expensive for Washington families to travel within the state, while failing to meaningfully address local housing affordability challenges.” The company’s positioning suggests the measure would unfairly advantage traditional hotel chains over individual homeowners seeking supplemental income, though critics might note the multibillion-dollar platform itself has long disrupted the traditional accommodation industry while operating under fewer regulations.
While Airbnb publicly states support for addressing housing affordability in Washington, the company advocates for alternative approaches, specifically referencing Senate Bill 6026, which aims to encourage residential development in commercial and mixed-use zones. This counterproposal aligns with Airbnb’s preference for solutions that expand housing supply without directly impacting their business model or increasing costs for their hosts and guests. The company bolsters its position by emphasizing the economic benefits short-term rentals bring to the state, citing a study from the Association of Washington Businesses that claims short-term rentals generated approximately $4.7 billion in economic activity in 2024 while supporting over 35,000 local jobs. The same report suggests these rentals and associated visitor spending contributed more than $300 million in state and local fiscal revenues.
Regulatory approaches to short-term rentals vary significantly across Washington state and beyond. Seattle implemented its own taxation system back in 2017 and requires licensing for hosts, creating a moderate regulatory framework that hasn’t eliminated the industry but provides some oversight and revenue. Other jurisdictions have taken more dramatic steps, with New York City serving as the extreme example by essentially banning most short-term rentals outright. The range of existing policies demonstrates the complexity of balancing tourism economics, housing availability, and community character—a challenge that has no simple solution but continues to demand legislative attention as housing pressures mount throughout the state.
As the bill progresses through the 2026 legislative session, the outcome remains uncertain, though the measure’s improved performance last year suggests growing momentum. What is clear is that the tension between short-term rental platforms and housing advocates represents a fundamental clash between competing economic models and social priorities. On one side stands the innovation economy championed by platforms like Airbnb, which has created new income streams for property owners and expanded accommodation options for travelers. On the other side are communities struggling with housing affordability and displacement, where the conversion of long-term housing to vacation rentals has exacerbated existing shortages. Whether Senate Bill 5576 succeeds or fails this session, the underlying housing challenges and the role of short-term rentals within them will continue to demand creative policy solutions from Washington lawmakers for years to come.
