Industry analyst says Seattle’s rent spike is real but part of a less alarming longterm trend

20150612SeattleOverallRentTrendByBRDepending on how you slice it, rental data on Capitol Hill can tell a few different stories. Real estate analyst Mike Scott, one of the most cited sources on rent trends in the region, says a recent spike in Seattle rent is only a small part of a less alarming trend.

Dupre+Scott Apartment Advisors says their dataset shows rents in Seattle went up around 2.3% a year on average since 2000 while owner/investor costs like property taxes and utility expenses rose at higher rates. Rent increases also ebbed and flowed during that time, especially during the Great Recession.

“Rents are impacted by a lot of things, like the economy and how much competition there is from new supply, to name just two,” Scott wrote in his most recent weekly column.

Still, rents are undeniably on the rise. Average rents in Seattle rose 8.3% last year, according to Dupre+Scott data. Scott says that spike can largely be accounted for by the opening of new units with better amenities. But even when new units are taken out of the equation, average rents still rose 7.5% over the past year.

On Capitol Hill, the situation is even more dramatic. Average rents went up 12% from 2013-2014 and have climbed 38% since 1998, according to a recent report from KUOW. This May utilizing a much smaller set of data, CHS reported that the median one-bedroom ad listing in Craigslist had climbed to $1,795 per month. A tenant would need to make at least $72,000 a year for that apartment to remain affordable, assuming a 30% affordability threshold.

Last year, Seattle had the fastest rising rents among major U.S. cities and rents on Capitol Hill were rising even faster. CHS reported that average rent in the neighborhood had reached $1,557, a 12% increase in just one year.

Capitol Hill’s construction boom is no doubt playing a factor in the neighborhood’s rising rents. Greater Capitol Hill will be home to at least 600+ new apartment units in 2015 as the most recent wave of ongoing construction projects finally finish up. A recent report from Dupre+Scott projects 729 new units will open in 2016 and 707 in 2017. In all likelihood, the true number will be even higher as the Dupre+Scott report doesn’t count microhousing, subsidized/nonprofit housing, or buildings that have under 20 units.

Silicon Valley tech workers are also playing a part in pushing up real estate costs. According to a recent report from Redfin, every 1% increase in tech hiring in Seattle results in a roughly 1% .5% increase in home prices beyond average appreciation.

Scott’s repositioning of his analysis comes as city officials seem more and more determined to do something to curb future rent increases in the city. The mayor’s Housing Affordability and Livability Committee is examining solutions like a housing bond program to build housing on city-owned land and private property acquired by nonprofits.

At the request of the City Council, the city recently released a plan that would require developers to create more affordable housing inside new buildings and/or pay a fee that would fund thousands of new affordable apartment units.

Rolling back the state ban on rent control has been a rallying cry for City Council member Kshama Sawant in her bid to represent the newly created Council District 3.

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9 thoughts on “Industry analyst says Seattle’s rent spike is real but part of a less alarming longterm trend

    • Well, when downtown is getting 30+ story buildings and we’re getting 6-8 story ones then yeah, one would expect to see fewer numbers on the hill. It’s not rocket science.

    • I was aware of that, thanks! :) Having that cap is obviously making it harder to deal with the demand in this neighborhood.

      I wonder if people can be convinced that they should live in 30-story buildings downtown rather than 6-story ones near Broadway and Pike? It’ll be interesting to see how that plays out, and if the downtown skyscrapers will be at such a high price point that they don’t fill up, especially if the economy slows down again.

    • nothing SENSIBLE about it.

      the man is INDUSTRY FUNDED. It’s like Coke funding a study that says soda pop is healthy or a pesticide expert paid by Monsanto telling you that Roundup is safe to drink.

      I’ll give in that it’s reality. It’s pretty simple here. The more we allow new buildings to go up, the more rent will go up so the investor can reclaim their investment on the property. The more units that rent for higher rates, the more existing landlords who will see that people will pay more and more for units in the hood and they’ll bump them up just because they can. The effect snowballs and we have the market you see today where people can’t afford to live in the hood unless they work at the Amazon or Microsoft that’s causing the run on the units.

    • Thank you for clarifying a new economic model. Where increase supply means higher prices. The data is what it is, and I have never heard about a situation where more supply leads to higher prices. When unemployment is up, wages stagnate. When it is down, wages go up. When there are 4 gas stations near the Interstate, the gas is generally less costly than when there is one to choose from.

      What we are seeing are thousands of units of apartments being built. These last decades. Jobs and businesses last as long as they last. Amazon is adding jobs and these apartments are being built in light of our robust economy. What happens one day when the thousands of units are built, along with many homes in the region, and a few companies decide to shed jobs? What happens when all those start ups that rely upon investors, no longer have investors to shore them up? I remember 2008 when one could roll a bowling ball down Pike street on the hill and nothing was happening. Likewise I remember the dot bomb era of 1999 or so, when office spaces were vacant and barely used servers were being auctioned for pennies on the dollar.

      Who are you to dictate new economic rules. And by the way, when landlords are taking losses on buildings one day, or you are being offered lower rent than what you are paying, will you feel for the owner and pay more than you need to, to shore up the losing investment they made? If your employer can’t pay you what you believe you are worth, will you take what they can afford? Who should set the rent? What is your solution besides delusional new economics where the more supply drives prices up. Does this mean if we suddenly invoke a moratorium on construction and there are no vacancies that rents will go down? And if you and I both want to rent the last apartment on the street after the moratorium, and you are willing to pay $100.00 more to avoid a long commute, that social justice means that the owner should rent to me because I say so? I am tossing my econ books and will attend seminars taught by you.

    • Thank you for your post. I hope more people read it. I understand people’s frustration with higher rent, but people like Sawant are taking advantage of the people who are unwilling to think methodically through our current situation. People need to take a step back and realize that we are all partvpf the problem as well as part of the solution. The most powerful vote you can make is with your wallet. If you are fed up with the rent then refuse to pay it. If enough people refuse and are willing to move elsewhere then rents will stabilize or even go down. However, it is ignorant and selfish to think that anybody is entitled to live wherever they live. There is one world and we all need to earn our keep. The idea that gentrification is ruining the neighborhood is ludicrous, it is just as much your neighborhood as it is mine. We are all in this together so help move us forward or get off the ship.

  1. As a property manager in Tacoma, I can tell you that this is having an effect upon rents (and availability) here as well. We are seeing a much increased number of what we are calling “King County Refugees” who are swapping a couple of hours commute time on the train for a 3br house in a quiet residential neighborhood and an extra 800$/mo. in their pockets. The effect of this on less qualified renters (poorer both in credit history and income) is to tighten the market for them considerably. My landlords have been speaking openly about “gentrifying” their tenant base and rents have been inching up accordingly.