Strong demand, weak construction activity and increasing condo conversions are making it tough for Puget Sound renters to find a place to call home.
Apartment rents throughout the central Puget Sound area are the highest in years and vacancy rates are tightening — narrowing options for renters who increasingly are finding themselves also priced out of homeownership.
Blame it on a strong economy that’s creating apartment demand.
Blame it on weak apartment construction activity that isn’t meeting the demand.
And blame it on condominium conversions that are sucking away rental supply, said apartment analyst Mike Scott, of Dupre+Scott Apartment Advisors in Seattle.
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Based on its semiannual survey of apartment owners and managers, Dupre+Scott found that the areawide vacancy rate is one of the lowest in 20 years.
That’s no surprise to Aleisha Smith, a young restaurant worker.
“I wouldn’t say options were abundant,” Smith said of her recent hunt for a new place to live near her work in Wallingford.
“I found a studio a couple of years ago, and it was definitely much easier then,” she said. This time, with rents climbing, she found a room to rent in another woman’s apartment.
Vacancy rates are lowest in King and Snohomish counties, at 3.9 percent and 4 percent, respectively.
Those are the lowest rates for the two counties since March 2001, and they demonstrate a clear tipping in favor of landlords. A 5 percent vacancy rate is considered neutral between renters and building owners.
Average rents for King County now stand at $946 and for Snohomish at $854 a month. Rents actually dipped following the 2001-02 recession. At the same time, the lowest mortgage rates in 40 years prompted many renters to buy a home.
Kitsap County has the four-county region’s highest vacancy rate at 7.8 percent, but its average rent is not the lowest at $784.
Pierce County’s vacancy rate is now 5.9 percent, and its average rent is $750.
Dupre+Scott’s numbers are based on buildings with 20 or more units.
“Vacancies are mostly lower because our region has seen continued job growth and in-migration in the past year,” Scott wrote in the April issue of his newsletter, The Apartment Advisor.
Statewide unemployment is at its lowest level since the late 1990s. In metro Seattle, the 4.4 percent jobless rate for March is what most experts would regard as full employment.
Scott said apartment demand is being exacerbated by “rising home prices making rents look like a bargain again,” and apartment-to-condo conversions that outpaced new apartment construction.
Indeed, while the average King County apartment rent is up 8 percent over a year ago, the median single-family-home price has climbed 12 percent to $454,950, according to the Northwest Multiple Listing Service.
Scott calculates that in the five-county region that includes Thurston County, some 2,617 new apartments opened last year. At the same time, 6,858 apartments were converted to condos in 2006, for a potential loss of 4,241 units. However, some of those units may have been purchased by investors for rental use, softening the loss somewhat.
Shawn Hoban, president of Coast Real Estate Services, said the rental market is nearing the point where “renters are going to have to compete for space, which is in contrast to landlords competing for renters a couple of years ago.
“I don’t know if it’s going to get to the point where there will be a bidding frenzy on apartments,” he continued, “but clearly it’s getting to the point where landlords can choose from a pool of applicants.”
Hoban, whose firm manages more than 10,000 apartment units, said that means applicants with the best credit, rental and employment histories will have an edge.
Their monthly income should equal three times their rent, and they need to have money in the bank, too.
That falls hard on renters such as college student Holly Andrew. She was desperately searching on Thursday for someplace to move that day.
“When you look on Craigslist for a place, the money you have to have — $900 to two grand — just to get into a place, dude, there’s just no way,” Andrew said. “Even with roommates, it’s 400 to 600 bucks. There’s no chance unless you’ve saved up money in the past.”
Also hampering her search is her cat; it just had kittens. Landlords often relax the rules on pets when vacancies climb and tighten them when renters come flocking.
The Dupre+Scott survey also found that just 15 percent of properties now offer move-in incentives worth an average $408, down 64 percent from two years ago.
Meanwhile, landlords are charging for extras. Monthly carport parking costs an average of $31 areawide, while garage space rents for an average of $82.
Hoban said renters facing higher costs should realize they’ve benefited from five years of minimal or no rent increases. Now “landlords are going to make up for rent increases they haven’t been able to realize in a number of years.”
He expects rents to increase 5 to 10 percent in the next year, and “some will go higher than that.”
If renters have a bright spot on the horizon, it’s this: Developers in the central Puget Sound region plan to roll out 20,857 new units between this year and 2011. And that’s just counting apartment complexes with 20 or more units.
Demand no doubt will drive others to develop smaller buildings within the region.
Elizabeth Rhodes: firstname.lastname@example.org