Washington Apartment Outlook - What You Need to Know
The rental housing industry is changing rapidly. Market conditions, economic conditions and legislative factors impact real estate and our industry’s ability to serve residents of our homes.
As professional business owners and managers, understanding market trends as well as threats and opportunities that impact our work is critical to success.
Attendees heard from exceptional and informative speakers, including WMFHA’s Director of Government Affairs Brett Waller; Matthew Gardner, Chief Economist for Windermere Real Estate; and Dylan Simon, Executive Vice President at Kidder Matthews.
The Threat of Continued Adverse Regulations
Brett gave a comprehensive update on legal and legislative matters impacting the rental housing industry at the local, state and federal levels.
Several laws adversarial to the rental housing industry were passed in the Democratic-controlled state legislative session in Olympia this year. WMFHA strongly advocated for policies equitable for both residents and housing providers, and strongly opposed policies that would make housing less affordable and less accessible.
Laws restricting housing are being passed at local levels in Tacoma, Burien, Kent and Kenmore, creating a hodge-podge patchwork of rules that differ from our state landlord-tenant law. These laws make it challenging for housing operators to stay in compliance and mitigate their business risk.
A very problematic just cause eviction ballot initiative coming up for vote in Federal Way has prompted WMFHA and its coalition partners to initiate a “No on Measure 19-001” campaign. Our aim is to educate Federal Way voters on the damaging effects Initiative 19-001 poses to renters’ safety and affordability.
The Seattle City Council continues to advance policies promoted by tenant advocacy groups without considering their impacts on housing. Seattle Councilmember Kshama Sawant introduced rent control legislation to prohibit rent increases beyond inflation, require vacancy control, create a large bureaucracy, and other poorly thought out and unworkable requirements.
Seven Seattle City Council seats are up for election in 2019. A change is needed to elect public officials who will pragmatically represent all stakeholders and businesses in Seattle, not just extreme activist groups pushing their ideologies.
Efforts to implement rent control across the United States are growing. This year, Oregon and California passed statewide rent control. New York ratcheted up their rent control measures too.
The rent control model passed in Oregon and California is appealing to those that believe rent increases are unnecessary. However, they completely ignore the actual costs to providing housing. It’s clear that any form of rent control hurts our mutual efforts to address housing affordability in Washington and across the United States.
Brett was emphatic. “We need your voice and support to defeat rent control in Washington in 2020. Whether that’s an effort to remove the statewide preemption to allow cities, like Seattle, to implement their own style of rent control, or a blanket rent control law that affects investment and rehabilitation of existing rental housing, your support is critical to the industry.”
Headwinds and Tailwinds, but Optimism Abounds
Matthew Gardner has spoken at WAO for twelve years and says it is the highlight of his speaking calendar each year.
Always entertaining and educational, Matthew presented an economic forecast for the nation and region. We are in the “Goldilocks Zone,” according to Matthew, with strong job growth, low unemployment, low-interest rates, and wages increasing.
The burning question for attendees centered on talk of an eventual recession. Matthew predicted a slowdown in growth and an increase in early recession indicators but predicted that any slowdown would be minor compared to the last few recessions.
The local economy will continue to outperform the national economy due to tech growth and expansion, but “Enjoy it while you can, because life is likely to change by the end of 2020.”
Federal policies, particularly tariffs and trade wars, pose the biggest threat to the national economy and global growth, Matthew explained. Locally, indicators are still strong for 2020 in Seattle and other cities in Washington. Local politics and the impacts of poor policy may drag down the real estate sector.
Emerging Trends and Drivers of Apartment Demand
Dylan Simon outlined current drivers of apartment demand locally and delivered data on development cycles in the Puget Sound region. Rent growth is moderating, but demand remains strong for rental housing. Cap rates will remain steady and low versus historical rates and compared to other markets.
The bulk of the audience came to hear about rent and vacancy trends, and Dylan gave a thorough evaluation of macro and micro trends and future expectations. New development continues to serve the growing demand for rental housing in our region at all price levels. “Competition is the new normal,” Dylan explained.
Dylan outlined emerging trends and predicted that job growth, new development and apartment sales will remain positive, but that the new decade ahead will bring higher competition, a need for innovation, and hybridization in product and strategies.
The local housing market has worked hard to support new residents of rental housing in our growing local economy. The rental housing industry stands ready to meet the needs of residents of our state, barring impediments that limit our ability to serve all Washingtonians.
Thank you for our presenting sponsors for this year’s Washington Apartment Outlook, Apartments.com, Buy-Rite Carpet, FPI Management, and Thrive Communities.