By Michael Coleman and Faris Babineaux
Associates, Haynes Boone
As of May 7, 2025, Washington state has a new rent control law under House Bill 1217. Washington is now the third state in the country with a statewide rent cap, joining California and Oregon.
For multifamily property owners and investors, this new law has significant implications. It affects the amount by which rents can increase each year, changes income and expense planning, and may influence property values.
Overview of Washington’s New Rent Control Law
Here’s what HB 1217 means for multifamily property owners and investors:
- Annual rent increase limit: Landlords can increase rents each year by a maximum of either 7 percent plus inflation (measured by the Consumer Price Index for All Urban Consumers, or CPI-U), or 10 percent, whichever is lower.
- Manufactured and mobile homes: In manufactured-housing communities, annual rent increases are limited to 5 percent.
- New tenancies: Landlords cannot raise rents during the first 12 months of a new tenancy.
- Not retroactive: The law does not apply to rent increases issued before May 7, 2025. It only applies to increases on or after that date.
- Exemptions: Some properties are not covered by the new rules:
- Residential buildings that are less than 12 years old.
- Owner-occupied properties with four or fewer units.
- Units that are already restricted by government affordable-housing programs.
The legislation implements new tenant protections as a response to rising housing costs. However, it creates additional considerations for property owners and investors who previously underwrote projects without rent restrictions.
Why This Matters for Multifamily Property Owners and Investors
The new limits on rent increases change how future income and expenses are calculated for multifamily properties. Property owners and investors should understand how these rules apply to their existing properties and financial models.
For owners of newer buildings, the law will not apply right away. However, after 12 years, those properties will also fall under the rent cap, which is likely to negatively affect property values and long-term business plans.
Impact on Property Values
When rent growth is capped, property buyers may view buildings as less valuable because they cannot count on unrestricted higher future income. This could push property values down or lead to higher cap rates for regulated properties.
Owners who plan to refinance or sell a building as it ages past the 12-year exemption period should factor these limits into their planning. Lenders and buyers are likely to examine how rent caps could affect future cash flows and returns.
Investor Takeaways for HB 1217
Washington’s new rent-control law creates several practical considerations for multifamily property owners and investors:
- Lease planning: Review lease terms and renewal strategies, especially for properties serving student or senior populations, where annual cycles and tenant turnover differ from conventional multifamily operations.
- Operating expenses: Understand that while rents are capped under HB 1217, expenses such as insurance, utilities, and property taxes are not regulated and can vary over time. Owners should track these costs closely when evaluating property performance.
- Capital improvements: Evaluate renovation and value-add plans in light of HB 1217, as rent increases after improvements remain subject to the statutory caps.
- Portfolio management: Track property ages to identify when exemptions expire, particularly for buildings approaching the 12-year threshold.
- Compliance documentation: Maintain accurate records of any exemptions, such as affordable-housing agreements, to confirm applicability under the law.
Understanding these practical details can help property owners and investors comply with HB 1217 and manage their assets effectively.
Practical Scenarios
Here are three examples of how HB 1217 may affect different types of multifamily properties:
Scenario 1: Private Off-Campus Student Housing Nearing Year 13
An owner of a private, off-campus student housing property in Washington built in 2013 is nearing year 13, when it will become subject to HB 1217’s rent caps. Owners should review how these limits apply to academic-year leases and typical student-housing rent escalations.
Scenario 2: Market-Rate Age-Restricted Property Under Renovation
An investor acquires a 10-year-old, market-rate, age-restricted multifamily property in Tacoma and plans renovations. The property is exempt from HB 1217 now but will be subject to caps once it reaches 13 years. Owners should consider how this timing could affect rent adjustments after improvements.
Scenario 3: Affordable Housing Property
An owner operates an affordable-housing property in Washington that is already subject to government-imposed rent restrictions. These properties are exempt from HB 1217, but owners should confirm regulatory agreements and maintain proper documentation to ensure the exemption applies.
State-by-State Comparison
Here’s a quick comparison of rent-control laws in Washington, California, and Oregon:
| State | Annual Rent Increase Cap | Key Exemptions | First-Year Freeze | Effective Year |
|
Oregon |
7% plus CPI-U, capped around 10% | Properties under 15 years old, government-restricted units |
Yes |
2019 |
|
California |
5% plus CPI-U, capped at 10% | Properties under 15 years old, certain affordable housing |
Yes |
2020 |
| Washington | 7% plus CPI-U, capped at 10% | Properties under 12 years old, owner-occupied 1–4 units, affordable housing |
Yes |
2025 |
While each state’s rules differ in details, these laws illustrate how some states have adopted rent regulation as a policy tool in high-cost housing markets.
Conclusion
Washington’s new rent-control law is a significant change for multifamily owners and investors in the state. Staying informed and reviewing property financials and business plans can help navigate the evolving regulatory landscape.
About the authors:
Michael Coleman and Faris Babineaux are associates in the real estate practice group at Haynes Boone’s Dallas office. Coleman has extensive legal experience in both the United States and Canadian real estate markets and offers clients a strategic, cross-border perspective and a solutions-oriented approach to complex real estate projects. Babineaux focuses on assisting clients with a wide range of complex commercial real estate transactions, including acquisitions, dispositions, leasing, finance and development.
