Washington/Seattle Perspective: Rental Housing Policies Aren't Working

by Cory Brewer, a vice president of residential rental operations and veteran property manager.

I have spent a lot of my time this year trying to get an important message across: Legal regulation is killing rental-housing supply in Seattle.

Whether it is via written article, calls and emails to elected officials and meetings with their staffs, or TV and radio interviews with news media, the message has been consistent.  I’ve laid out facts and offered carefully reasoned predictions.  I’ve partnered with my colleagues from around Washington State to compare data and share stories.

One thing is abundantly clear:  Lawmakers have put a target on the backs of corporate landlords, and their crusade against this existential bogeyman has resulted in nothing but collateral damage.

Over the course of countless state legislature, city, and county council meetings I have heard testimony from local mom-and-pop housing providers about concerns over “renter-protection” policies aimed at “profiteering” corporate landlords … but you know who never calls in to voice opposition?  Corporate landlords.

Why?  I propose to you that in the end, the only group that stands to gain from “renter-protection” policies are, ironically, the corporate landlords that they are intended to harm.  These corporations are often not local, and in many cases may not even oppose the legislation because – even while anti-landlord by definition – the policies do little more than to drive out the mom-and-pop competition.  Large corporations built on the economy of scale can absorb short-term losses and come out the other end way ahead when renters have fewer choices.

Some will say that the loss of single-family rental homes is no problem because so many new housing units are being added to the Seattle market.  The problem is that three+ bedroom houses are being “replaced” by one-bedroom apartment units, which are not suitable replacements at all.  The city of Seattle runs the RRIO program (Rental Registration & Inspection Ordinance) as a way to, among other things, attempt to establish a database of the rental-housing stock in the city.  Their 2020 report indicates a loss of 4,858 property registrations compared to the previous year (a drop-off of 14.4 percent).  During the same time period the UNIT count only decreased by 0.65 percent.  So what is going on here?  Clearly single-family houses are going away, and apartment units are “replacing” them.  Apartment units don’t work for everyone, especially in this new age of working and schooling from home.

This is becoming, as I predicted, increasingly difficult for those that the “renter-protection” policies are supposedly meant to help: low-income renters.  I recently spoke with Chris Klaeysen, an adviser with the Seattle Housing Authority, which administers Section 8 housing assistance vouchers to low-income renters.  Here is what he had to say: “Generally we do find that Seattle has a shortage of larger (3+ bedroom) units.  This obviously creates a difficult situation for the families we serve.  Many of the new buildings coming online have primarily studios and one-bedroom units.”

Read more in the Rental Housing Journal.

Portland Metro Area Unemployment Declines to 4.7%

The State of Oregon Employment Department reports today that since peaking in April 2020 at 13%, the metro area unemployment has declined from a 2020 high of 13% to 4.7%.

Other employment numbers released today:

• Salem, Oregon - 4.7%
• Linn County - 5.2%
• Lane County - 5.2%
• Deschutes County - 5.1%
• Jefferson County 6.1%
• Crook County - 6.5%

NAA/NMHC: Less than 25% of Rental Aid Has Been Disbursed

 

The National Apartment Association and the National Multifamily Housing Council recently reviewed U.S. Treasury Data and found that less than 25% of Rental Housing Assistance set aside to help renters and property owners for losses during the pandemic have been disbursed.

Washington, D.C. – The National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) issued the following statement on the disappointing news that less than a quarter of emergency rental assistance aid has been distributed to residents and property owners in need.

Over the course of the pandemic housing providers across the country have gone above and beyond to help and support residents dealing with financial challenges. From payment plans, waived fees, changes to lease terms and support in finding and securing rental assistance, housing providers have been deeply creative and innovative to keep their residents safely and securely housed.

However, after a year and a half of pandemic-related costs, the nation’s housing providers and residents continue to face serious challenges meeting their financial obligations. Residents are struggling to pay their rent and property owners always had to continue paying their taxes, mortgages, payroll, insurance costs and more. Housing providers across the country are facing untold millions of dollars in rental arrears. Accordingly, it is critical that rental assistance funds are distributed as quickly and efficiently as possible.

In order to facilitate the distribution of rental assistance aid to residents and housing providers alike, NMHC and NAA, on behalf of the nation’s 40.1 million individuals who call an apartment home, ask policymakers to make the following improvements to expedite rental assistance distribution:

• Reject the addition of counter-productive eviction moratorium provisions.
• Direct grantees to allow housing providers to apply on behalf of residents under a notification safe-harbor, prioritize arrearages and remove the 18-month limit on assistance.
• Allow ERAP to reimburse rental property owners, without qualification, on properties where a renter has moved out.

Additional reforms to the emergency rental assistance program can be found here.

Without action to improve disbursement of ERAP and increased participation in the program, renters are faced with further uncertainty and a mounting debt cliff, while rental property owners move closer to foreclosure, bankruptcy, or a forced sale of the property—putting the overall stability of the rental housing sector and broader real estate market in peril.

