The good news: Fewer landlords are planning rent hikes than last year. The bad news: Despite the ongoing eruption of apartment buildings across the region, rents are still increasing.
The good news: Fewer landlords are planning rent hikes than last year. The bad news: Despite the ongoing eruption of apartment buildings across the region, rents are still rising.
The average one-bedroom rent in King County is $1,266, up 8 percent over the past 12 months, according to a new report.
In much of the Seattle area, the pace of hikes appears to be slowing as thousands of new apartment units open and more properties offer renters greater inducements to move in, according to Dupre+Scott Apartment Advisors.
Seattle’s highest and lowest rents Average one bedroom:
$1,871
Belltown, downtown and South Lake Union, up 4.1% over a year ago.
$1,063
Rainier Valley, up 8.4% over a year ago.
About 11 percent of King County landlords in the firm’s March survey of apartment properties with at least 20 units said they offered concessions that average $1,066. And only one-third of landlords said they plan to increase rent in the next six months, compared with 81 percent in last year’s spring survey.
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But March’s vacancy rate of 3.2 percent was the lowest in nearly two decades, and the 8 percent annual gain in rent was still more than double the average annual gain from 1998 to 2012.
“It still is a tight rental market,” said Mike Scott, co-owner of the Seattle market-research firm. “It will soften up,” he predicted, but “it’s not going to do it immediately, overnight.”
The average renter in the three-county Seattle metro area is devoting nearly 31 percent of monthly income to rent, according to Seattle real-estate website Zillow. Most experts agree a housing cost over 30 percent is considered unaffordable.
That lack of affordability has wider implications.
“Rapidly rising rents, coupled with only meager income growth, means an ever-increasing share of income is siphoned off to rent every month, and not into a savings account for a down payment on a home,” Zillow Chief Economist Stan Humphries said in an email. “If this keeps up, renting will no longer be a steppingstone, but could instead become a barrier to homeownership.”
Wide differences
The countywide average rent masks huge variations in what renters are paying across the region.
Among the major cities, Kirkland’s one-bedroom rent of $1,522 was the highest, followed by Mercer Island, Seattle, Bellevue and Issaquah. These rents don’t include utilities or parking.
The lowest rent in major cities in King and Snohomish counties was in SeaTac ($784). Auburn, Everett, Marysville and Federal Way also had among the lowest rents.
Within Seattle, downtown led all neighborhoods with the highest average one-bedroom rent, at $1,871. Dupre+Scott includes Belltown and South Lake Union in its downtown statistics.
A slew of popular, close-in neighborhoods aren’t far behind, with average rents in a narrow range between $1,425 and $1,533: Ballard, Queen Anne, Green Lake, Fremont, Wallingford, Capitol Hill, Eastlake, First Hill and the Central Area.
The lowest rents in Seattle were at the fringes: $1,063 in Rainier Valley and $1,072 in North Seattle, according to data from Dupre+Scott.
The apartment-construction boom is skewing the statistics for average rents and annual rent growth, Scott said.
Among older properties in King County, the lowest average one-bedroom rent was $962 for apartments built from 1975 to 1984, according to Dupre+Scott. By contrast, the average rent in units built since 2010 is the highest, at $1,723.
Apartment boom
Developers are expected to open about 12,000 units this year, Scott said, with 11,000 more units next year and even more in 2017.
Some market observers have predicted the apartment-construction boom would eventually lead to high vacancies and softer rents.
But that hasn’t come to pass yet.
For example, in Seattle’s Ballard neighborhood, where a five-year building frenzy has more than doubled the number of apartment units, the average rent in March was 13 percent higher over the year. The vacancy rate was 3 percent, up from 1.2 percent a year ago, but still low enough to be considered a landlord’s market.
“We were surprised and impressed with the performance of the Ballard area,” said Tom Cain, head of market-research firm Apartment Insights Washington, in a recent report.
Including units in new properties that are still leasing up, the gross vacancy rate in King and Snohomish counties is about 6.6 percent, the highest in four years, Cain said.
Despite all the new construction, rents aren’t expected to fall.
Strong job growth and a tough housing market will keep renters in apartments. First-time homebuyers don’t have many homes to choose from, and homes are less affordable than a year ago, Cain said.
No longer in top 10
The slowdown in rent growth means that, for the first time in five years, the Seattle-Tacoma metro wasn’t in the top 10 markets nationally, according to MPF Research.
In the first quarter, the average Seattle metro rent grew 5.3 percent annually, ranking 14th in the nation. The Denver-Boulder area ranked first with a 10.5 percent increase, and Oakland and San Francisco each posted 10.2 percent gains.
Seattle’s rank contrasts with mid-2013, when it led the nation in rent hikes, according to one firm’s tally.
While the pace of rent hikes is slowing, thanks to strong job growth, demand remains high: The Seattle area ranked 10th among the metros in net apartments leased in the first quarter.
Nationally, the rent for new leases after move-in incentives was up 4.6 percent over the past 12 months, MPF reported. That’s higher than the 3.2 percent gain seen a year ago.
“Accelerating job creation is allowing more young adults to form new households, and almost all of the new households are opting to rent,” said Greg Willett, MPF Research vice president, in a statement. “At the same time, relatively few of the more-established renters are leaving apartments to make home purchases for the first time.”
Despite the easing of rent increases, working- and middle-class renters nationwide still have a tough time finding a place to call home, he said.
“Product availability is very limited in the middle-priced and most-affordable properties across the entire country,” Willett said. “The bulk of the available stock is found in brand new, expensive projects that are moving through the initial lease-up process.”