7 ms·

$1,000 hikes hit some older Seattle rentals

37 points by mburst 10y ago

option_greek 10y ago
Are the rent increases part of the inflation indexes ? I ask because Fed seems hell bent on stoking up inflation and I don't see why this shouldn't be part of it.
- tehabe 10y ago
  The Fed is using the Personal consumption expenditure index done by the Department of Commerce. And yes, rents are in. https://en.wikipedia.org/wiki/Personal_consumption_expenditures_price_index https://en.wikipedia.org/wiki/Personal_consumption_expenditu...
  - tostitos1979 10y ago
    Yes, but home prices are not. If they were, my guess is we'd see a different story (especially regionally). Someone used to do a shadow inflation index .. when energy prices were excluded from the numbers. Forget the details.
    - n00b101 10y ago
      http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
reustle 10y ago
I'm not very familiar with the situation, but could these fast rising prices have anything to do with the recent bump in minimum wage in Seattle to $15? It doesn't mention it in the article. http://www.forbes.com/sites/timworstall/2016/02/19/seattles-15-minimum-wage-jobs-down-unemployment-up-this-isnt-working-is-it/ http://www.forbes.com/sites/timworstall/2016/02/19/seattles-...
- seanmcdirmid 10y ago
  No, not at those price levels. High-end renters are driving the increases.
- kevingadd 10y ago
  How would recently increasing the minimum wage cause apartment rents to go up by $1000/mo? What do you think? Could it? What would be the mechanism responsible for the connection?
  - MichaelBurge 10y ago
    160 hours a month * ($15 new minimum - $7.25 federal minimum) = $1240 increase in monthly income. You usually need 3x income to qualify for an apartment, so I would expect people to qualify for $400/month higher rent, changing to $800/month from $400/month on minimum wage. If people on minimum wage rent a 3-bedroom as roommates, it could cause the price of a 3-bedroom to raise up to $1200 or a 2-bedroom by $800 if 100% of candidate tenants were roommates on minimum wage. The effect would realistically be lower. The article mentions people on fixed incomes like social security, which of course are going to be priced out. It also wouldn't matter for people who already made $15/hour, unless their incomes increased at the same time. You could tell which is which by looking at rent for mobile homes. You usually rent the land there and park a mobile home on it that you own. If the cause is minimum wage increasing, I would expect to see the land rent for trailer parks increase. If the cause is techie yuppies moving into the neighborhood, I would expect the trailer parks to be bought out by investors and developed.
    - zacharycohn 10y ago
      Seattle didn't use federal min wage. I believe the minimum wage was $9.50/hr. And the $15 min wage is phasing in over five to seven years.
- akamel 10y ago
  It's mostly tech money and foreign investors. In addition 15$ hasn't taken full effect yet, it is a steady increase to 15 and will only reach that target in a few years.
hanoz 10y ago
Free lunch! The home hoarding rentier class have been engorging themselves on the biggest free lunch going for a generation. Funded with borrowed into existence free money, and protected from market forces on the downside using money taken from the very people they're pricing out, in the form of state funded intervention and negative real interest rates.
- pliftkl 10y ago
  "The home hoarding rentier class"? What about someone who's primary assets are a couple of houses that (s)he rents out? Should (s)he be restricted from getting a market rate income on those houses? I disagree pretty strongly that the "rentiers" are protected from market forces. If we look at the case of people who really are in the "rentier class", who are heavily leveraged, they are taking a fairly big risk here that the economy and housing prices are going to stay high, and many are risking bankruptcy should we suffer a reversal.
  - tostitos1979 10y ago
    I have to side with the parent poster. The state essentially subsidized the "rentiers". I don't see how this is different from former communist countries doling out lucrative enterprises to private individuals. You might say what was done in capitalist countries (i.e. insane regime of low interests/hidden debasement of currency) wasn't corrupt because of free markets. I call BS on this. A poor person does not have access to said markets (downpayments are the hurdle). Take Toronto as an example. Pretty much most people who bought detached houses prior to 2005 are millionaires. The rich people at the time bought a bunch of houses. How is this not a gift from the state? If you happen to be a schmuck who came in later on or have poor parents, well ... sorry ... that's the way it is.
    - seibelj 10y ago
