Current rental cost datasets must be collected from sources like Craigslist while developers often have access to the most robust reporting based on property management analysis
On Monday, the City Council is expected to approve formation of the Seattle Renters’ Commission, thought to be the first commission of its kind representing tenant interests at a United States city hall. Another group is beginning its work in the rain this Friday afternoon to also create a better, more transparent, and more trackable future for Seattle renters.
Yes on I-127 have been given approval to begin collecting the some 16,000 20,638 or signatures they will need to get their initiative on the ballot calling for Seattle landlords to provide detailed breakdowns of rents and rent increases to tenants and share that information with the city. “By breaking down costs included in monthly rent, tenants can better understand cost of rents and rent increases associated with their homes,” the group contends. “They can also use this information to plan and prepare for the future.” Proponents say the initiative would give the city “an apparatus to track rent trends.” “This allows both the city and its residents to study and understand our rental market,” they write.
Devin Silvernail tells CHS the initiative is an outgrowth of volunteers coming together through the tenant bootcamps his Be:Seattle is organizing across the city. The next camp, by the way, is next week in the Central District.
Silvernail said the effort to collect signatures for I-127 by September to make the ballot this fall — 10% of the total number of votes in the last mayoral election is the goal — is underway and you should expect to see volunteers around Capitol Hill Station.
You can learn more at whatsinmyrent.com.
It really is endless. If you look up the capital return for a rental you will see mr landlord is lucky to make 3-5% and is then responsible for maintaining and managing a bunch of units. I would be trying to sell as Seattle tightens the noose.
How about crowd funding this one
http://www.loopnet.com/Listing/20223297/420-13th-Ave-E-Seattle-WA/
$5m for 16 units with 3% return.
The way to make that one profitable would be to turn it into an Airbnb, then you could make $3k a unit – double what it is doing as a rental, and would avoid this wonderful legislation.
Here are the financials for that listing (Redfin et al will also give you the rents per unit), for $5m invested you make $175k after expenses…
Cash Out
Annual Taxes: $37,189
Tax Year: 2016
Cap Rate (NOI/LP): 3.52
Gross Rent Multiplier: 17
Total Monthly Income: $23,528
Gross Scheduled Income: $282,336
Gross Adjusted Income: $276,689
Net Operating Income: $175,814
Insurance Expenses: $5,749
Water/Sewer/Garbage Expenses: $16,790
Other Expenses: $41,148
Total Expenses: $100,876
Total Expenses: $100,876
Location Information
Central Seattle/Madison Park
Listing Information
Possession: Closing, Subject to Tenant’s Rights
A person renting out an apartment isn’t the same as a government agency, right? I mean, the latter has to be pretty clear on how the money is being spent, and why taxes need to be raised. But, if you (in essence, a private company) want make more money -just for the sake of making more money- on a product you own, isn’t it within your rights to simply raise the price (or rent)? Plus, the market automatically puts bookends on these sorts of things, so that if you ask too much you just won’t get a buyer (or renter, in this case) and lose money. At least rent control would be more honest, this just seems like an attempt at passive aggressive shaming.
I don’t get the angle on this. Is this supposed to make housing more affordable by providing leverage to the tenants? Careful what you wish for city, by breaking out the tax burden and showing it to tenants you might get less “yes” votes on tax increases.
To me it’s a desire for accurate and complete if not comprehensive data on rentals in the city.
Being a renter and currently on the hunt for a new place, I can say that one, pricing is often not readily available, or it’s too vague and two, what’s included in that price isn’t always available.
If the data shows that rents raise equally with property taxes, maybe renters will stop voting for funding via that tax.
If that’s the case, the only data needed is the rent cost and the property tax. The city already has access to the property tax info.
As pointed out above, rentals are set by a market, not based on cost plus. Is this initiative meant to force landlords to adopt a cost plus model? If so, there are some very obvious big defects in its approach. For example:
The initiative seems to presume that underlying rental cost (whatever that means) and mortgage payments are somehow components of rental. Is the idea that somehow higher mortgage payments justify higher rent? That’s simply absurd. Rental price of a unit cannot legally depend on whether the property owner put equity into the property or financed the property with a mortgage. Let’s say there’s a row of similar apartment buildings. One was purchased 25 years ago and the landlord paid cash, or has paid down the mortgage to zero over the years. The next one has a big fixed rate mortgage because the landlord made a small down payment. The next one has a fixed rate mortgage 50% smaller because the landlord made a bigger down payment. The next one has the same size mortgage but a variable interest rate. They all have similar apartments in similar buildings in essentially the same location, which obviously should be priced similarly in any rational market. So, just what does the mortgage payment have to do with the rental amount?
