Seattle’s rental crisis cannot be solved with rental caps.
Acting as such will only make the situation worse.
Real estate is a living market.
Simply demanding that it meet demand is not sufficient.
Instituting Rent Control and calling it a day will not solve Seattle’s rental crisis.
Only when zoning laws, availability, and smart rental regulations work in tandem can Seattle’s rental crisis be dealt with.
Fix restrictive zoning
Seattle “simplified” zoning laws in 2015. Multi-Family zoning now falls into one three categories. LR 1, 2, and 3 respectively. The main difference with regards to the rental crisis is the restrictions on the number of units by overall building square footage.
At best, new construction is only allowed at a single unit per 800 sq ft. With others having a limit of one unit per 1,200 sq ft.!
Unfortunately, this creates an awkward scenario where lack of supply increases demand but developers cannot build to meet all the demand even if it would make financial sense.
Simply put, Seattle must allow for increased density in construction to supply the studio and one-bedroom apartments required to solve the crisis.
The case for Rent Stabilization
If you recall from our first piece, Rent Stabilization is different from Rent Control as it doesn’t set the maximum price units can rent for rather, a maximum rate for yearly rent increases.
This rate is determined by inflation, local residential real estate market, and other economic factors.
In particular, Rent Stabilization has the massive benefit of reducing the financial risk for developers when it comes to building. Property Management companies can buy units doing their profit analysis on the value the units are worth on the open market.
This means the developer does not have to worry about Rent Control making certain building types unattractive for sale post-construction.
Developers can focus on creating supply to meet the demand of would-be renters instead of worrying about if those projects will be able to turn a profit based on Rent Control regulation.
Regulations must be enforced
Solving Seattle’s rental crisis requires smart decision making and a well-constructed plan.
Additionally, regulations must be well thought out, written to have maximum impact, and pragmatic in their wording and execution.
Poorly planned or toothless regulation will be like pouring gasoline on a raging fire.
The last thing Seattle needs is a situation like London or New York are currently in.
Reports of family members pretending a parent is alive when they actually passed away years ago are not uncommon. Hard to blame them when the rent on their parents place was $270 when the market value is over $2,000!
Now what?
The only way to get this crisis solved is to find solutions that make it profitable for developers and landlords to participate.
As well as, ensuring Seattle residents have safe and affordable rentals to call home.
Solving Seattle’s current rental crisis has no single solution.
Specifically, easing zoning laws, implementing stabilization systems, and smart laws that take the human element and market into account will allow natural change to begin loosening the rental market.
Harmony between supply and demand will help every business in Seattle. When people have more money left in their pockets, businesses have more money in their tills.