Some landlords of older apartment buildings are keeping rents fair in desirable neighborhoods.
Ask Al Hendricks why Seattle rents are going through the roof, and he’ll sum it up in one word (and no, it’s not “Amazon”).
“Greed,” Al says. “That’s the economic world we’re in. If they can getcha, they’re gonna getcha.”
But that’s not the economic world of the El Capitan, the landmark Capitol Hill apartment building Al and his wife, Narci, have owned for 44 years. Despite its now-fashionable Pike/Pine location, monthly rents remain fair: for a new tenant, that’s between $800 and $1,000, including heat and most utilities. Rents of existing tenants rarely go up, and when they do, it’s only by $15 or so.
Seattle has added thousands of luxury units in recent years. But for folks on a modest income, the El Capitan and other older “Class C” properties in core Seattle neighborhoods are a lifesaver. Sure, they don’t have all the modern amenities, but you could easily pay twice as much at the newer apartments nearby.
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While the rents have risen at Class C buildings, it’s been reasonable. I asked Tom Cain of Apartment Insights, a Seattle-based rental-market research firm, to look into it. He analyzed data for 33 Class C buildings with 50 or more units in core Seattle neighborhoods, which shows that in the past five years, the average rent rose from $820 to $960 — an annual increase of 3.4 percent.
At luxury Class A properties in the same neighborhoods — units that are more expensive to begin with — rents have gone up at a much faster pace. Since 2010, they’ve jumped from $1,428 to $1,907, an average 6.7 percent increase per year.
And it’s not because of higher demand for these units. Class A properties have a vacancy rate of 4.6 percent, exactly where it was five years ago.
Vacancy rates in Class C buildings, however, have declined by half in the last few years. They now stand at just 2.7 percent, which means finding an available unit is increasingly difficult.
The data seem to defy the law of supply and demand. I asked Cain about it; he believes it has something to do with the different types of ownership models at luxury apartment buildings compared with the older ones.
Premium Class A properties are typically owned by institutional investors and managed by a national property-management company.
In contrast, Class C properties are usually owned by people with a connection to Seattle — either a family (though that’s become a lot less common in recent years) or a small group of local investors.
“Also, these owners seem to hold the properties longer,” Cain says, “and as a result, they have lower debt coverage ratios.” The less debt they have to service, the less pressure to push rents to the maximum.
In other words, many of these landlords aren’t jacking up rents to whatever the market will bear. It’s a refreshing change from the all-too-common stories of brutal rent hikes forcing tenants to relocate.
Back at the El Capitan, Al talks about the “family feeling” at the building. He tells me about tenants who’ve stayed put for decades, who’ve raised children — now grown — there.
Narci recalls how after the 2001 Nisqually earthquake crumbled part of the El Capitan’s parapet, most of the tenants helped them clean up the mess in front of the building. “When people move in here,” she says, “it feels like home.”
With an office in the basement, it’s not as easy as it once was for Al to get down the stairs, but he still comes to work most every day. He typically fields several phone calls from folks who’d like to live at the El Capitan, but there are never any vacancies. In fact, there’s a waiting list. Al says that’s what happens when you treat people fairly and honestly.
Happily, the future of the El Capitan is safe; when the time comes, the couple’s son Manny will take over.
As for Seattle’s other vintage apartment buildings, things are less certain.