Navigating The Crossroads: The Future of Rental Housing in Washington

As we enter the final months of 2024, Washington State’s rental housing market stands at a crucial intersection. Costs continue to rise for the development and operation of rental housing, putting renters—and rental housing providers—in increasingly difficult positions. Despite market realities, the legislature is primed to continue its push for more regulation, market distortion, and bureaucracy. Proposals like Rent Stabilization are on the table.

As rental housing providers, we are at the center of these debates. On one hand, the demand for affordable housing—or rather, housing affordability—continues to grow, and policies must address this need. On the other hand, the economic realities facing rental housing providers, particularly small operators, are often overlooked. The rising costs of maintenance, taxes, and regulatory compliance are squeezing rental housing providers, threatening to undermine the very housing stock that tenants rely on.

LOOKING AHEAD: THE UPCOMING ELECTION AND HOUSING POLICY 

The upcoming election cycle will shape the future of housing policy in Washington. Candidates are divided: some advocate for aggressive rent controls and changes to application and screening criteria, which affect the safety of tenants, rental housing operators, and the public at large. Others promote market-driven solutions like expanded housing vouchers, temporary financial assistance, and incentives for private development. Regardless of the election’s outcome, the core issues remain: how do we balance affordability with sustainability for housing providers?

MEMBER ENGAGEMENT KEY QUESTIONS TO CONSIDER

• Do we focus on new housing development?

• Should we prioritize creating sustainable frameworks for tenants to stay safe in their homes, with access to rental assistance as needed?

• Do we, as a society, truly think it’s wise to squeeze out small housing providers, the backbone of affordable rentals in the state Will developers and capital partners begin projects in a highly regulated market, especially one with a history of sweeping legislation?

• Are rental housing providers even included in community conversations on housing affordability, homelessness, and price controls?

• Are these policies working anywhere in the country right now?

Government Intervention vs. Market Solutions

Private market solutions, in partnership with the public sector, are crucial. Rental housing vouchers, rapid rehousing program funds, incentive payments to rental housing providers, and temporary financial assistance remain essential tools to overcome barriers for vulnerable populations to find and maintain permanent housing. Coupled with subsidies like the low-income housing tax credit, they can help create affordable units without disincentivizing rental housing providers and their capital partners. However, policies must also uphold realistic standards for tenant behavior, especially regarding drug use and mental health support—balancing compassion with accountability.

Both private and nonprofit housing sectors face the same market forces. Even major media outlets agree that it has become more expensive for nonprofit housing providers to own, operate, and build.

However, these same challenges faced by private housing providers are often ignored. In reality, small rental housing providers already have housing available that people can move into today, yet policies seem to focus only on theoretical vacancies in units that have yet to be built, particularly those labeled "affordable housing."

Speaking of Affordable Housing vs. Housing Affordability

Affordable Housing refers to housing that is built and subsidized by the government or nonprofits to ensure low-income individuals can afford it. These units are often income-restricted and come with specific criteria for eligibility.

Housing Affordability refers to the general ability of people to afford the housing that is available in the market. This term applies more broadly to all housing options, whether they are subsidized or not. When we talk about housing affordability, we’re discussing whether typical market rents are within reach for the average renter.

Advocates of rent control and the "housing first" model argue that housing is a human right. However, the unchecked implementation of these policies has led to unintended consequences. Cities across the country, including Seattle, are grappling with increased crime, unsanitary conditions, and deteriorating neighborhoods. As housing providers, we see firsthand the consequences of legislation that punishes rental housing providers while failing to address the root causes of homelessness.

Data and Rising Costs

The cost of operating rental properties has skyrocketed. Insurance premiums for rental properties have increased by as much as 50% in some areas.

Maintenance costs have also surged, with a 10-15% annual increase in construction and repair expenses due to inflation and supply chain disruptions. Property taxes are rising, further squeezing rental operators.

While rents have reached historic highs, the gap between renting and buying a home has widened. With interest rates pushing mortgage payments significantly higher, renting remains a more affordable option for many. For example, homeowners are now paying 30-50% more monthly on mortgages than renters, factoring in insurance and interest rate hikes.

California’s Homelessness Crisis: A Warning for Washington

California provides a stark warning for Washington as we grapple with similar housing challenges. Governor Gavin Newsom, once a proponent of aggressive homelessness spending, recently acknowledged the failure of California’s approach: “At the end of the day, the state's $20 billion spent on homelessness has not produced the expected results.” He admitted that “the system is broken, and we need a reset”.

Despite significant spending, California has seen homelessness worsen, serving as a cautionary tale for those advocating for more government intervention without accountability.

The Election and Beyond

The upcoming election will be pivotal for the future of housing policy in Washington. Do we believe more government intervention will solve these issues? Or is it time for a reassessment of the policies that have led us here? It’s time for accountability. We must prioritize policies that balance compassion with sustainability. The 2025 legislative session will be critical. Rent stabilization may sound like a solution, but it doesn’t address the root issue: the need to build more housing—diverse types of housing for all income levels. Affordable, public, private—you name it, it needs to be built.

There are exciting technologies and funding mechanisms in place, particularly innovative solutions like modular homes that can quickly and affordably expand our housing stock. Coupled with the zoning deregulation that has occurred, we might have a chance to grow our housing supply.

Conclusion

The future of Washington’s housing landscape will be shaped by the decisions made in this election and in the upcoming legislative session. RHAWA members must continue to advocate for common-sense solutions that protect both tenants and rental providers. This election, your vote matters. The direction of our state—and the housing industry—depends on it.