washington’s 10% rental cap heads to finish line

As Washington approaches the end of the current legislative session this week, the state appears close to passing its first-ever rent-increase-cap measure. Bill 1217, which proposes a rent cap of 10% plus inflation, has passed both chambers for the first time, and now heads back to the House one more time for final ratification. 

Bill 1217 would be the first of its kind in Washington’s history and would have the state join just a handful of others with similar statewide caps. Under the proposed law, landlords could set the initial rent freely but would then be limited to one rent increase per year, capped at a set percentage. They would also be prohibited from raising rent during the first year of tenancy and would be required to provide at least 90 days’ notice before any such increase.

Republican lawmakers have opposed the bill on the grounds that it would further disincentivize developers, who are currently operating in a challenging high-cost environment, and thereby limit new supply. They also argue that the bill would make it difficult for landlords to keep up with the impact of high inflation on their expenses. This kind of pushback has already led to changes in the proposed cap, which was 7% in previous versions and with no allowances for inflation.

Democrats who support the bill, on the other hand, argue that it gives renters much-needed predictability in housing costs while still allowing landlords to increase rents sufficiently to keep pace with growing expenses. 

Market Impact

Per various rental data aggregators, rental price growth in Seattle has averaged between 3-5% annually over the past decade—considerably lower than the proposed cap. At the same time, there have been periods of sharp rent growth, such as in 2022 when annual rents grew between 10-15% year-over-year.

The proposed 10% threshold would primarily affect the market during these periods of accelerated increases while having less impact during more typical years. Looking at the past decade, the cap would have been relevant in approximately 10 months of the 120-month period, primarily during the post-pandemic recovery of 2021-2022. Rent increases during the 2016–2017 period also came close, though they generally remained just below the cap.

But the cap could also create friction in years of market recovery, not just during boom cycles. During the early stages of the COVID-19 pandemic, vacancy rates surged in some urban neighborhoods as residents moved away from city cores. In response, many landlords offered steep rent discounts to attract tenants. According to a report from Zillow, in July 2020, over 30% of rental listings in the Seattle metro area offered concessions, up from 16% the previous year. While the most common incentives were months of free rent, landlords also reduced starting rents. As demand rebounded, many needed to raise rents significantly—often by more than 10%—just to return to pre-pandemic market levels. As previously mentioned, King County recorded median annual rent growth above the proposed cap in 2022, with rent pressure even more pronounced in the urban core, where early-pandemic vacancy and discounting had been most severe. In such cases, a hard cap could prevent rents from catching up, even if long-term price growth remained modest.

Having said all this, the inflation exemption is an impactful addition for property owners. During the recent peak in inflation in 2021-2022, many housing expenses such as insurance, utilities, and property taxes rose rapidly, with annualized changes to the Consumer Price Index reaching as high as 9.1% nationally. 

For developers and investors, rent control measures can reduce the attractiveness of purpose-built rental projects by limiting their potential returns. When future rent growth is capped, the financial calculations that drive new development become less favorable, potentially slowing the pipeline of new housing supply. Investment capital may shift toward other markets or property types with fewer restrictions on revenue growth. The bill, however, does include a notable 10-year exemption for new construction, which would allow newly built properties to operate without these restrictions during their initial decade.

Will it pass?

There are two key indications that the bill has a strong chance to pass this year. First, the Senate Housing Committee, which effectively blocked last year’s version of the bill, now features two fewer Republican representatives, replaced by legislators with more progressive housing policy positions. Second, the legislative body that now has the final say, the House of Representatives, already passed the previous version of this bill earlier in the session. That signals clear political will in support of rent stabilization; the remaining question is whether they’ll accept the amendments made in the Senate. Given the years of gridlock that have surrounded this issue, lawmakers may be inclined to take the current version as a compromise—one that, while imperfect, breaks a long-standing deadlock and establishes a rent cap in place for the first time.