For more than 25 years, the National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA) have partnered on behalf of America's apartment industry. Drawing on the knowledge and policy expertise of staff in Washington, D.C., as well as the advocacy power of more than 156 NAA state and local affiliated associations, NAA and NMHC provide a single voice for developers, owners and operators of multifamily rental housing. One-third of all Americans rent their housing, and 40 million of them live in an apartment home. 

Multifamily Marketwatch Podcast - October 25, 2021

This week: how people in commercial real estate feel about the future; Oregon finally makes progress in distributing rental assistance, and - is this is a good time to own an apartment building? All that and more in our podcast.

Listen to our latest podcast.

Oregonian: Thousands in Danger of Eviction

A cover story in Friday's edition of The Oregonian revealed just how the state's slow action and lack of leadership are taking a toll on renters and housing providers alike. Read more. 

Meanwhile, Oregon Public Broadcasting, the Salem Statesman Journal are among the many news organizations staying on top of this story. Click the links to read more. (No subscriptions required.)

Tribune: Some Landlords Get Rent, Many Still Waiting

The Portland Tribune reports today that even though Oregon is facing a backlog of requests from tenants for back-owed rent, the state may still qualify for more federal funds to help out.

The paper reports:

The backlog remains greatest in the three Portland metro area counties, where 42.1% of completed applications have been paid through Oct. 18, compared with 54.5% statewide.

Still, the Oregon Department of Housing and Community Services and 18 community action agencies paid out a total of $133 million by a Sept. 30 deadline set by the U.S. Treasury for states to commit at least 65% of their initial shares of rental assistance. Oregon's initial share was $204 million, and Oregon is in line for more money that will be reallocated from other states failing to spend their full amounts.

According to the state agency's dashboard, 20,968 of 38,474 completed applications for rent and utility assistance have been "paid and obligated" statewide as of Oct. 18 — the figure includes payments approved by agencies but not yet redeemed by landlords — for a total of $165.6 million. Requests total $300.8 million.

For Multnomah, Washington and Clackamas counties, 9,201 of 21,882 completed applications have been paid for a total of $37.7 million. Requests total $180.4 million. (See breakout for county details.)

Read the whole story.

Multifamily Marketwatch Podcast - October 18, 2021

This week: apartment rent payments are slowing as the pandemic wears on; the nation’s shortage of housing affecting all price points and rent and vacancy trends for Oregon and SW Washington.

Listen to our latest podcast.

Sold! 9 Units in Vancouver, Washington

 

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HFO is pleased to announce the sale of Hidden Green Apartments consisting of 9 garden-style units in Vancouver, Washington Congratulations to brokers Jack Stephens and Todd Tully and the rest of the HFO team. 

Rent & Vacancy Trends Announced for Portland, Vancouver, Salem, Eugene & Bend

Multifamily NW held its semi-annual Apartment Report breakfast with fall 2021 data this morning. Here are how today's numbers compare with those from one year ago. 

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RealPage: Severe Shortage of Rental Housing at Every Price Point

RealPage reports the magnitude of the demand boom is far beyond even the most optimistic forecast, following September's historic low vacancy rate of 2.7%. 

The news also included these points:

• New lease demand for year ending September 2021 increased by 50.5%
• Apartment resident retention surged to an all-time-high of 58%

Vacancy registered below 45 in 140 of the 150 largest US metros RealPage tracks in September. Orange County led the way at 1.12%, followed by Providence, RI (also at 1.12%); Riverside, Calif. (1.37%); San Diego (1.53%); Miami (1.75%); Virginia Beach (1.76%); Fort Lauderdale (1.94%); Sacramento (1.96%); Tampa (1.98%); and Detroit (2.04%).

The lack of availability also has “nothing to do” with construction completions, according to RealPage: new completions over the last year hit a three-decade high of 362,087 units, a wave that would historically be considered a major risk factor for investors but which has wholly failed to meet demand in the current cycle.

Net absorption hit 610,715 for the year ending in September, smashing prior records by more than half.

“We were bullish on apartments heading into 2021, but the magnitude of the demand boom is far beyond even the most optimistic forecast,” said RealPage director of forecasting and analysis Carl Whitaker. “And the absorption numbers could have been even bigger if not for the historic lack of availability.”

Rents also remain at record highs. National median rent growth has increased by 13.8% since January; prior averages were around 3.6% from 2017 to 2019. Increasing incomes and budgets of renters searching on their database are closely related to the increasing cost of homeownership and a tight residential real estate market, some analysts say: the for-sale market has posted a 48% drop in listings since last year, with supply seriously constricted.

“With rents rising virtually everywhere, only a few cities remain cheaper than they were pre-pandemic,” a recent Apartment List analysis notes. “And even there, rents are rebounding quickly.”

