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Market Rental Update – January 2017

HOW NEW LAWS IN SEATTLE IMPACT YOUR INVESTMENT PROPERTY

Seattle has some of the highest housing costs in the nation. Renters have been looking for some form of relief and have found a very receptive partner in the Seattle City Council. In the past year, the Council has passed more new laws regarding rental property and quite frankly created a hostile tone towards landlords.

These new laws and regulations are a misguided attempt to provide housing access and affordability, however, they will have the opposite effect. Here is a summary of the new laws:

FIRST IN TIME APPLICANT RULE (begins Jan. 1, 2017)

This requires landlords to take the first qualified applicant. While best practice in the industry has always been to take the first QUALIFIED applicant the new law is a game changer. Landlords are now required to date and time stamp applications as they are received, applications must be processed one by one in the order they are received, with offers of tenancy made in that same order, and the Council has determined minimum screening criteria.  In general, the aim of the legislation is to prevent landlords from cross-shopping applicants and choosing the BEST qualified from a pool of renters, which can include multiple applicants who meet the stated rental criteria. NO OTHER CITY IN THE UNITED STATES HAS THIS LAW

RESTRICTIONS ON DEPOSITS & MOVE IN FEES

There is now a cap on move in fees and deposits. The total deposit may not exceed one month’s rent (this includes pet deposits). In addition, the landlords must allow tenants to pay the deposit over a six month period. The payment plan means the landlord is required to give a six-month term loan at 0% interest.

RENTAL REGISTRATION AND INSPECTION ORDINANCE

Gives the City the right to inspect your property and require you to make repairs or be fined. The Landlord must pay to register the property with the City as well as pay for the certified inspector. This program has been phased in according to zip code over the past 2 years.

SOURCE OF INCOME

This expands protections to prospective tenants to include all legal alternative sources of income including short-term vouchers, income to rent ratios, pledges to prevent evictions and more. This provision was created to help borderline tenants from being passed over for more highly qualified tenants.

ALL of the above rules increase your risk as a Landlord. In addition, the Seattle City Council has declared they are in favor of Rent Control. The answer to creating more affordable housing has proven to be to allow more building of housing units and not rent control. So where do we go from here?

HISTORIC CONSTRUCTION BOOM CONTINUES

In the last 5 years, there has been a boom in new construction. In 2017 another 11,000 new units will be hitting the market. This additional supply has started to impact vacancy rates which have climbed to 4.5% from 3.5%. Higher vacancy rates slow the cost of rent increases. A 5% vacancy rate is considered balanced. Vacancies will continue to climb with the market peaking in 2019 to 8% (Dupre & Scott Apartment Advisors). There is no need for Rent Control when the market is allowed to supply more units.

WHERE IS THE REWARD FOR LANDLORDS?

With all the additional risk for Seattle area landlords is this still a good place to own investment property? Seattle is the fastest growing tech hub in the country. Bellevue represents three of the hottest tech neighborhoods in the country (in terms of leasing commercial space). The emergence of Amazon has changed the landscape of Downtown Seattle and surrounding neighborhoods. A vibrant city life, the beauty of the Northwest with its attractions for outdoor enthusiasts, along with high-paying jobs in the field of science, engineering and technology continue to attract people to the area in droves. This will result in continued demand for housing and equity building for landlords.

Written by:

Tamara Simon
Designated Broker
Koss Property Management Inc.

Koss Property Management has been serving the needs of Seattle area landlords and their tenants since 1991. Please contact our office if we can be a source of information regarding your investment property, property management, or the Puget Sound real estate market. You can reach Tamara at tamara@kosspm.com or our office at rentals@kosspm.com.

I have Seen It All

Being a Seattle native and grandchild of Seattle immigrant pioneers with roots that go back to the Pike Place Market and the Yukon Gold Rush, I have seen a lot of changes happen to my beloved Seattle and its surrounding areas. I grew up in what was, and still is, the middle of town- Capitol Hill and Montlake neighborhoods. The change in that neighborhood between then and now is a good example of how our city has changed.
My parents were typical of the middle class folks who lived pay check to pay check and still managed to buy a charming post World War One Dutch Colonial home for a few thousand dollars in the 1950s. The neighborhood was comprised of small business owners, Boeing workers and teachers that either owned or rented their homes. We rarely ventured further North than Northgate or further South than Rainer Avenue or an occasional trip to SeaTac Airport. The 1970s brought a bit of decline to both neighborhoods as the Boeing bust took its toll. Capitol Hill had a lot of large homes that suddenly had groups of young people living communal style. During this period I moved to Bainbridge Island where I stayed for 15 years. I remember well people asking me how I could stand the “long” half hour commute by Ferry to downtown Seattle.

