Can Building Housing Lower Rents? 

Seattle says "yes."

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click to enlarge From 2005 to 2015, Seattle built twice the number of housing units as San Francisco. - PHOTO BY ERIC FREDERICKS/FLICKR (CC)
  • Photo by Eric Fredericks/Flickr (CC)
  • From 2005 to 2015, Seattle built twice the number of housing units as San Francisco.

I asked Melissa if they could afford to buy in Laurelhurst today, and she laughed. "We probably would be living in an apartment in Seattle, but given how high rents now are even that would be tough." Seattle has gone from a city where a racing handicapper and manufacturer's representative could buy a house in a very desirable neighborhood to one where middle-class families like the Dodges would likely be priced out of the city.

Melissa and Dennis's daughter Mary Dodge, who was 38 in 2017, also had good timing with Seattle real estate. In 2012, Mary and her husband James bought a three-bedroom, one-bath home in West Seattle for $364,000, in a very different Seattle housing market than the one buyers face today. While the city's economy was not as battered as in the years following Boeing's collapse, Seattle was still recovering from the 2008 financial crisis. The national housing bubble had burst, leaving vacant, foreclosed houses across the city.

Mary and her husband followed the example of her parents and got into the housing market before the boom. In 2017, the median home value in Mary's 98136 zip code was $716,900. That's nearly double what she paid only five years earlier. Mary told me that she used to think of West Seattle as the city's "best-kept secret"; it is a secret no more.

Mary is a psychotherapist and her husband James is a manager with REI. Like her parents, she has two kids. But unlike her parents, she could never afford to live in the North Seattle neighborhood where she grew up.

Her 1,070-square-foot house in West Seattle cost a lot more than her parents' first house, which was 3,000 square feet, or their 2,200-square-foot Laurelhurst home. And even though they bought their home before the current boom, Mary told me that they could not have afforded it if James had not had money from his uncle's life insurance policy and Mary from her father's estate. The home-buying challenges for Seattle's middle class are far worse in 2018. Mary and James clearly could not have bought their current home at current market prices.

The despair expressed by residents over the pricing out of the city's working and middle class and small businesses was new for Seattle. Longtime residents of San Francisco and New York City have talked this way since the 1980s. But Seattle was different. It was a more laid-back big city. When Seattle launched Starbucks it made sense: Seattle was known for people escaping long periods of rain by sitting down to enjoy coffee. The opening of outdoor apparel company REI in Seattle reflected the city's long months of rain and gray mists; Seattle's weather also led Eddie Bauer to launch his future clothing empire by making down jackets for the city's Boeing Aircraft workers. As for Seattle's values, its launch of grunge rock and the career of Nirvana and Kurt Cobain was associated with people who put musical integrity ahead of careerism.

Even Microsoft's opening in nearby Redmond, Washington, did not change perceptions that Seattle residents prioritized quality of life and a desire to live near nature over maximizing their income. The company's 1986 public stock offering turned thousands of Seattle residents into millionaires overnight, but Seattle's culture did not change. More than two decades after Microsoft employees hit it rich, Seattle still remained affordable to the working and middle class.

That is no longer the case. Amazon's dramatic job growth has put enormous pressure on Seattle's housing stock. Apartment rents in 2017 were 63 percent higher than in 2010, and home prices doubled from 2012 to 2017. The connection between Amazon's Seattle growth and rising housing prices is clear.

In 2017, Amazon occupied 19 percent of all prime office space in the city, more than the 40 next biggest employers combined. Amazon went from employing about 5,000 people in Seattle in 2010 to 40,000 in 2017; this number is projected to rise to 55,000 by 2020. Amazon occupied 8.1 million square feet of office space in 2017; that will rise to more than 12 million square feet by 2022. Amazon "has turned Seattle into the biggest company town in America," wrote journalist Mike Rosenberg in a Sept. 27, 2017 Seattle Times report.

But unlike San Francisco or Los Angeles, Seattle's affordability crisis cannot be blamed on its failure to build housing to accommodate population and job growth. Seattle has steadily built more housing for decades, but the city could not have anticipated Amazon's dramatic job growth. And even if it had, in 2017, Amazon was advertising as many as 9,000 Seattle jobs a month; developers could not have built enough units in time to meet such a demand.

Yet Seattle's construction boom was so robust that apartment rents began declining by the end of 2017, despite Amazon's massive new job creation. If Seattle had not kept building housing, its rents and home prices may well have come close to San Francisco levels.

A Proactive Housing Strategy

Seattle may be the nation's most proactive city for housing. Some credit is probably due to San Francisco, which has become the cautionary tale of unaffordability that Seattle seeks to avoid. As Rosenberg put it in a Seattle Times piece in 2016, "Talk to just about anyone about local real estate prices and there's a good chance you'll hear this: Seattle is becoming the next San Francisco. Sure, housing prices and rents are skyrocketing here, but are we really doomed to a fate where million-dollar homes and $5,000-a-month rents will soon be the norm?"


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