Here we are again, fellow Capitol Hill renters – smack in the middle of the “bummer in the summer”. I speak, of course, to moving season and harsh reality of the rental market on Capitol Hill.
Hopefully you are one of a few smart negotiators that secured a multi-year deal with only nominal increases to your rent, because, sadly, I am here to report to you that the rental market has once again shifted in favor of the landlords. The “one month free” signs ubiquitous in a renters market are being yanked from windows and rents are going up, up, up.
For the last 3-4 years, Capitol Hill rents have been on the rise at a rate higher than most Seattle neighborhoods simply due to its popularity among Seattleites, young and old. Average Capitol Hill rent this summer is $1728 per unit or $2.32 per square foot, showing a $10 monthly increase over last quarter and roughly 6 percent over last year.
According to Reis, Inc, a real estate analytic firm, apartment rents in the Seattle area climbed over 6 percent in each of the last two years. This outpaces increases in other typically high cost centers such as San Francisco, San Jose, Calif., or Boston and is more than twice as fast as the national average of 2.6 percent.
What’s causing these increases? There are a few factors in play. During the recent years of the Great Recession, there were unprecedented numbers of foreclosures occurring across the country. These former homeowners have been driven into the rental market. Also, folks who have been renting are renting longer, waiting out the market while they gain confidence lost in the housing bubble burst of 2009.
The growth and increasing stability of our local economy is also a significant driver of higher rents – a significant down-side to what would ordinarily be great news. The good news is that some large home-town companies, Amazon as one example, are growing, hiring more people and expanding their Seattle presence. The bad news for renters is that this growth brings new employees to Seattle, increasing numbers seeking housing. The influx of new renters reduces the numbers of unoccupied units thereby increasing rents by leaps and bounds. These increases are certainly shocking to the system (not to mention the wallet!), but they are not unprecedented.
Rents in Seattle increased by 7 percent annually from the beginning of 2006 through mid-2008. Increases at this rate have not been seen in the Seattle area since until recently and it reflects our recovering local economy. It is little wonder that more apartment buildings have been developed in Seattle in the last two years than during any of the previous 20. The record demand for rental units is pushing vacancy rates (percentage of rental properties vacant at any given time) down to historically low levels.
Apartment research firm Dupre + Scott reported the vacancy rate in Seattle at 3.32 percent of total units last spring. I repeat, 3.32 percent. This number is staggeringly low and, as one of Seattle’s most popular rental neighborhoods, Capitol Hill is disproportionately impacted. Consider this: In 2013, there were over 10,000 units added to the market putting Seattle second only to Houston in the number of units added that year. This year there are – get this – 46,755 apartment units in the pipeline to become available in Seattle, 2,500 units in Capitol Hill according to Apartment Insights Washington.
The area of Capitol Hill, First Hill and the 23rd and Union location will boast 26 new apartment buildings averaging 6 stories and 97 units in 2014 and early 2015. There are an additional 21 projects in the pipeline, projected to add 2,200 new units. That is a lot of new neighbors. This building boom explains the forest of construction cranes dotting our neighborhood.
I know it’s easy to become discouraged when looking for apartments in Capitol Hill, as prices are invariably high. The good news is that these rental expansions will lead to some relief for renters as numbers of available units flood into the market during 2014 and into 2015. In the meantime, negotiate strategically, attempting to get multi-year leases with reasonable incremental increases, and be a good, drama-free tenant so that your landlord will want to make it easy for you to stay.