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.
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 email@example.com or our office at firstname.lastname@example.org.