Municipalities and the media need to do a better job explaining how renters are affected by levies and tax increases.
Finding a place to live in the Greater Seattle area is expensive — so expensive that some elected officials say we’re in a crisis.
The funny thing is, those officials are a big part of the problem.
By continually raising taxes and utility rates, they’re pushing landlords to raise rents and keep pace.
Those cost increases — plus inspection fees and other complications of doing business in Seattle — are driving some independent landlords to give up and sell. That further raises rent because new owners tend to charge more to make their investment pencil out.
Elected officials must know this, yet they keep proposing new and larger levies that will make housing even less affordable.
They’re not completely deranged. I suspect they’re taking advantage of a perception gap among renters, who don’t realize they pay property taxes just like homeowners. The difference is their taxes are rolled into rents, so they’re not obvious.
“The average renter does not make the connection between underlying, rising costs and the fact the landlord is forced to raise rents,” said Floyd Lorenz of Issaquah, who rents a six-unit building in Ballard.
“Taxes and fees go up every year and at some point you have to raise your revenue or your rent in order to cover your costs,” he said.
Around 10 percent of his Ballard rental income goes to taxes. Utility bills take another 8 percent.
With costs rising and politicians floating rent-control proposals, Lorenz recently decided to sell the place.
His timing looks good. With thousands of new apartments being built and job growth expected to slow, the rental market’s likely to cool in the next few years.
But new taxes would limit how far landlords could lower rents.
“It looks like we’re all getting rich on raising rents and everybody’s screaming about rents but we’re getting killed by expenses — taxes, utilities,” said Bart Flora, co-president of Seattle property manager Cornell & Associates.
The market’s been good lately but, “It just isn’t as good as what you read in the newspapers about skyrocketing rents — those rent increases are primarily taking place in newer properties or renovated properties,” he said.
Flora’s firm manages around 6,500 units, mostly in older buildings. Its rents increased 3.5 to 4 percent annually over the past five years. Yet a sampling of its buildings found taxes grew around 8 percent a year over that period, he said.
There’s a political calculation. Perhaps it’s easy for Seattle to pass levies because most of its voters rent. Seattle officials also apparently prefer levies over managing expenses and making do with regular revenue, even if they increase housing costs.
The average tenant “sees all these tax measures like the park measure and the transportation one and says it’s good, let’s vote for it,” Flora said. “But what they don’t understand is that somebody’s got to pay for it.”
Suburbanites chuckling at disjointed Seattle should beware.
Renters will eventually become the majority in King County, if development trends continue. Over the last four years, renters became the majority in Redmond and it may happen next in Renton.
Because of this shift, officials and the media need to do a better job communicating how levies affect renters.
The Let’s Move Seattle levy, for instance, is billed as costing the owner of a $450,000 house $279 per year.
If you don’t own a house, who cares, right?
The King County Assessor’s Office can fill in some blanks. It assessed Seattle multifamily units at an average of $154,241 last year. Let’s Move Seattle would cost the average unit around $95 annually.
But that still doesn’t provide a complete picture.
Multifamily assessments have soared. Since 2012, they grew 20 percent in Seattle, 25 percent in Redmond and 15 percent in Bellevue.
Property taxes may ebb as the pool of taxable property grows.
But Seattle’s been on a property-tax bender. Yes, Tim Eyman initiatives have limited tax increases, but Seattle’s overall property-tax revenue surged because of its growth, rising property values and an addiction to levies.
Over the last decade, Seattle property-tax collections grew 38 percent, more than triple its 12 percent population growth. It’s academic, but Seattle’s yearly property tax collection per capita grew 24 percent, from $539 to $666.
Lorenz has discussed these issues with tenants but still doesn’t think they make the connection between taxes and what landlords’ charge.
“They think it’s great that we need to improve roads, that we need to fund our schools, that we need infrastructure — who can dispute that,” he said. “Yet those are costs and when the costs go up, the revenue has to go up.”