      No one forces anyone to live anywhere. You don't have to pay the rent. Move somewhere else, buy in an inexpensive area, etc. The mortgage interest tax deduction is a handout but otherwise the government isn't propping up anyone, and there are government programs that help first time home buyers into houses with 0% down (which I think is a big mistake). On the NPR program On Point last week, a guy called in complaining that he couldn't find anything in Nashville for under $400k, and the guest responded that the average home in Nashville was around $200k. People need to realize that you don't get to live in the most desirable places just because you want to. No one has the right to live someplace, you need to pay for it, and if you can't pay then go somewhere else.
jacknews 10y ago
Oh dear, what a headline. What about the 'free lunch' that landlords already enjoy in the form of rent, just by owning property. Or should that be "im-property".
- mirkules 10y ago
  I got the impression that the headline was sarcastic, given that it is a direct quote from one of the landlords. Anyway, there was a better quote in the article where a landlord said he is being vilified by the public for doing the "right thing business-wise". My opinion: he should be. As a former renter in an expensive area, it is really tough to swallow that a rate hike is nothing more than a money-grab. As a former landlord, if the rent covers my mortgage and expenses, it is a far better business decision to keep a steady-paying, no-trouble-causing tenant than it is to price them out of the area and lose that customer loyalty, and to have to spend time and money looking for new tenants. And most importantly, as a human being I just can't do this to people. But then again, I have a heart when it comes to this kind of stuff, and having been burned by a tenant because of my abundant good will, I sold my property and don't rent anymore - I just can't handle being cold and ruthless and "businessy" to people who depend on me for a roof over their head.
  - spacehome 10y ago
    For a 5 or 10 percent increase, maybe you're right, but an extra $1,000/mo is real money, and probably worth the hassle of finding another tenant.
- dang 10y ago
  The submitted title ("Free lunch is over for tenants: $1,000 hikes hit some older Seattle rentals") didn't include the quotation marks of the original, which mirkules rightly points out make a big difference. But we'll just take the free lunch bit out of the title here.
jseliger 10y ago
The comments here are so far not good. The big problem in Seattle, as in many other U.S. coastal cities, is zoning, which prohibits the supply of housing to rise to meet demand. See my post, "Do millennials have a future in Seattle? Do millennials have a future in any superstar cities?" (https://jakeseliger.com/2015/09/24/do-millennials-have-a-future-in-seattle-do-millennials-have-a-future-in-any-superstar-cities/ https://jakeseliger.com/2015/09/24/do-millennials-have-a-fut...) or "Zoning's Steep Price" (http://object.cato.org/sites/cato.org/files/serials/files/regulation/2002/10/v25n3-7.pdf http://object.cato.org/sites/cato.org/files/serials/files/re...) for more detail.
- Finnucane 10y ago
  Yeah, everyone loves to blame zoning, though in practice, developers are only really enthusiastic about building as long as prices are high and rising. When that stops, they walk away. Plus, there's never enough to meet demand: as long as people are moving into the area because there's money to be made there, and money keeps flowing in, there will always be more demand than supply. And, I would wager that there's a correlation between those who say there should be no limits on building, and those who are unwilling to pay for public infrastructure (schools, roads, transit systems, water and electric supply, etc.) needed to support the increased population.
  - saosebastiao 10y ago
    Tokyo has consistently grown faster than any other first world megacity for over 30 years now, feeding off of its status as pretty much the only place in the country that hasn't had stagnated economic growth. And despite this growth (housing units growing at >2% per year every year, compared to 0.3% for Seattle which is one of the fastest growth rates of any city in the US), housing prices have remained flat for 30 years now. Developers don't 'walk away' because prices are low...they are forced to compete to survive and they deal with the low prices. The problem really is supply, and japanese zoning is objectively better for housing costs. Anybody who thinks that it is impossible for supply to keep up with boom time demand has no idea how much housing that developers are willing to build if we just fucking let them.
louprado 10y ago
Since these rent hikes usually occur when a property changes ownership, we should encourage landlords to offer their tenants a first right of refusal to purchase. At least it would prime every tenant's mind that the rental terms might change one day. I recently told one of my tenants that I'd be selling the property next year and would give her first rights. She now keeps the front yard clean (the city had filed past complaints), she is saving money to prepare, and she has hope. Simply put, she is a better citizen. People need encouragement to think long term. It is human nature to not consider risks when things haven't been a problem in the past. Nearly everyone now wears a seat belt and a helmet, but a few decades ago even the smartest people didn't bother until they were strongly and repeatedly encouraged to do so.
