A monumental change hit Washington’s rental market this month, one in the works for years: caps on rent hikes.
But what it means for cash-strapped residents, and whether it will curb a market where housing costs have soared in recent decades, remains a live question.
Gov. Bob Ferguson signed a bill into law earlier this month capping annual rent hikes at 10% per year for many apartments and 5% at mobile home parks. That means that for a tenant in a $1,500 apartment covered by the new law, their rent could increase to no more than $1,650 in a single year.
Supporters say the new caps offer a commonsense way to give tenants more predictability and prevent price-gouging. Skeptics worry the policy could drive small-time landlords to sell their properties, incentivize more frequent rent increases or quash housing construction.
While landlords may still sue to try to block the law, observers on all sides of the white-hot debate have largely moved on to preparing for the new rules and anticipating how they could shape an increasingly brutal housing market.
For renters who have enough income to afford some rent increases, the law promises a bit more stability, said Terri Anderson, interim executive director of the Tenants Union of Washington State. “Life is a little more predictable.”
But for others, the limits won’t be enough, she said.
“It’s not going to help the most vulnerable tenants.”
Help for renters, but not always enough
When Sara Eubank moved to the Seattle area from Utah in 2021, a manufactured home in Bremerton was an affordable option that allowed Eubank and her husband to live close to their daughters and grandchildren.
Then, the rent increases began.
Ranging from 8% to 13% a year, the cost hikes squeezed the couple in their 70s and pushed them to go back to work.
“Our Social Security would not cover the rent increase, our groceries and not a whole lot of frills,” Eubank said. “If we were to get another 13% rent increase, we would be out of there.”
For manufactured home residents like Eubank, who typically own their homes and rent the land underneath, the new state law will cap rent hikes at 5% per year. Eubank says she’s “incredibly thankful.”
Landlords are likely to issue the maximum-allowed rent increases each year, Eubank acknowledged, “but in the long run, it’s better for everybody because we can plan ahead.”
For tenants of traditional rental housing, the rent hikes will be higher.
The state now caps annual increases at 7% plus inflation, up to a maximum of 10%, for many rentals. New buildings and subsidized housing are exempt.
Camas renter Dominique Horn is looking forward to the same peace of mind Eubank is counting on.
Horn is thankful she hasn’t yet faced rent increases at her current home in Clark County. She was careful to choose a rental she could afford, “but that only works until you get your first increase.”
For others, the cap is too little too late.
Lynnwood renter Royce Timothy struggles to cover her monthly rent of more than $1,900 with a Social Security check of roughly the same amount. She has sold jewelry, coins and her parents’ wedding silver to try to cover her housing, insulin and other costs. Rent hikes in recent years have been more than 13% per year, Timothy said.
The caps in the new law are too low to help older adults who rely on Social Security, she said.
Annual increases to Social Security payments have generally hovered around 2%-3% in recent years, though recipients saw bigger increases in 2021 and 2022 amid supercharged inflation. This year, payments increased 2.5%.
Timothy has struggled to find other, less expensive rental housing or to afford the high costs of moving.
“I don’t know what I’m going to do. I really don’t,” she said, pausing. “Live in my car.”
Developers fear construction slowdown
Landlords and developers are bracing for the new law in the midst of an already flagging construction market.
While more stringent rent control policies cap overall rent prices and allow tenants to pass low rents to the next renter, Washington’s law allows landlords to increase rent to any amount when a tenant moves out and exempts new buildings for 12 years — both attempts to lessen the law’s blow to property owners.
Progressive Democrats in the state Legislature have pushed for limits on rent increases for years, with a Seattle lawmaker introducing a similar bill as far back as 2018. The idea gained traction in recent years as advocates say lawmakers across the political spectrum heard from struggling renters in their districts.
Landlords have issued mixed responses to the policy that finally emerged. Some acknowledge a 10% cap is not likely to have significant effects on their operations, but they worry the law could spook investors and dry up the funding needed to build much-needed housing across the state.
For Kevin Wallace, who has developed about a half dozen apartment projects in the region, the caps on rent increases are “not that big a deal” for his ability to collect rent and operate the buildings. But he wonders if lawmakers may lower the cap in the future.
