Jumps in Rent Underscore Need for Rent Stabilization in Washington

Rent stabilization and ending apartment bans, a match made in heaven.

Rents are going up, and almost no one is being spared. Even tenants in subsidized affordability programs are being impacted by rising housing costs. This is because those rents are set to the area median income (AMI) as determined by the U.S. Department of Housing and Urban Development (HUD). In King County, household AMI jumped a staggering 16.3% this year, as salaries and hiring increased at leading employers, particularly in the tech sector. While the region’s high-income earners may have had a banner year, wage growth was slower among the working class, and this widening wealth inequality is wreaking havoc on housing markets.

Rents capped at 60% or 80% of AMI might have been affordable enough for tenants to make ends meet last year, but a 16% rent hike would be devastating for many. Rent control has been banned in Washington State since 1981, but policymakers have generally assumed nonprofit and affordable housing would be protected from the whims of the market and see only modest rent hikes. Unfortunately, this is not proving to be the case.

Tenants at a low-income senior housing building in Bellingham run by Mercy Housing have even picketed to protest the 9% rent hikes they’re facing. Meanwhile, Social Security checks only saw a 5.9% cost-of-living due to a high inflation, still not enough to keep pace with rent hikes in some subsidized apartment like Mercy Housing.

Writing in Publicola, Katie Wilson pointed to the strain that AMI adjustments are putting on tenants: “Of course, the fact that King County’s median household is now pulling in $134,600 instead of $115,700 doesn’t mean that lower-income households suddenly have more money to spend on rent,” Wilson wrote. “Seniors and people with disabilities living on fixed incomes, working families earning near the minimum wage — they’re not getting raises like that. Therein lies the problem.”

A worker in King County earning minimum wage would need to work 92 hours per week to afford a typical one bedroom apartment without being rent-burdened, a recent study from the National Low Income Housing Institute found. Our housing system simply isn’t providing stability for lower-wage workers — and middle-income earners are in a precarious position as well. This trend has dire consequences; rising housing costs are the primary driver of the homelessness crisis that is impacting all corners of the state.

In her article, Wilson explained many types of affordable housing face no rent restrictions other than AMI limits. “Although many types of affordable housing are protected from large rent increases, many buildings financed with federal low income housing tax credits (LIHTC) and tax-exempt bonds are not,” Wilson wrote. “The same is true for most units whose rents are restricted through state and local multifamily tax exemptions (MFTE) and programs like incentive zoning and Seattle’s Mandatory Housing Affordability [MHA] program.”

Wilson did reach out to several nonprofit housing providers, such as Bellwether Housing, and find some were voluntarily opting to keep their rent hikes very low. However, others weren’t not so generous or forthright. Plus, MFTE and MHA rents will be completely up to private market landlords, who are not known for passing up on easy profits. Policymakers won’t even have a complete picture of what MHA and MFTE landlords are doing because of how little rent data is available. Declining to address that problem, the Seattle City Council narrowly voted against rent tracking legislation earlier this year, bowing to budgetary and landlord lobby concerns.

There are technical fixes that could lessen the rent burden for tenants in rent-restricted programs. “Cities with MFTE programs could follow Seattle’s lead and impose a more stringent cap on rent increases for new units,” Wilson suggested. While noting the help that statewide rent stabilization could provide across the board, Wilson also acknowledges that repealing the state rent control ban is a big lift and smaller steps exist. “But there are also politically easier steps the state could take, focusing only on rent-restricted units,” she wrote. “In Oregon, for example, if LIHTC properties (and many others that benefit from state funds) want to raise rents more than 5% a year, they must apply for approval from a state agency.”

If the state legislature cannot marshal the votes for rent stabilization, they should certainly set up an approval system like Oregon did for large rent increases at subsidized apartments. But tenants in market-rate units are struggling too, which makes the broader solution of rent stabilization appealing.

With the housing market so out of whack, it’s time for policymakers to take bolder action to protect tenants while still ramping up housing production to address the longer term housing shortage. A great way to do that is statewide rent stabilization paired with statewide zoning reform to stimulate apartment and townhome production. The Oregon legislature blazed the trail, passing this pair of policies in 2019, but the Washington State Legislature has been lollygagging on both rent regulation and zoning reform for the last three years since.

The Urbanist Elections Committee makes it a habit to ask state legislature candidates for their position on rent control and the state’s ban on it. We continue to be flummoxed at the number of reasonably progressive candidates who suddenly start talking like a landlord lobbyist as soon as the topic is broached.

Corporate centrist state senators like Jamie Pedersen, Mark Mullet, Annette Cleveland, and Reuven Carlyle have long blocked even the most modest forms of rent stabilization in the higher chamber, although it’s not clear rent stabilization has the votes in the lower chamber either, despite a more comfortable 57-41 Democratic advantage. Washington’s realtor lobby and landlord lobby are each well-organized, well-funded, and highly motivated to block rent control, which may explain why we have been slow to follow Oregon’s lead.

Terrain may be shifting next session, however, as Sen. Carlyle’s retirement has cleared the way for Rep. Noel Frame, a rent stabilization supporter, to take his seat — and she has dominated in the primary election. Democrats also have a chance to flip a senate seat in the 42nd Legislative District, but it’s not clear if the candidate in question, Rep. Sharon Shewmake, supports repealing the ban as she has declined to return The Urbanist’s questionnaire. Still, adding Frame could be enough, particularly if a coalition of tenant advocates mounts a pressure campaign on some of the legislators on the fence.

Opponents argue a majority of economists are deeply skeptical of rent control, but a majority of economists were also deeply skeptical of minimum wage laws — at least until the evidence mounted they work effectively and the policy enter the mainstream. Recent empirical research has poked holes in this economist consensus (largely built on a just a handful of older studies of strict rent control regimes) and shown well-calibrated rent stabilization can increase housing stability and accrue benefits to lower-income tenants without hampering development. The Urbanist did an overview of that research here.

While rent control is experiencing a resurgence, one recently-passed program also offers a cautionary tale that rent control should be well-calibrated to avoid clamping down on housing production.

A ballot measure in Saint Paul, Minnesota enacted a strict version of rent control that made no exemption for new construction and sharply capped rent increases at 3% — for context, Oregon’s stabilization cap is 7% plus an inflation adjustment. As a result, Saint Paul has seen building permits plummet and several major housing projects shelved as financing dried up. In response, the City Council is weighing reforms aimed at promoting housing growth and avoiding other unintended consequences.

Oregon’s statewide rent stabilization, which makes an exemption for new buildings for their first 15 years, didn’t cause a similar development logjam, and missing middle zoning reform in the state is also stimulating housing production to help lessen the housing shortage. This suggests modern rent stabilization can soften rent hikes without making new development infeasible so long as it’s designed well, especially if it’s paired with inclusive zoning reform that lessens the grip apartment bans have on many cities. Plus, upzones tied to a inclusionary zoning program like Seattle’s MHA can harness market-rate development to produce more affordable housing, too.

Considering the housing crisis, state legislators would be wise to pursue this path — or at least repeal the state ban so jurisdictions have the opportunity to take the lead.

The Case for Rent Control