An article in the front page of the January 13th Seattle Times lamented rent increases sometimes running over 130% in older multifamily apartment buildings in Seattle. The article prominently featured unit prices in excess of $200,000 on the average and the plight of poor renters who had enjoyed below market rents for many years.
A Matter of Apartment Development Philosophy
Seattle Commercial Real Estate sympathizes with the plight of renters, but we must fairly point out the realities of the demands of the apartment market place. The reality of governmental restrictions and impositions on the cost of development for apartments has inevitably driven up the cost of new construction.
Why rents increase in older buildings
Sellers of apartment buildings in Seattle are responding to the rise in prices by taking older buildings in which they are no longer willing to put money and apartment complexes with historically low rents by and selling them as a real estate investment to apartment investors. The property investors are capitalizing their high unit purchase prices by putting in some minimal improvements and raising rents to a current market level. Real estate investment is a market driven vehicle, not a vehicle responding to governments deploring a lack of affordable housing while offering no incentives to real estate investors or real estate developers to provide affordable housing units.
The way forward to affordable apartments
The market can easily respond to the issue of “Affordable Housing” in the multi-family property market in Seattle real estate by instituting stream lined approvals, limiting mitigation costs such as streets, parks, libraries, etc., and real estate tax mitigation programs to incentivize the creativity of developers, not by restricting the ability of private enterprise to respond to opportunity.