“That’s what everybody’s worried about,” he said. “If that were to happen, it would be horrific.”
In the near term, Wallace is more worried about whether the policy could discourage new development. Large-scale investors look at long timelines and eschew uncertainty. A 12-year exemption is not enough to offset that uncertainty, he said.
Wallace has already struggled to get financing for projects he has in the works, calling this “the most difficult period of time in my career, other than maybe right after the great financial crisis.”
Interest rates remain high and developers are concerned about recently changed state energy code rules, among other regulations. Applications to build more apartments had already begun to sink in Seattle and elsewhere before this law passed.
It’s not yet clear whether Washington’s new law could affect three Seattle-area projects Wallace has in the development pipeline.
“This is one factor out of many, and we’re going to have to see if there’s enough appetite” from investors, Wallace said.
Landlords are wading through the details of the law to figure out how to comply, said Sean Flynn, president of the Rental Housing Association of Washington, which mostly represents small-time landlords.
Some property owners were eager to raise rents before the law took effect on May 7.
“If you were under market (rate), this bill gives you every reason to bring your rents to market,” Flynn said.
While the association has sued to try to stop other tenant protections, Flynn said the organization hasn’t yet decided whether it will challenge the new law in court.
Some of his members plan to sell their rental properties; others are holding off on buying more. Selling single-family homes to homeowners could reduce the supply of single-family homes for rent, and a decline in new construction could worsen the state’s housing shortage.
“For our mid- to large-size members, I’m hearing that they’re not interested in acquiring any more in the state of Washington, but they’re going to look elsewhere for their growth,” Flynn said.
Supporters of the new rules say the law allows rent increases large enough to keep landlords afloat.
“Builders that don’t want to build because rents could be capped 10 years down line — to me, those are the same kinds of landlords that are contributing to the problem,” said Horn, the Camas renter.
Washington’s previous ban on rent control made investors more confident they could back projects even in liberal strongholds like Seattle, said Seattle developer Ben Maritz. Now, they may fear an even lower cap.
“There’s definitely a perception that this is just the beginning,” Maritz said.
Convincing lawmakers to lower the cap further in coming years is “a possibility” but “it’s going to take a lot of work,” said Anderson, from the Tenants Union.
Builders hope the state will instead focus on supply-side policies like lowering developer costs, going beyond the zoning and permitting reform passed in recent years.
“The way to attract (large investors) is to acknowledge, yes, we understand there is now more risk because of rent control. But on the other hand, we have a really, really developer-friendly environment because we know we need more housing,” Maritz said.
Washington’s affordability crisis
Capping rent increases can help stabilize tenants renting today but may not have a significant effect on the state’s broader housing market.
Steven Bourassa, director of the Washington Center for Real Estate Research, which tracks rental prices across the state, said he doesn’t anticipate significant effects on overall average rent costs or on new development.
“It’s kind of the new generation of rent control laws, which are designed not to have the negative effects that some of the old legislation has had,” Bourassa said.
Data on individual rent increases is hard to come by in Washington.
Statewide apartment rents climbed about 2.5% a year on average over the last 25 years, Bourassa said. Some years saw bigger spikes, including in 2021, when rents climbed after the pandemic hit. Nearly two-thirds of Washingtonian renters reported that their rent increased in the last year, according to a census survey conducted in the fall. The most common increases were between $100 and $249 per month.
Flynn, from the landlord group, expects politicians across Washington to continue to feel heat to do more to address housing affordability.
“All the same pressure is going to be on the lawmakers because this isn’t going to solve the problem they set out to solve,” Flynn said. “You’re still going to get people calling saying, ‘I’m on a fixed income, I can’t afford this rent increase’ because rent control doesn’t solve poverty.”
But tenants remain grateful to have some sense of what their next lease renewal could bring.
“I don’t know what it’s going to do to make the state more affordable,” Horn said. “I only know for myself as a renter, it gives me a little relief to know there’s a limit on how much that increase can be.”
“Before now,” she added, “I have just been in fear of what could that next increase be.”
