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Originally published July 5, 2014 at 9:35 AM | Page modified July 12, 2014 at 11:28 AM

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Keeping rents at market value can help tenant and landlord | Rental Resources

What frustrates some about the current conversations about rental housing, increasing rents and affordability is that the basic economic facts surrounding rental housing are often omitted from public debate.


Special to NWhomes

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Rising rental rates is turning into a battleground issue, and nowhere is this more evident in Seattle than at the Lockhaven Apartments.

The Ballard-area property has been in the news for the past several months as its residents staged protests and formed a tenants’ union after what they perceived to be unfair increases in rent from new ownership.

Before its sale, Lockhaven had been under steady family ownership for many years, which allowed its owners to keep rents modest. In time, Lockhaven became “affordable housing” in an area where new development and high demand has led to higher rents.

Like much of the Seattle area’s existing rental-housing stock, Lockhaven has gotten old — 65 years old, to be exact. Rental housing has a life cycle. Once beyond that cycle, buildings require constant repairs or a complete update.

What is occurring at Lockhaven is no different from what occurs at any other property when its owner chooses to sell. An old building that’s out of date becomes a new building again, thanks to capital investment by new ownership.

These scenarios are not all bad.

Older property owners who’ve provided affordable housing for many years sell their properties and move on to retirement, where they can enjoy the fruits of their many years of labor. New owners can then refresh tired properties, ensuring the community has healthy, safe housing for years to come.

Neither of those benefits can happen, however, without a property that’s able to create positive cash flow. The byproduct of having rehabilitated housing is that rents increase to cover the cost of the mortgage and any improvements or renovations to the building.

What frustrates some about the current conversations about rental housing, increasing rents and affordability is that the basic economic facts surrounding rental housing are often omitted from public debate.

Tenant-advocacy groups and other political activists are now talking about rent control — prohibited by state law — as the solution to all housing affordability problems.

But keeping rents current can help tenants more than it hurts them. Gradually increasing rents to keep up with the market allows for predictable financial planning on the part of both landlord and tenant.

What we are seeing today are the realities of market demand in an area where vacancies are low and new-construction rents are 40 percent higher than that of existing rental housing. Inevitably, rent cannot stay the same in every sector.

It’s far too common, however, for renters to be caught off guard when the rent unexpectedly increases at a time a building is sold to new owners, or when a landlord realizes he or she hasn’t increased the rent for 10 years and it’s 40 percent below market.

Sean Martin is the director of external affairs of the Rental Housing Association of Washington, a not-for-profit association of more than 5,000 landlord members statewide. Rental Resource is the organization’s biweekly column. For more information for landlords or tenants, visit rhawa.org.



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