- daveguy 10y ago
  > Simply put, she is a better citizen. Threats of $1000 rent hikes sound like a good way to keep the citizens in line. Well done, landlord.
  - zo1 10y ago
    Sounds more like an early warning than a threat.
  - louprado 10y ago
    Well, I have a practice of never raising the rent on a tenant in good standing. By why would anyone give a landlord the benefit of the doubt. A cynical mixed-context response is so much easier than contemplating solutions to a complex problem. Perhaps many landlords initially want to do the right thing. But after years of hearing "landlord" used as a slur they just say, fuck it, and act indifferently towards their tenant.
n72 10y ago
"Their pleas for a smaller, phased-in rent hike were rejected. “We couldn’t believe it. All my friends have just said that it’s not right,” Haug said. So now, they’re getting ready to move out." Would they have preferred he had raised the rent slowly over the last five years, thereby resulting in more money paid to him overall?
mratzloff 10y ago
High-density housing has been going up throughout the area because the population is skyrocketing. It's true that single-family homes are in short supply and sell quickly, but they can't build enough single-family homes to keep pace with the demand; there simply isn't space, especially in the city. Wallingford is a desirable neighborhood and rents are going to increase there. That's just reality. These tenants had been insulated from the last decade of market pressures, but there are plenty of apartments available. I do sympathize with their situation. Being priced out of your home and having to quickly find a new place and move is incredibly stressful and can be personally devastating if you've grown attached to where you live, your neighbors, etc. And I do think legally limiting the rate of rent increase each year (as a percentage of overall rent) is a reasonable compromise. Unfortunately, with Amazon and other tech companies importing thousands and thousands of young men with six-figure salaries, housing prices in general will only continue to increase.
- kazinator 10y ago
  > Unfortunately, with Amazon and other tech companies importing thousands and thousands of young men with six-figure salaries, housing prices in general will only continue to increase. Indeed. The only problem is that people with six-figure salaries rely on the services of people who don't have six-figure salaries, and those people also require proximity to their own non-six-figure jobs. Oh, like teachers for their kids, police officers, supermarket cashiers, you name it.
mcoliver 10y ago
Housing articles appear on HN quite frequently and the comments are usually quite devisive. The same people that deride owning property as a terribly illiquid investment also complain about instability with regards to rent. Yes a 30 year mortgage may cost you interest expense and yes your down payment is locked up in an illiquid asset buy one of the main things you get is stability in your cost of housing. Your 20 year old self may be fine with moving here or there,telecommuting, etc..buy your 60 year old self on fixed income may be in another boat being forced to move from a community you have been in for 30 years. Buy land...it's the only thing they aren't making more of. Take a RE investment class, learn about valuations, figure out a place where you want to live. As hard as it is to do now...IMAGINE YOUR LIFE AT 60 OR 70. Set yourself up to be in control of your life then and make the immediate gratification sacrifices now.
- kazinator 10y ago
  > Yes a 30 year mortgage may cost you interest expense and yes your down payment is locked up in an illiquid asset buy one of the main things you get is stability in your cost of housing. A $1000 mortgage, even if variable rate, isn't suddenly going to jump to $2000. I suppose it could happen if this is early in the mortgage (most of the payment is interest and the interest rate suddenly doubles). Unlike rent, interest rates don't go monotonically up, though; they go up and down. Unless it's already at zero, interest has room to go down, too. A mortgage gets cheaper when the interest rate goes down. Won't happen with rent, except in some god forsaken town that is shrinking. (The company closes the mine, and everyone leaves or whatever, and the remaining people practically have to be paid to stay.) That is to say, a mortgage can get cheaper even if you're living in a desirable place where values are appreciating, because the interest rate is linked to national and global finance which isn't related to the real estate dynamics of your particular neck of the woods. Rents will never get cheaper in a place like that.