What is meant by maintenance and operations costs? Does it mean out of pocked costs? What if a landlord who lives off of rental income has a four-plex and she does most of the maintenance herself, to cut costs. Next door is a similar apartment where the landlord is using the property for a tax loss and pays an expensive contractor to do very similar work. Should similar apartments in these two buildings have different rentals? If not, what does the dollar amount of maintenance cost have to do with rent? (Except, obviously, by charging rent, the landlord has a responsibility to maintain the premises of course. We already have laws that require apartments to be maintained, though in some cases they aren’t enforced adequately, but this initiative has nothing to do with that.)
Is it projected costs or past costs that are supposed to be reported? If it’s projected costs, how are these supposed to be computed, especially by smaller landlords? For example, let’s say, one apartment has a roof that is expected to last another 5 years, the apartment next door has a roof that’s expected to last 15 years. The apartments are very similar otherwise and both roofs are expected to cost about $30,000 give or take $10,000 to replace, in constant dollars. Is this kind of anticipated costs supposed to be included in the “maintenance and operations report” or is it supposed to be ignored? If expected costs are supposed to be included, how is the landlord supposed to do the estimate? What about the risk of inflation (with Trump in office and a Republican congress, not something it’s prudent to ignore). If expected costs are supposed to be ignored, doesn’t that give a very unrealistic picture of the landlord’s costs?
Many apartments in this city are owned by landlords who have one or two smaller buildings, say a four-plex or a six-plex. These are covered by this law. Are they really going to be penalized if the department of construction and inspections doesn’t agree with their estimates of how much future maintenance might cost? Egad!
All great questions, that should make anyone with any sense wonder about another one– Since their webpage mentions NOTHING about funding for the increased administrative expenses of running this gigantic yank: who pays the costs if this ridiculous law passes, and the city is forced to immediately defend it in court, when it’s immediately challenged by property owners who refuse to provide the information, and likely can’t be compelled to? Oh, never mind, I know– same people who bear the brunt of most city expenses– homeowners again, from their property taxes. Thanks again, naive renters.
Bingo. I just spent another $30K last year fixing up my building. I expect to have minimal maintenance expenses this year because I’ve paid them upfront.
These are meaningless numbers.
This is nonsense and then some. As others have pointed out, the rent charged has everything to do with the market and nothing to do with the expenses. Would one seriously argue that the owner who pays cash for their building and does their own maintenance will or should charge less than the building with a big loan on it. And let’s imagine that the cycle continues and we see thousands of new units built, then Amazon decides to lay off 10,000 people and funders pull their money out of start ups, leading to a surplus of units. Then I bought a highly priced building in a hot market with a sizable mortgage only justifiable by high rents. Can I tell a tenant that I must charge more than all the other buildings in the area because I have high expenses and expect them to bite?
What if you are working at a company and you went to a less costly state school, and had no college debt vs. the person at the next desk who has 200,000 in debt. Should your boss pay them more than you for the same job because they need to money more than you? If I were a landlord, I raise the rent because I can. Sure taxes and other expenses are real and impact all landlords, but the rent charged is a function of the market. Thus this whole exercise is nonsense and a waste of time.
I can’t wait until this law passes and I have to include the costs of paying a professional accountant $300/hr to calculate and submit this information — along with an additional rent increase to cover my expenses.
Guessing 4 hours of work, I think that would mean a nearly 1% tenant rent increase for my 3-unit building.
(of course, not counting the 3-4% each year I have to raise to offset the increased taxes.)
Seems random that duplexes are exempt, and not triplexes. Do folks really want to know the details of operations for my buildings? Please let me bore you with my expenses accounting. As everyone noted, the market adjusts for rent levels. And more expenses, guess what, add up to higher rent.
Yes, if the landlord is getting so rich, I’d like to see renters buy a property and try to rent it out without going broke.
Hopefully it will show how much of the rent is taxes. Maybe renters would not be so interested in 2 or 3 property tax increases a year if they knew THEY were paying for it.
You can already access that info now without this program. The King County Property Tax page will let you look up any address and see the tax on the bldg. Divide by # of units and you’ll get an average cost/apt attributable to property tax.
What a surprise that the rental registration program will be used to further constrain the property rights of Seattle landlords. Re-registration will require compliance with this silly and burdensome law. And I thought they meant it when they said rental registration was only created to ensure the safety of rental homes and deter “slumlords” from operating in our fair city.
And tenants don’t care about each line item expense the property owners pays. They care about how much they pay for rent, and the individual breakdown is meaningless. This is just another device providing the city and tenant advocates with tools necessary to impose rent control. Lastly, can we go two months around here without another law intended to burden and vilify landlords?
The rental registration program can already access public data to pull property taxes. For that matter, so can renters. This whole program is another yank. If it passes, I hope it spurs a whole bunch of condo conversions.
The next round of condo conversions will create havoc on this city, depleting rental inventory and driving up costs even more.
I disagree that the breakdown is meaningless to renters, Glenn. It’s all too easy for a landlord to blame property taxes, rising utility costs, or upgrades/maintenance for why the rent is increasing, when in reality they’re just raising the rent. I’ve had landlords lie to me about this before.
