On January 13th, the front page of the Seattle Times featured an article which Seattle Commercial Real Estate addressed. In serving our clients looking for apartment buildings for sale and other commercial real estate investments, it is not enough to read the news; it is necessary to understand the news as it relates to investment real estate. It was thus noteworthy, that in the Sunday Seattle Times of January 18th, 2015, that not one but two columnists devoted a substantial amount of space to issues relating to apartments and rents.
Talton is the business editor of the Seattle Times and writes from a decidedly business and real estate investment viewpoint in regards to the multi-family market. He points out, quite accurately, that the biggest rental increases are occurring for buildings that have just been sold and are, for the most part, older.
Real Wages and Rents
Talton draws a clear line to several key areas. First is the fact that median house prices continue to rise and the fact that real wages, adjusted for inflation, only increased by the rate of $1 for each hour worked in the City of Seattle. Against inflation, that is a DECREASE in net income. This correlates to the fact that most of the jobs created nationally in recovering from the Great Recession have paid low wages; that is not the case in only two percent of US counties (King and Snohomish being among the two per cent). This and a diminished supply of available units has inevitably led to rent inflation.
Westneat’s columns focus more on social issues. His column in question dealt with the human aspect and the moral conflicts presented when rents are doubled. Landlords contacted him and concurred about the lack of morality in terms of not considering the human impact. He goes on to agree with Talton that rent controls may not be the answer, bringing their own set of problems complete with fraud and theft being two of the lesser evils. The fact of the matter is, that rent control is illegal under Washington State law. In today’s political climate, that too could be open for change.
What is the cure for rising apartment costs?
The City of Seattle is talking about a “Linkage Fee”, which is simply another way to compel developers to set aside units for “affordable” multiple residential housing or be compelled to pay a “fee” for not developing affordable multi-residential units. The issue of setting up “Boards” to respond to “unreasonable” rent increases was raised. What was clearly acknowledged was that the stress on rents may be lessened with the flood of new units, but still there was no suggestion for a “cure”.
Seattle Commercial Real Estate believes there is no such thing as a problem, only an issue in search of a solution, and we deal in solutions. Why not allow the private sector to cure the problem? Try innovative construction using fast track construction methods, modular construction, smaller more efficient units and greater densities. Couple this with tax incentives and faster governmental approvals and Seattle’s multi-family investment real estate market will find stability and renters will find affordable rents.