Seattle Times - Mike Rosenberg - 27 March 2017
After a brief winter slowdown in rising rents, tenants across the Seattle region are back dealing with the same old discouraging story: Rents are shooting right back up again.
But there is some promising news: Hot neighborhoods with lots of apartment construction are finally starting to see some slight rent relief, and a lot more building is on the way.
A pair of new reports from the region’s two major apartment survey firms — Dupre + Scott and Apartment Insights Washington — provide the first look of the year at the local rental market. The results were disappointing for renters, who had gained some optimism amid a record apartment-construction spree and a report late last year showing rents had actually dropped slightly from fall to winter.
But now that dip is looking more like a blip than the start of a new trend.
Average rents across the region are up about 1.1 percent from last quarter and up 8.3 percent from a year ago, the reports show.
Those increases, only slightly smaller than the surges seen in recent years, put Greater Seattle among the most extreme markets in the country for rent hikes. Rents here have grown about six times faster than the national average over the last year, according to Zillow.
In all, rents in the city of Seattle are up 57 percent in the last six years. The average renter is now paying $1,749 a month, or an extra $635 compared with 2011.
“Overall, the market seems to have stabilized after a dismal fourth quarter” for landlords, said Tom Cain, who leads Apartment Insights Washington. He had thought the rent drops last year might have provided a “turning point” for the market.
However, Seattle’s historic construction boom is still picking up steam — and most of the new apartments on tap haven’t actually opened yet. Once they do, it could step up competition and prompt landlords to halt their increases.
Seattle is expecting nearly 9,000 new apartments this year — thousands more than any year in the city’s history — with even busier construction forecasts set for 2018 and 2019. The region as a whole, from Tacoma to Snohomish County, is experiencing its second-biggest apartment boom ever, with more than 60,000 units in the pipeline this decade, according to Dupre + Scott.
“Given all this new supply, we expect the rental market will soften over the next couple of years,” Dupre + Scott said in its new report.
Some of the construction is already making an impact.
Neighborhoods where a lot of apartments have been built — like the greater downtown Seattle area, Ballard and Capitol Hill — all saw rents increase only about 5 percent year-over-year, well below the regional average, according to Dupre + Scott.
On the other end, the biggest rent increases were generally in outlying areas, which have seen barely any new apartment buildings even as they generate more interest from locals priced-out of Seattle and the Eastside.
The South King County area, in particular, saw the biggest jumps, with annual rent increases topping 10 percent in Burien, Rainier Valley, Des Moines, Kent, Federal Way and White Center. In SeaTac, rents are up more than 15 percent. Most of those markets didn’t have a single new apartment added in the last year.
New housing is no instant fix: Those apartments are about 40 percent more expensive, on average, than older rentals. And most of the planned apartments are still forecast for hot neighborhoods like Belltown and South Lake Union.
But cities generally see overall rents slow when they add more housing; it just hasn’t happened here as the demand, fueled by intense job growth, has been so strong.
What’s more, property owners have complained of rising taxes, fees and other costs that they have been passing on to renters.
Further out, rents are up about 7 to 8 percent in both Pierce and Snohomish counties, similar to the changes across King County, though those outlying areas remain much cheaper. The average rent across all unit types is $1,325 in Snohomish County and $1,070 in Pierce County, compared with $1,617 in King County, according to Dupre + Scott.
Rents are highest in downtown Seattle ($2,173), West Bellevue ($2,125) and Issaquah and Mercer Island (above $1,900). Rents are hovering at or just below $1,800 in several Seattle neighborhoods, including Ballard, Green Lake/Wallingford, Queen Anne and First Hill, as well as in Kirkland and Redmond.
Beyond rents beginning to rise again, there are other signs that momentum has slowed for renters.
A key number to watch is the vacancy rate: The higher it is, the more desperate property owners get to fill their units, and the more likely they are to keep rents flat. The local vacancy rate began to rise late last year, but Cain said it remained unchanged in the most recent quarter, at about 4.7 percent.
The number of landlords offering perks like free parking for a month had also begun to increase late last year. But Cain said that trend, too, has leveled off. About 21 percent of local properties are offering incentives worth an average of $13 per unit each month, the same as last quarter.
With home prices also soaring, more people in Seattle and throughout the region are stuck as long-term renters, unable to save up enough for a home down payment while coping with higher rent bills. The Seattle City Council last week even voted to form the nation’s first renters’ commission in hopes of improving laws for renters, which make up a majority of Seattle households.
Other local residents are dealing with more urgent problems, facing the prospect of getting priced out of their rental homes or their neighborhoods altogether. A recent survey found that 45 percent of local millennials fear they will have to move because of high housing costs.
Dan Bristol and his fiancée moved into a 400-square-foot apartment — the size of a small studio — in Upper Queen Anne three years ago and paid $1,250. A year later, the rent went up $75 a month. Then in another year, it shot up another $125. With their lease expiring in a few months, they’re bracing for another increase that could push them out.
“When our rent increased (most recently), my fiancée and I had to rework our budget,” Bristol said. “We used our car less, weekend treats like going out to brunch became less frequent, we started buying food in bulk.”
Mike Seeley, a University of Washington sophomore, is moving into a house with friends near campus, and they received a 10 percent rent increase compared with the prior tenants. He said the landlord told them to expect annual rent hikes of 3 percent to 10 percent going forward.
“These houses aren’t luxury apartments. They’re sort of rundown,” Seeley said. “As a college student, it’s never something you want to hear — you have to pay more for stuff.”