Olympia Report: Private Equity Homebuyers, Flavored Cigarettes

As more homes fall into the hands of big investors, State Senate Democrats are rolling out a plan to keep private equity out of your backyard.

This week, the Senate Housing Committee is scheduled to hear Senate Bill 5496 from Sen. Emily Alvarado, D-Seattle, which would restrict such investors from going on “excessive home buying” sprees that the real estate market is seeing nationwide. The bill would limit private equity firms to 25 single-family homes. Each violation would cost offending parties as much as $100,000 in fines.

Washington real estate isn’t getting any cheaper and we’re nowhere close to keeping up with demand. On paper, SB 5496 would keep big firms from locking up too many starter homes as rental properties, thus making life easier for first-time buyers. The idea is catching fire in Congress and a dozen other statehouses.

So how many homes does private equity own in Washington today? Hard numbers are hard to come by for our neck of the woods, but there’s a wealth of data on the matter at the national level. Firms—not people—are eating up residential real estate faster than ever. In the first three months of 2024 alone, private equity snapped up 14.8% of homes sold, per Realtor.

The extent to which private equity’s investment in residential real estate has jacked up housing prices is debatable. It’s unlikely Washington is a prime target for said investors, given how soaring home prices here are turning real estate into a value trap, from what we’re told by folks in the business. The Realtors, who wield one of the biggest sticks in Olympia, are largely neutral on the bill as is.

Private equity seems more interested in cheaper housing markets. Drexel University’s Nowak Metro Finance Lab found nearly one in five single-family homes in Richmond, Va., went to investors from 2020-21; investors bought nearly one in four single-family homes in Jacksonville, Fla., during that same period.

SB 5496’s backers tell us there’s real buzz for the bill under the capitol dome. Expect it to keep its head above water for some time this session. (Tim Gruver)

House weighs new rules for flavored nicotine

House lawmakers heard two bills that would take dramatically different approaches to regulating the sale of flavored nicotine and tobacco products—from menthol cigarettes, which are marketed toward communities of color, to flavored and interactive nicotine vapes and pouches, aimed at younger people.

The first, House Bill 1203 from Rep. Kristine Reeves, D-Federal Way, would end the sale of flavored and entertainment nicotine and tobacco products. The second option, House Bill 1534 from Rep. Sharon Tomiko Santos, D-Seattle, contradicts HB 1203 in that flavored nicotine and tobacco products could still be sold in Washington, but with stricter requirements for manufacturers about what products are legitimate.

HB 1534 is modeled after the federal tobacco registry and aims to curb the availability of illicit nicotine products by defining what is and isn’t legal to sell, Tomiko Santos said in committee Friday. The goal is for the entire industry to help with enforcement, she said, instead of just regulating retailers, who are already banned from selling to people under 21 in Washington. HB 1203 would end the sale of these products outright, though it stops short of a ban on the possession of flavored tobacco or nicotine cigarettes, vapes, and pouches.

The bills are mutually exclusive and have many overlapping sponsors in the House, though Tomiko Santos’s bill has some bipartisan backing and the appreciation of nicotine and tobacco retailers looking for clearer guidelines on what is and is not considered a legitimate product.

“When has prohibition ever worked in the United States?” Tomiko Santos said before the floor opened to public testimony on her bill. Intentional or not, the statement cast doubt on the premise of Reeves’s HB 1203.

The pro and con testifiers fell along expected lines for Reeves’s bill to end the sale of all flavored products. Public health, education, parents, and youth stakeholders supported the ban on the sale of flavored nicotine and tobacco products. Tobacco, nicotine, and food industry lobbyists were predictably against HB 1203 and came out in big numbers.

Menthol cigarette smokers and racial-justice advocates shared their concerns that the ban on the sale of these products could lead to more interactions between Black Americans and law enforcement, with one testifier noting the murder of George Floyd by police started over a cigarette.