37 points by mburst 10y ago

Are the rent increases part of the inflation indexes ? I ask because Fed seems hell bent on stoking up inflation and I don't see why this shouldn't be part of it.

tehabe 10y ago
The Fed is using the Personal consumption expenditure index done by the Department of Commerce. And yes, rents are in. https://en.wikipedia.org/wiki/Personal_consumption_expenditures_price_index https://en.wikipedia.org/wiki/Personal_consumption_expenditu...
- tostitos1979 10y ago
  Yes, but home prices are not. If they were, my guess is we'd see a different story (especially regionally). Someone used to do a shadow inflation index .. when energy prices were excluded from the numbers. Forget the details.
  - n00b101 10y ago
    http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts

reustle 10y ago

I'm not very familiar with the situation, but could these fast rising prices have anything to do with the recent bump in minimum wage in Seattle to $15? It doesn't mention it in the article. http://www.forbes.com/sites/timworstall/2016/02/19/seattles-15-minimum-wage-jobs-down-unemployment-up-this-isnt-working-is-it/ http://www.forbes.com/sites/timworstall/2016/02/19/seattles-...

seanmcdirmid 10y ago
No, not at those price levels. High-end renters are driving the increases.
kevingadd 10y ago
How would recently increasing the minimum wage cause apartment rents to go up by $1000/mo? What do you think? Could it? What would be the mechanism responsible for the connection?
- MichaelBurge 10y ago
  160 hours a month * ($15 new minimum - $7.25 federal minimum) = $1240 increase in monthly income. You usually need 3x income to qualify for an apartment, so I would expect people to qualify for $400/month higher rent, changing to $800/month from $400/month on minimum wage. If people on minimum wage rent a 3-bedroom as roommates, it could cause the price of a 3-bedroom to raise up to $1200 or a 2-bedroom by $800 if 100% of candidate tenants were roommates on minimum wage. The effect would realistically be lower. The article mentions people on fixed incomes like social security, which of course are going to be priced out. It also wouldn't matter for people who already made $15/hour, unless their incomes increased at the same time. You could tell which is which by looking at rent for mobile homes. You usually rent the land there and park a mobile home on it that you own. If the cause is minimum wage increasing, I would expect to see the land rent for trailer parks increase. If the cause is techie yuppies moving into the neighborhood, I would expect the trailer parks to be bought out by investors and developed.
  - zacharycohn 10y ago
    Seattle didn't use federal min wage. I believe the minimum wage was $9.50/hr. And the $15 min wage is phasing in over five to seven years.
akamel 10y ago
It's mostly tech money and foreign investors. In addition 15$ hasn't taken full effect yet, it is a steady increase to 15 and will only reach that target in a few years.

hanoz 10y ago

Free lunch! The home hoarding rentier class have been engorging themselves on the biggest free lunch going for a generation. Funded with borrowed into existence free money, and protected from market forces on the downside using money taken from the very people they're pricing out, in the form of state funded intervention and negative real interest rates.

pliftkl 10y ago
"The home hoarding rentier class"? What about someone who's primary assets are a couple of houses that (s)he rents out? Should (s)he be restricted from getting a market rate income on those houses? I disagree pretty strongly that the "rentiers" are protected from market forces. If we look at the case of people who really are in the "rentier class", who are heavily leveraged, they are taking a fairly big risk here that the economy and housing prices are going to stay high, and many are risking bankruptcy should we suffer a reversal.
- tostitos1979 10y ago
  I have to side with the parent poster. The state essentially subsidized the "rentiers". I don't see how this is different from former communist countries doling out lucrative enterprises to private individuals. You might say what was done in capitalist countries (i.e. insane regime of low interests/hidden debasement of currency) wasn't corrupt because of free markets. I call BS on this. A poor person does not have access to said markets (downpayments are the hurdle). Take Toronto as an example. Pretty much most people who bought detached houses prior to 2005 are millionaires. The rich people at the time bought a bunch of houses. How is this not a gift from the state? If you happen to be a schmuck who came in later on or have poor parents, well ... sorry ... that's the way it is.
  - seibelj 10y ago
    No one forces anyone to live anywhere. You don't have to pay the rent. Move somewhere else, buy in an inexpensive area, etc. The mortgage interest tax deduction is a handout but otherwise the government isn't propping up anyone, and there are government programs that help first time home buyers into houses with 0% down (which I think is a big mistake). On the NPR program On Point last week, a guy called in complaining that he couldn't find anything in Nashville for under $400k, and the guest responded that the average home in Nashville was around $200k. People need to realize that you don't get to live in the most desirable places just because you want to. No one has the right to live someplace, you need to pay for it, and if you can't pay then go somewhere else.

