What the law does
In 2025 Washington enacted HB 1217, which amended the Residential Landlord-Tenant Act (RCW 59.18) to limit residential rent increases statewide. In broad terms, the law caps most increases within any 12-month period at a figure tied to inflation, subject to a fixed maximum, and prohibits increases during the first 12 months of a tenancy. The Department of Commerce calculates and publishes the cap each year and maintains a landlord resource center that explains notice requirements and exemptions.
The law includes exemptions, and they matter. Among them, units whose first certificate of occupancy is less than 12 years old are exempt. Other categories exist as well, so confirm how a specific property is treated using the Commerce resource center and, where the stakes are high, your own counsel. This guide is general education, not legal advice.
Why the cap rarely changes day-one underwriting
A DSCR lender underwrites the rent the property earns now. For an occupied property that usually means the signed lease, sometimes compared with the appraiser’s market rent estimate. For a vacant property, it usually means the appraiser’s rent schedule. Neither number depends on future increases, so a cap on future increases does not reduce the rent the lender uses today.
Put differently, the cap will not lower your approved loan amount on its own. What it changes is the path from today’s rent to tomorrow’s, and that is your business planning, not the lender’s ratio.
Where the cap does bite: occupied purchases with below-market rent
The most important practical effect shows up when you buy a property that is already rented below market. Before the cap, an investor might have planned to bring rent to market at the next renewal. Now the increase is limited each year, and Washington’s just-cause rules make it hard to end a tenancy simply to re-lease at a higher rent.
So underwrite the deal on the rent that is actually in place and on how much it can lawfully rise each year. If the ratio only works at market rent, you may be looking at several years of a thin or negative margin. That is a reason to negotiate price, bring more equity or pass, rather than a reason to assume the rent will reset.
Building hold-period projections inside the cap
A useful habit is to model two scenarios before you buy. In the first, rent grows by the published cap every year. In the second, it grows more slowly because the market softens or you choose to keep a good tenant. Then compare both with realistic growth in your costs: property tax, insurance and HOA dues all tend to rise, and Washington insurance renewals in particular can move more than rent.
If the property still covers its payment comfortably in the slower scenario, it is resilient. If it only works when rent rises at the maximum allowed every year, the margin is thin. The DSCR calculator gives you today’s ratio; your own spreadsheet should carry it forward.
- Year one: no increase for a new tenancy, so today’s rent is next year’s rent
- Later years: increases limited to the annual cap Commerce publishes
- Costs: assume property tax, insurance and dues rise at least modestly
- Reserves: keep enough to cover a vacancy and a large repair in the same year
Notice rules and exemptions to check before you buy
The statute sets notice periods for rent increases and imposes consequences for increases that do not comply. When you buy an occupied property, request the leases, the rent history and copies of any increase notices the seller has served. A seller who raised rent improperly can leave you with a tenant dispute on day one.
If the building could qualify for an exemption, such as newer construction, document the basis. An exemption can make a difference to long-term growth assumptions, but do not rely on one you have not confirmed.
Local rules stack on top of state law
Some Washington cities add their own landlord rules. Seattle has extensive tenant protections and a rental registration program (RRIO). Tacoma has its own rental housing code. Other cities have notice and relocation requirements. Before you buy, read the local rules for the specific address, because a property that is simple to own in one city can carry obligations in another.
None of this makes Washington a bad state for rental investors. Demand is deep across Puget Sound, the Inland Northwest and the Columbia Basin. It simply means that the best Washington DSCR files are built on today’s rent, realistic growth and a margin that survives a slow year.
A quick example of the first-year rule
Imagine you buy a Vancouver duplex where one unit is leased at $1,650 and market rent is closer to $1,850. The lender underwrites the $1,650 lease for that unit. If you sign a new lease on the other unit at $1,850 the month after closing, that tenancy cannot see an increase for its first 12 months, and later increases on both units are limited by the annual cap. Your DSCR at closing reflects $3,500 of combined rent, and that number may move only gradually. Illustrative figures, not a loan offer.
Frequently asked questions
Does the rent cap apply to single-family rentals?
The cap applies broadly to residential tenancies under RCW 59.18, subject to the exemptions in the law. Check the Department of Commerce resource center for how a specific property is treated.
Will Washington’s rent cap lower my approved loan amount?
Not directly. Lenders underwrite to the current lease or market rent. The cap mostly limits how fast rent can grow after you buy.