Sold! Mobile Home Park in Gresham

 

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HFO is pleased to announce the sale of Glisan Terrace - a 14-pad mobile home park in Gresham, Oregon. Congratulations to Todd Tully and Greg Frick and the rest of the HFO team!

Multifamily Marketwatch Podcast - October 11, 2021

This week: supply chain issues causing construction delays, rents across the country spike, and a Portland rental market update.

Listen to our latest podcast.

Oregonian: Most Renters Still Waiting For Aid

Today's lead story in The Oregonian concerns the continued backlog of rent assistance payouts. Although the state has made headway in tackling the problem, some counties are still behind expectations and many renters could lose their eviction protection before the money arrives.

Of the $204 million Oregon received from the U.S. government for the latest round, it had paid out or allocated 71% including administrative costs. But, only 37% of the money has actually reached landlords on behalf of renters. 

New guidelines released by the Department of the Treasury on Monday indicate that level of performance should be enough for the state to keep the money it's received. The new guidelines will allow Oregon to request more funding because it had committed more than 65% of the monies received by a September 30th deadline.

Another $156 million is already on the way according to a government executive, although the state is receiving between 1,000-2,000 applications weekly and the money is expected to be quickly depleted.

Between mid-September and October 4th, Oregon moved from being ranked 26th in the nation for distribution of rental aid to 8th place. 

The worst counties in the state for distributing funding include Marion County, which has received $10.4 million but had not paid out any rental assistance by the end of August and by the end of September had paid out nearly $575,000. 

Meanwhile, eviction filings in Oregon totaled 361 in July, 463 in August and 473 in September. The numbers do not include renters who move before the rental owner takes them to court.

Portland Multifamily Market's Challenges and Opportunities

Multi-Housing News interviewed Guardian Real Estate Services’ Hollie Forsman provides insights on local market fundamentals.

Forsman said that although the pandemic rounded off a thriving decade for Portland and has constricted employment, the metro’s multifamily market continues to benefit from a steady influx of residents priced out of more expensive West Coast markets. 

Nonetheless, hurdles do exist, such as expiring eviction moratoriums, rent controls and limited supply, Hollie Forsman, director of operations at Portland-based Guardian Real Estate Services, told Multi-Housing News.

In the interview, Forsman reveals the most critical trends and challenges shaping Portland’s multifamily market right now. Read more. 

Oregon-like Statewide Zoning Legislation Likely in Upcoming Washington Legislative Sessions

AARON KUNKLER   SEPTEMBER 30, 2021 
Washington State Wire

Creating more local incentives for cities to increase density, reexamining accessory dwelling units and at times preempting local jurisdictions on zoning policy are all on the table heading into the 2022 session. 

Rep. Nicole Macri (D-43rd LD), vice chair of the Appropriations Committee, participated in a panel discussion hosted by the nonprofit Up For Growth where she discussed her legislative housing priorities for the upcoming 2022 session. Making state-level zoning a priority has also been voiced by Macri’s colleague Rep. Jessica Bateman, who sits on the Housing, Human Services and Veterans Committee. 

“The key is going to be to bring together a big team,” Macri said. 

There’s a tension between supply-side housing strategies and ones that are aimed at protecting communities that have been disproportionately impacted by high housing costs, Macri said. By introducing both renter protections and loosening zoning regulations, Macri said she’s taking cues from Oregon. 

In 2019, Oregon became the first state to nearly eliminate single-family housing by allowing duplexes to be built in all but the most remote areas. 

In 2020, she introduced a pair of housing bills that both died in committee. The first was designed to allow more dense housing, ranging from duplexes to courtyard apartments, in all areas of cities with more than 15,000 residents where single-family zoning was allowed. The second would have protected tenants from sudden rent increases, and limited how much rents could rise. 

These bills were controversial by design, Macri said, and introduced with the goal of generating conversation on how to move housing policy forward in the state. State zoning mandates have historically been unpopular, but as the housing affordability crisis worsens, Macri said lawmaker’s hesitancy may be easing. 

“We were sort of guided by this principle that state mandate bills on land use and zoning will never garner the votes… and we’ve seen as the housing crisis has gotten worse that there’s more willingness among policymakers to think about the role that states can have in both land use and also in regulation,” Macri said. 

Even if lawmakers are more willing to discuss housing issues, Macri expects upcoming proposals to still attract significant opposition. 

At the same time as she is considering zoning bills, Macri is also thinking of more ways to protect tenants and stabilize rents. These bills could be tough sells for state Republicans who view current tenant protections as going too far. 

Sold! 12 Units in SE Portland

 

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HFO is pleased to announce the sale of 12-unit Lauralane Apartments. Congratulations to brokers Greg Frick and Lee Fehrenbacher and the rest of the HFO team! 

Multifamily Marketwatch Podcast - October 4, 2021

This week, Washington State and Washington County in Oregon extend eviction moratoriums; Seattle home prices show their biggest ever 12-month gains; and why multifamily is still the most favored asset class.

Listen to our latest podcast.