jacknews 10y ago

Oh dear, what a headline. What about the 'free lunch' that landlords already enjoy in the form of rent, just by owning property. Or should that be "im-property".

mirkules 10y ago
I got the impression that the headline was sarcastic, given that it is a direct quote from one of the landlords. Anyway, there was a better quote in the article where a landlord said he is being vilified by the public for doing the "right thing business-wise". My opinion: he should be. As a former renter in an expensive area, it is really tough to swallow that a rate hike is nothing more than a money-grab. As a former landlord, if the rent covers my mortgage and expenses, it is a far better business decision to keep a steady-paying, no-trouble-causing tenant than it is to price them out of the area and lose that customer loyalty, and to have to spend time and money looking for new tenants. And most importantly, as a human being I just can't do this to people. But then again, I have a heart when it comes to this kind of stuff, and having been burned by a tenant because of my abundant good will, I sold my property and don't rent anymore - I just can't handle being cold and ruthless and "businessy" to people who depend on me for a roof over their head.
- spacehome 10y ago
  For a 5 or 10 percent increase, maybe you're right, but an extra $1,000/mo is real money, and probably worth the hassle of finding another tenant.
dang 10y ago
The submitted title ("Free lunch is over for tenants: $1,000 hikes hit some older Seattle rentals") didn't include the quotation marks of the original, which mirkules rightly points out make a big difference. But we'll just take the free lunch bit out of the title here.

jseliger 10y ago

The comments here are so far not good. The big problem in Seattle, as in many other U.S. coastal cities, is zoning, which prohibits the supply of housing to rise to meet demand. See my post, "Do millennials have a future in Seattle? Do millennials have a future in any superstar cities?" (https://jakeseliger.com/2015/09/24/do-millennials-have-a-future-in-seattle-do-millennials-have-a-future-in-any-superstar-cities/ https://jakeseliger.com/2015/09/24/do-millennials-have-a-fut...) or "Zoning's Steep Price" (http://object.cato.org/sites/cato.org/files/serials/files/regulation/2002/10/v25n3-7.pdf http://object.cato.org/sites/cato.org/files/serials/files/re...) for more detail.

Finnucane 10y ago
Yeah, everyone loves to blame zoning, though in practice, developers are only really enthusiastic about building as long as prices are high and rising. When that stops, they walk away. Plus, there's never enough to meet demand: as long as people are moving into the area because there's money to be made there, and money keeps flowing in, there will always be more demand than supply. And, I would wager that there's a correlation between those who say there should be no limits on building, and those who are unwilling to pay for public infrastructure (schools, roads, transit systems, water and electric supply, etc.) needed to support the increased population.
- saosebastiao 10y ago
  Tokyo has consistently grown faster than any other first world megacity for over 30 years now, feeding off of its status as pretty much the only place in the country that hasn't had stagnated economic growth. And despite this growth (housing units growing at >2% per year every year, compared to 0.3% for Seattle which is one of the fastest growth rates of any city in the US), housing prices have remained flat for 30 years now. Developers don't 'walk away' because prices are low...they are forced to compete to survive and they deal with the low prices. The problem really is supply, and japanese zoning is objectively better for housing costs. Anybody who thinks that it is impossible for supply to keep up with boom time demand has no idea how much housing that developers are willing to build if we just fucking let them.