seattle pikes place 1950s

Well, that was then and this is now. My old neighborhoods are considered upscale with home prices at one million and above. Many homes have half million dollar and up remodels with designer kitchens and bathrooms. I live in North Seattle in a modest bungalow that is way above the median home price because of its location near the upcoming light rail and upscale grocery stores and proximity to I-5. A lot of folk like me have had to come to terms with being forced to move further North or South in order to afford the rental and housing prices.
I still love my beautiful city dearly; no one was more happy than me to see the snow return to the mountains this year. However, I am frustrated as many of you are with transportation issues. Getting around from one end of Seattle to the other requires a lot of patience these days. I am glad the city is bursting with vitality, but I still resent not being able to find parking on the streets downtown anymore. I consider this my birth right.

I know, get over it!

Written by:
Dianne Trani Brown
Leasing Agent
Koss Property Management

Spring Seattle Rental Market Update


The New Gold Rush

The Seattle Metro Area ranks high in the Top Ten Markets nationally to invest in rental properties. A strong job market lead by the continued growth of Amazon has resulted in more people looking for housing than there is housing available in our area. The law of Supply and Demand is the simple explanation for the rise in our rental market and the cost of purchasing property in the Seattle area.

Seattle Rent Market

The median price of Single Family homes sold in Seattle rose to an all-time high of $644,950. That is a 24 percent increase over the past year (in King County the median price is $514,975). The increase in multi family property has been just as dramatic. For the condo market we have a median price of $323,975 in King County with Downtown Seattle condos median prices at $597,500. Historically Real Estate appreciates three percent(3%) per year so how do we account for the double digit gains in the Seattle Market.

  1. Strong job market Unemployment rate in Seattle hovers at 3.7%
  2. Puget Sound Region is a Trendy Tech Center attracting workers to our area. ONE HUNDRED TWENTY THOUSAND PEOPLE moved here last year
  3. Historically low interests rates
  4. Historically low rates of return on other investments less than 1% return on money markets & CD investments
  5. The median price of a home in Silicon valley is 1.1 million dollars and in Vancouver B.C. it is One Million Dollars. Seattle has become the new destination for many of these high tech workers as our housing costs look like a bargain in comparison. The fact that Washington State has no state income tax is also a bonus
  6. Seattle has the Growth Management Act that limits high density. Most of Seattle is zoned for Single Family Homes with only a few neighborhoods zoned for high density (condos & apartment buildings with heights of 3 to 6 stories) Ballard and the University District fall into the high density zones that is why much of the new construction is centered there

Rent Control

As rents to continue to rise there has been pressure from Seattle tenants to have rent control legislation in place. They have found a sympathetic partner with the Seattle City Council. In reality the Seattle City Council does not have the power to pass a rent control law. This would have to change at the state level in Olympia, WA. At this time the state legislature is not interested in rent control measures. The Seattle City Council has passed measures to create more burden for a landlord to sell or remove a tenant from the rental property. The Seattle City Council is also looking at creating more restrictions on security deposits. The federal government is also looking at creating more protected classes in regard to rejecting a rental applicant based on criminal history.

Housing Bubble?

As many of you may recall, 2007 was the previous height of our housing market and then the crash came in 2008. On average housing prices fell 30% and rents fell between 10% to a high of 18% in the Downtown core. The market is showing some signs of slowing and there are areas of concern. Boeing has announced layoffs of 4,000 workers and we see some investors making the same mistakes that were made in 2007. If interest rates rise the housing market will appear less attractive for investors.

Housing Bubble Seattle Rent Market

Investors have played a major role in the high demand for housing with 30% of all property sold to the investor market. New construction can outpace demand. Seattle is also home to the biggest building boom we have seen in the past 40 years. This year alone 20,000 new units will come online. At some point the housing supply may outpace demand. This will lead to a higher vacancy rate and stabilize or lower rental rates, and the cost to purchase housing.

 

Koss Property Management continues to monitor the Seattle area housing and rental market to help our clients achieve the best possible cash flow and reach their investment goals. Please update our office with your current contact information and see the attached information for our current staff rooster. We welcome questions regarding your property and can provide a current market analysis on your investment property as well as locate property for those seeking additional investment property.

Written by:
Tamara Simon
Designated Broker
Koss Property Management

© Koss Property Management 2016