Fun fact: I listen to KUOW's Week in Review even when I'm not on the air! I sometimes want to interject, but then remember I'm not in the fishbowl with everyone else. Sigh.
This last week, the panel included Brier Dudley from the Seattle Times (along with the amazing Sydney Brownstone and C.R. Douglas). Sound Transit 3 came up, and so did the property tax portion. Mr. Dudley got in a "question" about rents going up, the impact on homelessness, and something to the effect of "so don't property taxes cause rents to go up faster?" This was one of those instances where I wanted to interject. But since I couldn't, I decided to talk a little bit about taxes here, WHERE MINE IS THE ONLY VOICE!!!
First and foremost - all renters are paying property taxes. Sure, they're not writing the check, but through rents to the property owners, those property owners are using rents to pay property taxes.
Now, let's look at some numbers. For good measure, I'm going to use my apartment building as an example. Currently, my building - in the Eastlake neighborhood of Seattle - is assessed at just over $14,000,000. There are 55 apartment units in my building. Because multi-family rental properties are assessed as commercial properties, there isn't a per-unit assessment (like condos have), so I'm going to just even things out, and say my basement apartment is worth as much as the top-level apartments with a city view. So my unit would be valued at $255,000.
Earlier this year, three property taxes (beyond the general tax) came online in Seattle - Move Seattle, Honest Elections, and the Seattle Park District. Combined, these tax increases added $5,623.20 to the property tax bill for my building, or $102.24 per unit, per year. Or $8.52 per month. This year, we have already approved the Seattle Housing Levy, adding $1,755.60 to the building's taxes, or $31.92 per year per unit. That's $2.66 per month. Combined with the 2016 taxes, $11.18 of my rent, per month, will be due to tax increases in 2017.
Bring in Sound Transit 3. Billed as this massive tax, the property tax portion is $0.25 per $1,000 of assessed value. So, assuming ST3 passes, my building will see a tax bill increase, based on current assessment, of about $3,506 per year. $63.75 per year per unit, or $5.31 per month. Combined, property tax levy lid lifts in Seattle will account for an increase of $16.49 per month, cumulative over two years. To me, that is definitely manageable.
But what will my actual rent increase be?
Well, in 2016, my rent went up by $100 per month. This followed an increase of $100 per month in 2015, along with a requirement to purchase renter's insurance. So while taxes went up modestly (actually down in 2015), insurance costs actually decreased for my building. Inflationary pressures for landscapers and on-site management should be factored in, but it is highly unlikely that all combined amount to 8% increase in year-over-year costs for the building owner. In fact, assuming all units not occupied by on-site managers went up by $100 per month (that's my understanding), the building saw an increase in revenue from rents of $64,800 this year, and the same the year before. Not bad for a building built in 1994, and last sold in the early 2000's.
So, Mr. Dudley, to address your concern - ST3 is not going to cause rents to increase and lead to more homelessness. The 2016 levy lid lifts will be responsible, in fact, for just $7.97 per month of a rent increase in my building, which is in a pretty highly assessed neighborhood. (As I understand, the actual average value of a rental unit in Seattle is closer to $200,000).
What is leading to massive rent increases: housing being treated as a commodity, and subject to market pressures. My building isn't increasing rents by 8% per year because of taxes, but because the market allows it. And mine is one of the nicer ones. We're not getting slapped with $350 per month rent increases to clear out and make room as longer-term renters. I appreciate that.
The steps we as a city can take to reduce the massive rent increases: allow for more housing, and more housing types, while implementing commercial linkage fees and mandatory housing affordability measures. Ensuring downward pressure on the market through "missing middle" housing, mother-in-law and backyard units being allowed (and support through low-interest loans for conversions from the city), and lifting building height limits near light rail stations - and snagging as much MHA as possible - are all part of the solution.
Passing Sound Transit 3 - or Regional Prop. 1 - is also crucial. With requirements that air rights go primarily to affordable housing, we can take more steps to ensure a more affordable city and to invest in future infrastructure that is good for transit, livability, and our environment.
Some landlords will try to tell renters that passage of ST3 (or any property tax measure) will lead to massive rent increases. But that just isn't the case. Lack of enough housing units and types leads to massive rent increases. Increased property taxes just means more investment in our communities, and a marginally decreased profit for landlords. I'll take that investment!