We all know Seattle area rents are going through the roof. There’s no surprise there. But what really jumped out at me from the latest statistics was this:
Apartments in Seattle’s Ballard neighborhood saw the biggest increase in rents. The average asking rent was 12.3 percent higher over the quarter, rising to $1,628.
But Ballard also had a vacancy rate of 8.6 percent, the highest in Seattle. And when new apartments that just opened are included, the vacancy rate shoots up to 18 percent.
The apartment boom in Ballard has led to a doubling of the inventory over the past six years, said Tom Cain, head of Apartment Insights Washington. When the units now being built are complete, Ballard’s inventory will have quadrupled.
New units rent for a premium, and they’re part of what’s driving up market rents, Cain said.
Listen to the free market folks and you’d think the solution to Seattle’s worsening affordable housing crisis is simple: get out of the way of developers and let them build more units faster! And that somewhat makes sense. Supply and demand and all that. And yet the neighborhood with highest vacancy rate and one of the biggest booms in new construction, is also the neighborhood with the fastest rising rents. How does that work?
The problem is that the market incentivizes developers to focus on meeting the demand of high-end renters to the detriment of middle and low income households. The cost of borrowing and the cost of land remains the same no matter what you choose to build. Given these and other fixed costs, there’s just more profit to squeeze out of any given lot by catering to the highest end of the market the neighborhood will support. And so that’s what developers tend to do.
Thus if we rely on the market to address affordability in Seattle, it will necessarily constrain the growth in luxury housing prices first, before saturation at the high end of the market ultimately forces developers to target their product further down the income scale.
Yes, rents of older housing stock rise more slowly than rents of new, and all this expensive new housing will eventually be old. But as these units age, unless their rents increase more slowly than growth in median income, these apartments will never become more affordable.
Affordability is not just a product of how much we build, but of what we build. And private developers simply aren’t focused on meeting the demand for low and middle income housing.
Yes, the city should always strive to make the permitting process faster, cheaper, and more efficient. And we certainly need to let go of our nimbyist fetish with building heights. Seattle must become a taller, denser city. But simply getting out of the way of developers won’t solve our problem. If we can’t find a way to effectively incentivize developers to meet the demand for low and middle income housing, then the city is going to have to find a way to tap into its own access to capital markets to build more low and middle income housing itself.