Supply and Demand in Seattle's Apartment Market
The law of supply and demand works, people are going to keep moving here, and rents aren't going up as much as you think, according to the apartment gurus at Dupre+Scott.
At yesterday's city council planning committee meeting, apartment analyst Mike Scott—half of the rental-market analysis firm Dupre+Scott—sped through some of the latest indicators in Seattle's rental-housing market. (As we indicated in Fizz this morning, it was a packed agenda.)
Most interesting, from PubliCola's urbanist/pro-affordable housing POV, were five data points:
1) The law of supply and demand is, it turns out, an actual thing.
In periods when the supply of available housing has dipped, rents have increased; in periods when more apartments have been available, rents have declined. This directly contradicts claims from development opponents that building more housing makes prices go up.
2) Although the average rent in Seattle has been going up steadily in recent years, most of that increase is thanks to the inclusion in the average of some very expensive new apartments that are, Scott said yesterday, "concentrated in the $1,300 to $2,000 range"; rents at older buildings—those constructed in 2009 or earlier, which range from about $800 to about $1,300—have actually risen more slowly than the cost of operating those same buildings.
"The issue there is simply that if older buildings rent for $1,000 and a new building rents for $1,700, simply including the new building looks like a rent increase, so that now the average is between $1,000 and $1,700," Scott tells PubliCola. "Is that a rent increase? It’s not a rent increase in a building, but it is a rent increase in a market."
Overall, Scott said, rents for apartments in buildings constructed before 1997 average around $1,100 a month; rents for apartments in buildings built after that average more than $1,700 a month. Since 2000, meanwhile, operating costs (everything from replacing broken washing machines to landscaping to real estate taxes) have been increasing about 3.5 percent a year while rents have been going up about 3 percent a year, Scott told PubliCola.
This defies the common narrative among anti-development activists that new development raises rents for everyone, and suggests that for those who aren't moving into the most expensive new buildings, rents are actually fairly stable.
3) On the other hand, apartments are getting smaller, shrinking from an average of about 750 square feet in the mid-'90s to about 650 today. This tracks with a trend Josh wrote about yesterday (and that I've covered before) away from "family-size housing"—apartments and other units with three (or even two) or more bedrooms, big enough for families with kids.
4) More housing is being built in the city of Seattle itself than in the suburbs (and even in the suburbs, the development is in more urbanized areas like Bellevue and Renton), suggesting a move toward urban living and away from more car-dependent outlying areas.
"In the last huge building boom, which was in the late 1980s, it was almost totally suburban development," Scott says. "One of the reasons [for the shift to urban areas] is that that seems to be what the consumer is looking for—urban, less transit time on a daily basis, and more things to do rather than ... needing a car to get to almost anything in the urban environment. You can walk out your front door in South Lake Union or West Seattle or Ballard and there is stuff to do within walking distance, there are transportation alternatives like Car2Go and RapidRide."
5) Finally, it turns out that apartment density has actually increased in the absence of any zoning changes or "social engineering" by the city, as developers build under existing rules (that is: sans the dreaded upzones) in neighborhoods where people want to live. Six of 13 neighborhoods tracked by the city saw the number of apartments for rent more than double between 2009 and 2018. In Ballard, for example, the number of rental units are expected to increase more than 250 percent between 2009 and 2018; in the downtown area, that anticipated increase is more than 200 percent.