Washington Democrats are looking at taxing storage units as a way to help bridge the state’s multibillion-dollar budget shortfall and raise new money for housing.

House Bill 1907 would redefine self-storage unit rentals as retail transactions subject to the state’s main business tax and sales and use tax. Storage rentals in Washington are now treated like an arrangement between a renter and a landlord, with neither the consumer nor the business paying these taxes.

By changing this to a retail sale, similar to buying an item at a store, consumers would pay sales tax with every payment for their storage unit. Washington’s sales tax is 6.5% at the state level and local taxes can bring it up to around 10%.

Estimates attached to the bill show it would raise about $57.6 million for the next two-year state budget and around $90 million in the two-year cycle after that. Those totals do not include local government revenue.

The bill says these collections would be intended for affordable housing programs, but the legislation would not make it mandatory that the money is always used in this way.

“I think that closing this tax loophole and bringing in some of those funds to help with our housing crisis is something that makes sense,” said Rep. Strom Peterson, D-Edmonds, sponsor of the bill. He noted there are about 46 million square feet of rental storage space in the state.

Taxing the rentals is one of the smaller-ticket ideas on a menu of tax options Democratic lawmakers have been discussing since at least late last year. The House Finance Committee held a hearing on the bill Tuesday but it is not yet scheduled for a committee vote.

Storage facility industry groups and businesses are swiping back at the proposal, saying it will push up prices and pointing out that the units are often used by low-income renters, members of the military and people in difficult circumstances, including those who are homeless.

“This is not just an unfair financial burden, it is an unconstitutional attempt to tax rental real estate,” said Patrick Gilroy from the Washington Self Storage Association. He added that storage facility owners pay other taxes, including property tax.

The fiscal analysis for the bill acknowledges there is some risk that the tax could get invalidated in court but adds there is “a good likelihood” it would be upheld by the state Supreme Court.

Republican leadership opposes the tax.

“It appears to me that taxing storage units is an anti-renter tax, because whenever you think about the people who need those storage units, you’re looking at people who are renting apartments and possibly don’t have sufficient storage inside of their apartment units,” said Sen. Chris Gildon, R-Puyallup, a top Republican on the Senate Ways and Means Committee.

The Association of Washington Cities is among the supporters of the bill, saying cities have been under pressure to maximize the use of available urban land to expand housing. The fiscal analysis shows the tax would generate an estimated $61 million for local governments over the four years beginning July 1.

“This quirk in state tax policy was prioritizing storing things over helping house people,” Carl Schroeder, a lobbyist for the association, told lawmakers during testimony on Tuesday.

“We think it’s totally appropriate to treat these businesses like any other business in this state that is operating and making transactions,” he added.

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