State funds that pay for homelessness services in Washington are running low, and the Legislature may need to find extra money to avoid program cuts.
The Department of Commerce anticipates a nearly $403 million shortfall in fee revenue that goes toward programs like emergency shelter grants, temporary rent assistance and support for homeless youth. This money is from document recording fees people pay when they file real estate deeds and other paperwork with county auditors.
The department is asking the Legislature to set aside general funds to maintain current levels of service, to address inflation and to help local governments who have seen declines in their own homelessness funding.
“We have a really significant deficit of funding for homelessness,” said Michele Thomas, director of policy and advocacy at the Washington Low Income Housing Alliance. “It’s a really dire time.”
But getting new funding approved could be difficult as lawmakers are looking at a possible $12 billion deficit with the state’s overall operating budget during the next four years. Gov. Jay Inslee, who is releasing a budget proposal in the coming weeks, has encouraged state agencies to come up with cost-saving measures.
Fewer real estate sales, less revenue
Washington auditors charge a recording fee on most documents that residents file with them – most notably, real estate records like deeds and mortgages. As of last year, that fee was $303.50 for most documents.
As the Federal Reserve increased interest rates between 2022 and 2023, home sales slowed significantly. This slump left state and local governments with less document recording fee revenue than planned, according to the Department of Commerce.
The department says it needs about $908 million through 2027 for services funded through the document recording fee, but only about $505 million is projected to come in. Their $403 million request also accounts for an 11% bump to address inflation over the next two years.
Without additional funding, the state will have to cut capacity to critical services, Rep. Nicole Macri, D-Seattle, said. She emphasized that this request is not for any expansion of services.
Most of the fee collections go toward the state’s Home Security Fund, which pays for grants to build temporary housing, local efforts to relocate people from roadside encampments, and programs to help homeless young people.
About $302 million of Commerce’s request would go toward backfilling this fund.
The next largest destination for recording fee revenue is the Affordable Housing for All account, which gives funding to organizations that operate housing with low rents. About $88 million is needed to keep that fund whole.
The smallest portion of the money goes toward a program that provides reimbursements to landlords dealing with property damage or losses so they can keep their units on the market. About $12 million would fill the hole in this area and allow the department to pay about 3,000 claims to landlords through 2027.
Commerce’s request also includes funding that would go directly to local governments to help them backfill a portion of their recording fees that go toward homelessness services.
‘Very, very challenging’
Macri said she will prioritize not cutting any existing services that help those who are homeless, though she acknowledged that alone could be difficult.
“The next step, of course, would be to expand services where we can,” Macri said. “But the prospects for that look very, very challenging.”
Thomas said current funding is short of needs when it comes to addressing homelessness.
“Providers across the state are constantly turning people away because there’s not enough resources,” she said.
With such a large budget deficit, some lawmakers may propose new taxes to expand homelessness services and housing programs.
In the housing arena, a bill that came up in this year’s session would have added a tax to the sale of real estate over about $3 million. Revenue would have provided a steady funding stream to pay for affordable housing.
That bill, which never made it out of the state House of Representatives, will likely be back in the 2025 session.
But whether Democrats, who hold majorities in both chambers, will be able to muster the support for new taxes is uncertain. Republicans will surely put up a fight.
After a Nov. 20 revenue forecast, Rep. Ed Orcutt, R-Kalama, one of his caucus’s leading voices on budget and tax policy, criticized state spending growth over the last two decades.
“How do I go tell them they need to give more money out of their pocket to prop up a state budget that has grown as rapidly as this one has,” he said.
Inslee’s budget proposal will be the starting point for lawmakers’ conversations surrounding the next two-year budget. It is expected in early December.
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