Tomiko Santos’s bill, HB 1534, had some overlapping supporters and opponents with HB 1203. Small businesses were mixed, some supporting the proposal with others still wary of adding more rules to an already heavily regulated industry. The Washington Retail Association was in support, while the Washington Public Health Association was against HB 1534 and noted the need for more specific language on product legitimacy to get on board. The American Cancer Society said the policy was too soft to make a difference in tobacco and nicotine-related deaths and injuries in Washington.

Perhaps the most meaningful difference between the bills is the fiscal impact. A fiscal note was not available for HB 1534, but HB 1203 would represent a loss in sales tax revenue from the sale of these products. If the ban on the sale of flavored products was adopted, the state would lose an estimated $234 million in sales tax revenue in 2025-27 and spend an additional $4 millision on administration and enforcement—a dicey proposal during a down budget year when all sources of revenue are prized.

Reeves acknowledged this reality in her testimony about HB 1203 and pointed to two tax bills she introduced this session that aim to offset these losses: House Bill 1417, a carbon tax on cigarettes, and House Bill 1416, an increase in the sales tax on tobacco products. Both bills had an initial reading and were referred to the House Finance Committee, but no hearing has been scheduled. (Sara Kassabian)

Ferguson to probe data centers

Sydney Brownstone and Lulu Ramadan of The Seattle Times get to spike the football a bit over Gov. Bob Ferguson’s executive order to dig into the various impacts of the giant data centers that dot the state. As they reported in a Times/ProPublica series, data center operators enjoy lucrative tax incentives while their servers suck up enormous amounts of electricity mostly in rural areas where local public utility districts historically run a power surplus thanks to giant hydroelectric dams. Various mandates to electrify things that currently run on fossil fuels—think your furnace and your SUV—have other interests eying all that cheap clean power. Looks like we’re in for another chapter in the decades-old dispute about who gets to use that juice. (Paul Queary)

The state’s ballooning costs for legal claims

In less good news for Ferguson’s administration, Jim Brunner of the Seattle Times has a breakdown of the state’s sky-high costs for legal judgments. In the last two years, the state has paid out more than $500 million to settle claims of negligence or misconduct by state agencies. Substantially more than half of that total stemmed from cases involving the Department of Children, Youth, and Families, the state’s child welfare agency. (Paul Queary)

Walsh reelected WSRP chair; Yakima County GOP chair named political director

Jerry Cornfield of the Washington State Standard caught up with state Rep. Jim Walsh after his reelection as chair of the Washington State Republican Party. The news in the piece was less about a second term for the pugnacious populist from Aberdeen than the decision to name Yakima County GOP Chair Matt Brown as the state party’s political director.

Brown was instrumental in one of the GOP’s few bright spots in November: Winning three open seats in the 14th Legislative District, which was substantially redrawn by a federal court to favor Democrats after a Voting Rights Act challenge to the map drawn by the Washington Redistricting Commission in 2021. The GOP credits Brown’s get-out-the-vote and ballot-harvesting efforts for helping secure those wins, two of which were quite narrow. His assignment: Deploy those tactics to take back some formerly Republican ground in upcoming elections.

Brown’s game plan figures to get a test this year in the 26th Legislative District on the Kitsap Peninsula, where appointed Sen. Deb Krishnadasan, D-Gig Harbor, faces a special election for the final year of now-Congresswoman Emily Randall’s term. Krishnadasan’s seatmate, Rep. Michelle Caldier, R-Gig Harbor, who won reelection easily last year, is already running for the Senate seat. Randall’s races for the Senate seat were both tight and bonkers-expensive.

The party’s meeting over the weekend also featured some hugging it out with GOP leaders in the Legislature. The party and the Republican caucuses backed different candidates in a handful of primaries this year. Democrats flipped a seat in both the Senate and the House against the party-backed candidate. (Paul Queary)

These stories also appeared in the authors’ website, Washington Observer.