Seattle is in a Rental Crisis
To sum up the Seattle rental market:
It is not pretty.
With rising rents in the Seattle area, finding a one bedroom apartment now requires a take-home income in excess of $60,000.
Rapidly increasing rents, explosion of short-term rentals and developer discouraging building regulations are fueling a shortage of rentals that worsens each month.
Seattle City Council members have requested the 1980’s ban on Rent Control to be overturned in a letter written to Olympia.
While intended to solve a crisis, rent control by itself will not resolve the issue.
Rent Control. What is it?
The concept of “Rent Control” relates to a system of laws that aim to keep housing affordable to keep the bargaining power between property owners and renters balanced.
Rent Control’s intended outcome is more to prevent rental rate gouging due to a competitive market.
In the most basic form, Rent Control laws will cap how much a landlord can increase the rent each year. This percentage is usually sourced from inflation rates. (“Rent Stabilization” is the technical term for this. For simplicity we throw it under the same umbrella.)
The other tool of Rent Control is simply capping the amount that a landlord can charge for rent.
The Best Intentions. The Worst Outcomes.
Rent Control legislation forcing units to rent below market value often leads to backlash from landlords and developers.
The incentive for landlords to invest in their existing units is severely diminished since their return on investment is no longer based on the market, it becomes tied to a fixed rate.
Developers are better served building single family homes and condominiums that can sell for the price set by the market rather than what Rent Control law says.
Additionally, Rent Control often forces developers to set aside a portion of the space in any proposed multi-family housing.
What About “Inclusionary Zoning or Social Housing?”
Depending on who you ask, this is the London or New York solution.
The idea is that for a developer to get their building project approved they agree that a portion of the units go to specific tenant types or rent below the market rate.
The rent for a London flat is $2,486/mo. Central London is well over $3,000/mo.
Landlords in New York often choose Rent Control unit tenants in comically corrupt ways. They are often rented to those with personal or business ties to landlords. Often, the tenants are far above any income maximums
What sounds like a perfect solution, has turned out to be better in theory.
Effect on Small Business & Possible Solutions
A general economic principal states that a fiscally responsible person or household should spend no more than 30% of their income on their rent or mortgage.
With this theory in mind, it is no wonder Seattle is supporting this principle. Yet, as seen in other cities the cost of living and citizens disposable income can fluctuate.
When push comes to shove, people are going to pay their rent before they go out to have a drink at the local bar.
Seattle’s rental crisis has no easy solution. However, we can say with certainty that Rent Control on its own will not be a silver bullet. Multiple factors play into the exponential cost of living increase in Seattle. The solution must also be a multi front approach. These solutions deserve thorough analysis and will have their own article.