RRIO was a Trojan Horse from the get go. Now it’s only going to be expanded on. GOVERNMENT IS ALWAYS THE PROBLEM.
For honest, decent small landlords with a couple or three or four properties this is just more death by a thousand cuts. Politics by pseudo socialism in Seattle gets stranger by the day. As a very long time renter in Seattle I have come to appreciate good landlords/owners and what they are faced with. The bad ones, the big enterprises looking to cash in on the tech boom and to hell with anyone priced out, the out of state or out of country greedy developers……I hate their guts. In the end I think costs and taxes need to be lowered and housing treated less like a market commodity. Even some extremely conservative, free market people I know think letting rents rise for an entire city because of a percentage of highly paid tech workers is at the point of being unsustainable and unworkable for a city to function.
I think you overlook the real issues : property is expensive in Seattle. Tax and WSG are also big costs. In general returns on rentals are low and spread out over 20+ years. Just look on Redfin etc at multifamily – all of the data is public find me one that makes more than 5%.
PS when will Seattle control Airbnb ? I see a lot of studios going at $120 night..
If you want to constrain rents, you need to also constrain property tax increases. You don’t get one w/o the other.
SPEAKING of Airbnb, I can pretty easily convert my cute little cap hill apts to short-term rentals, and make 3X as much AFTER EXPENSES. Does the city want this? This is happening on Vashon, where tons of long-term inventory has disappeared. A long-term view, non-reactionary direction is needed to deal with housing problems if you don’t want to come back and fix them again later.
Yup – I recently moved a studio into Airbnb that was almost impossible to rent out ( basement level apt, little natural light, limited kitchenette). Now getting $1600 – $2400 month. Admittedly you have to go do some laundry and cleaning for 30mins each change over, but that return would take two studio rentals. And you can look at reviews of who you are renting to before you host them !
What we need is a city wide renter reviewe system. Keep tabs on the late payers and delinquents !
SPEAKING of Airbnb, I can pretty easily convert my cute little cap hill apts to short-term rentals, and make 3X as much AFTER EXPENSES. Does the city want this? This is happening on Vashon, where tons of long-term inventory has disappeared. A long-term view, non-reactionary direction is needed to deal with housing problems if you don’t want to come back and fix them again later.
I’ve never owned property, so I’m not claiming any expertise here or looking to troll. But on the AirBnB front, isn’t there a market-place upward bound to the return on investment? At some point it seems the AirBnB supply would outpace the demand. Then again, AirBnB might have a deep pool of hotel visitors/capacity to draw from. In theory, I like the idea economic flexibility AirBnB offers property owners, and I would like to think the competition for hotels benefits consumers, but I also recognize there are a lot of potential side effects that I have not researched. Good discussion CHS.
Scott- so far I don’t see any softening in Airbnb. I think the number of people willing to host, furnish and clean an apt limits the supply side.
Seattle / Airbnb should stop people illegally renting out property they don’t own (no lease allows sub rental), and maybe restrict apodment usage as Airbnb (a nearby apod has 10+ unit’s listed – can’t imagine how much churn of people that causes to neighbors).
So poorly conceived, it boggles the mind. Was there anyone with a financial background to help write this?
Ha! Kshama teaches economics at Seattle Central. Soviet style economics
Good One, Poncho.
I’m not sure what the point of this law is. Landlords just charge whatever they can get for rent. It isn’t based on the landlords costs…
I wouldn’t mind knowing how much the property tax is on a unit I was renting, since that would provide feedback to me as a voter on the level of taxation. However, it should be the city’s job to provide that information, not the landlord.
Check out KC the parcel viewer. Tap on the property, tap on ‘property report’ link, tap on ‘property tax bill’, tap on ‘search’ (the field should be populated with the number already)
http://www.kingcounty.gov/services/gis/Maps/parcel-viewer.aspx
Aren’t all non profit organizations supposed to open their books for all to see?
We will all see another expense line item similar to what is being charged for the rental registration and inspection ordinance being paid for by rental housing operators and passed on to renters. DCI will need to acquire several extra key towers to fit all the bean counters
Rentals are usually investments, it’s rare to find housing owned by 501c3s. Smaller landlords have their entire retirement locked up in the properties.
I meant to say *often* have their entire retirements locked up. Not always, but it’s quite common.
Can we make taxes transparent?
This is social persecution of landlords. Plain and simple.
What about asking for a full breakdown of money spent with a person’s welfare check, and food stamps? This Initiative move’s Seattle one step closer to rent-control. More Government regulations, penalties, and “jobs” to manage yet another disastrous Tenant/Land Owner program.
JUST SAY NO!!!
Just another reason to steer clear of doing any business in Seattle. I will never purchase an investment property in Seattle. Let just hope this kind of BS doesn’t work itself down towards Pierce County or become a statewide initiative.