What's Next For The Seattle Rental Market?
Published on Oct 5, 2022General
Rent has been steadily on the rise in Seattle for the last few decades. Even with the steady rise in rent, there were some ups and downs during and after the pandemic. But real estate is a long-term investment. If you’re a landlord, you’re not too concerned with the short-term movements in rent. So what does the current post-pandemic rental market look like? What is the long-term outlook for the rental market in the Emerald City?
Where we are now
Before the pandemic and before the slight population decrease during the pandemic, there was a housing shortage in Seattle and the surrounding areas of King County, Pierce County, and Snohomish County. While rents and demand fluctuated between 2020 and 2022, nothing changed the supply of housing in any significant way. Since then, the population has rebounded and reached a new record which lead to a fast rise in rent across the city.
While it isn’t likely that rent will continue to increase at such a high pace, rent should continue to rise as long as the population continues to grow. It will likely settle down over the long term and unless there is some unforeseeable event like a global pandemic, the long-term trend should be one of steady increase.
Zoning tells the story
While there is a high demand for housing and the population continues to increase, there’s very limited land that can be developed to meet that demand. As long as the city and the state don’t make any major changes to their zoning laws, housing construction will continue to lag behind the population growth. Even if the city or the state did make significant changes, it would take years to feel the impact of those changes.
It’s not just the number of units allowed on a lot that impacts the number of units constructed. It also includes things like the number of staircases required, parking minimums, lot size minimums, and other local building codes. This means that developers often can’t even build the number of units a parcel is zoned for because they need to meet all these other requirements. As long as the city and state make it difficult to build enough homes, rent should increase.
The Seattle area
One of the major problems when it comes to the regional housing supply is that the suburbs and the cities surrounding Seattle build very few homes. This means that even if Seattle did everything within its power to increase the supply of housing, it still wouldn’t be able to meet the demands of the region. This is due to single-family zoning which means only one home can be built on a parcel of land.
There have been attempts to make it easier and legal to build accessory dwelling units in the backyards of single-family homes but those have mostly failed or haven’t gone far enough. Unless the suburbs in King County, Pierce County, and Snohomish County change their zoning laws to allow substantial amounts of housing construction, the entire region will continue to see rents rise even in cities far outside of Seattle.
What to expect
Real estate is a risky investment. There are a million unforeseen possibilities that can impact your investment in good and bad ways. There can be recessions, natural disasters, local economic decline, and on and on. These risks are expected but even with a housing bubble that burst and a once-in-a-century global pandemic, the Seattle housing market has continued to see rents rise. When you consider all the regulations and local zoning codes, it’s difficult to see a path for a drastic increase in construction, so expect housing prices and rents to rise.