What is your rent check paying for in Seattle? Study digs into the numbers
A recent study from the Sightline Institute sought to break down and calculate exactly why Seattle rent is so high, what specifically it pays for, and what the city could do to reduce prices.
RELATED: Seattle rents slowing down while condos begin to surge
The Sightline Institute, an independent, nonprofit research organization, dove deep into the numbers behind Seattle’s expensive rent market. The goal was to figure out what exactly a building could cut back on to lower rent prices for tenants.
Using a “generic, 75-unit, six-story apartment with 50 stalls of underground parking and a small street-level retail space” as its model, Sightline calculated what a Seattle tenant’s $2,200 per month rent would pay for.
The biggest percentage of that $2,200 rent check pays for construction by a wide margin of 39 percent, and $858 per month. The next highest driver of that hypothetical price point is property tax at 14.2 percent and $312 per month, followed by land purchasing at 13.7 percent and $301 per month.
Other smaller pieces of the pie include 5.9 percent and $129 per month for property managers, 2 percent and $43 per month to connect water, sewage, and electricity, and a 2 percent parking subsidy.
For in-building parking, you actually end up footing the bill whether or not you own a car. Sightline estimates that construction costs approximately $50,000 per stall for underground parking — even after charging $175 per stall every month for anyone with a parking space, all tenants end up paying $43 a month as part of their base rent.
As for construction making up the biggest percentage of rent costs, that largely revolves around a relative shortage of skilled labor and quality materials in recent years.
The hypothetical building in Sightline’s case study was based off of beginning construction in 2014, and finishing in 2017. It estimates that if the building was finished three years earlier, cheaper construction — a result of increased availability for labor and materials — would have reduced rent by $170 per month.
In terms of how a building could cut costs to reduce rent, Sightline recommended the following:
- Modular construction: Instead of constructing materials on-site, modular construction moves a percentage of building off-site and into factories. The most optimistic projections claim that it could cut construction costs in half, which in turn would reduce rent by around 25 percent.
- Exempting multifamily housing from property tax: This one’s a simple, albeit tough to execute, method. If Seattle exempted multifamily housing and provided incentives for buildings to include more multifamily units, a 4 percent drop in rent could follow.
- Eliminate fees for permits and utility connections: Sightline estimates waiving permits and utility connection fees could slash rent by as much as 2 percent. The exact opposite could be happening in Seattle, though, as the city weighs new fees for water, sewage, and transportation.
While it doesn’t have exact numbers for how much other methods would reduce rent, it also suggests rezoning that allows for more units per building, doing away with off-street parking requirements, and reducing the time it takes to acquire permits to entitle a building. As of now, it takes upwards of two years.
As Seattle searches for creative solutions to its housing crisis, it’s always worth considering any and all methods to provide relief, and at the very least, understand where its rent check is going.