louprado 10y ago

Since these rent hikes usually occur when a property changes ownership, we should encourage landlords to offer their tenants a first right of refusal to purchase. At least it would prime every tenant's mind that the rental terms might change one day. I recently told one of my tenants that I'd be selling the property next year and would give her first rights. She now keeps the front yard clean (the city had filed past complaints), she is saving money to prepare, and she has hope. Simply put, she is a better citizen. People need encouragement to think long term. It is human nature to not consider risks when things haven't been a problem in the past. Nearly everyone now wears a seat belt and a helmet, but a few decades ago even the smartest people didn't bother until they were strongly and repeatedly encouraged to do so.

daveguy 10y ago
> Simply put, she is a better citizen. Threats of $1000 rent hikes sound like a good way to keep the citizens in line. Well done, landlord.
- zo1 10y ago
  Sounds more like an early warning than a threat.
- louprado 10y ago
  Well, I have a practice of never raising the rent on a tenant in good standing. By why would anyone give a landlord the benefit of the doubt. A cynical mixed-context response is so much easier than contemplating solutions to a complex problem. Perhaps many landlords initially want to do the right thing. But after years of hearing "landlord" used as a slur they just say, fuck it, and act indifferently towards their tenant.

n72 10y ago

"Their pleas for a smaller, phased-in rent hike were rejected. “We couldn’t believe it. All my friends have just said that it’s not right,” Haug said. So now, they’re getting ready to move out." Would they have preferred he had raised the rent slowly over the last five years, thereby resulting in more money paid to him overall?

mratzloff 10y ago

High-density housing has been going up throughout the area because the population is skyrocketing. It's true that single-family homes are in short supply and sell quickly, but they can't build enough single-family homes to keep pace with the demand; there simply isn't space, especially in the city. Wallingford is a desirable neighborhood and rents are going to increase there. That's just reality. These tenants had been insulated from the last decade of market pressures, but there are plenty of apartments available. I do sympathize with their situation. Being priced out of your home and having to quickly find a new place and move is incredibly stressful and can be personally devastating if you've grown attached to where you live, your neighbors, etc. And I do think legally limiting the rate of rent increase each year (as a percentage of overall rent) is a reasonable compromise. Unfortunately, with Amazon and other tech companies importing thousands and thousands of young men with six-figure salaries, housing prices in general will only continue to increase.

kazinator 10y ago
> Unfortunately, with Amazon and other tech companies importing thousands and thousands of young men with six-figure salaries, housing prices in general will only continue to increase. Indeed. The only problem is that people with six-figure salaries rely on the services of people who don't have six-figure salaries, and those people also require proximity to their own non-six-figure jobs. Oh, like teachers for their kids, police officers, supermarket cashiers, you name it.

mcoliver 10y ago

Housing articles appear on HN quite frequently and the comments are usually quite devisive. The same people that deride owning property as a terribly illiquid investment also complain about instability with regards to rent. Yes a 30 year mortgage may cost you interest expense and yes your down payment is locked up in an illiquid asset buy one of the main things you get is stability in your cost of housing. Your 20 year old self may be fine with moving here or there,telecommuting, etc..buy your 60 year old self on fixed income may be in another boat being forced to move from a community you have been in for 30 years. Buy land...it's the only thing they aren't making more of. Take a RE investment class, learn about valuations, figure out a place where you want to live. As hard as it is to do now...IMAGINE YOUR LIFE AT 60 OR 70. Set yourself up to be in control of your life then and make the immediate gratification sacrifices now.

kazinator 10y ago
> Yes a 30 year mortgage may cost you interest expense and yes your down payment is locked up in an illiquid asset buy one of the main things you get is stability in your cost of housing. A $1000 mortgage, even if variable rate, isn't suddenly going to jump to $2000. I suppose it could happen if this is early in the mortgage (most of the payment is interest and the interest rate suddenly doubles). Unlike rent, interest rates don't go monotonically up, though; they go up and down. Unless it's already at zero, interest has room to go down, too. A mortgage gets cheaper when the interest rate goes down. Won't happen with rent, except in some god forsaken town that is shrinking. (The company closes the mine, and everyone leaves or whatever, and the remaining people practically have to be paid to stay.) That is to say, a mortgage can get cheaper even if you're living in a desirable place where values are appreciating, because the interest rate is linked to national and global finance which isn't related to the real estate dynamics of your particular neck of the woods. Rents will never get cheaper in a place like that.