‘Not a quick fix’: Rents in Spokane area rapidly increasing as apartment vacancy remains low

When Spokane resident Kevin Breen’s apartment lease was set to expire at the end of October, he reached out to the property manager a month before to sign a renewal.

The property manager initially agreed to prepare the lease renewal paperwork, but Breen’s dozens of follow-up calls to the office were not returned.

In December, Breen heard the property management company was not renewing leases until further notice. His lease had expired on his one-bedroom apartment and was converted to month-to-month rent.

“I have not heard from the property management company, until then, I’ve continued to pay rent,” he said.

Breen’s rent has remained steady at $875, but he suspects the property management company is hoping to convert residents into what he called “unwilling month-to-month” tenants in an effort to eventually raise rents.

Breen is among hundreds of tenants in the Spokane area grappling with the possibility of higher rent, a situation fueled in part by people moving from expensive West Coast metro areas to more affordable, midsized cities like Spokane.

While the state of Washington’s eviction moratorium – set to expire in June – prevents landlords from increasing rent for existing tenants, it doesn’t prevent property managers from charging higher prices for vacant units.

Currently, median rents in Spokane are $836 for a one-bedroom apartment and $1,149 for a two-bedroom unit. However, several listings on Apartments.com show monthly rents for one-bedroom apartments in Spokane starting at more than $1,000.

Spokane-area rents increased 5.1% in April, compared to the month before, marking the fifth consecutive month the area has seen its median rent increase, according to Apartment List, a rental-listing site that compiles monthly rental data for cities nationwide.

Last month, Spokane’s rents were up 12.6% compared to April 2020, the third-fastest rent growth among the nation’s 100 largest cities, according to Apartment List.

Competitive home market spills over

The reason area rents are increasing so rapidly is simple economics.

“It all comes down to basic supply and demand,” said James Young, director of the Washington Center for Real Estate Research at the University of Washington.

Late last year, Spokane had a 1.1% apartment vacancy rate for all unit types, according to the Washington Center for Real Estate Research’s fall 2020 apartment market survey. The spring 2021 survey is not yet available.

Prior to the pandemic, Spokane was gaining national attention as an attractive area for relocation and had tremendous employment growth with the opening of Amazon’s fulfillment center that brought more than 3,000 jobs to the area, Young said.

“Spokane was booming before COVID-19 and the rental market was extremely tight,” Young said. “Now, you’ve got an influx of people taking advantage of the lower cost of living. When Spokane got discovered – unless they started building really fast – it was going to be too late. That’s what we are seeing now with price patterns.”

Spokane’s brisk and competitive housing market has resulted in very little supply, which is spilling over into the rental market, Young said.

“A lot of the problem comes down to whether people are able to buy or not,” Young said. “It really becomes a problem for first-time homebuyers trying to save for a deposit.”

Terri Anderson, the Spokane director for the Tenants Union of Washington, said fair market rent this year for HUD’s Housing Choice Voucher Program went from $790 to $990 for a one-bedroom apartment.

“And that was during a pandemic,” she said.

Anderson said it’s difficult to get a gauge on rent increases because of the state’s eviction moratorium, but tenants have been moving out of places either because landlords are selling the building or say they are going to move into the rental, she added.

Anderson said in the past six months, the tenants union has received several calls from tenants seeking assistance because they are unable to renew leases with property managers.

“Whatever the reason, people are moving and (landlords) are increasing the rent,” she said. “We’re already seeing people moving into homelessness to avoid these things. We are probably going to see more doubling up because it’s cheaper to split the rent … inventory is down to 1%. I don’t know how much more we can eat into that until there’s nothing left.”

Eviction moratorium also affects supply

Steve Corker, president of the Landlord Association of the Inland Northwest, said a main driver behind rent increases is the lack of supply.

“We were having that problem before COVID and it’s been exacerbated because you don’t have turnover, the lack of available properties and ability to build quickly,” he said.

Tenant turnover occurs when renters move out and the property is prepared for new occupants.

Some landlords are raising rents for new tenants to keep up with increasing costs such as property taxes and utilities, Corker said.

More than half of the association’s landlords own fewer than two properties and aim to keep rent affordable for tenants, he said.

But for some, going months without collecting rent during the eviction moratorium could put them into financial trouble. As a result, some landlords are selling the properties, which removes it from the rental market and squeezes availability, Corker said.

“If a landlord has a mortgage and people haven’t paid rent in 10 or 11 months, and if they can’t keep the property, the only option is to sell it,” Corker said. “That’s the problem with unintended consequences, and we begged the Legislature to understand. Their solution is rental assistance, but they are dragging their heels.”

Corker said the city won’t be allocating rental assistance payments until at least mid-May and as a result, dozens of landlords could choose to put their properties up for sale because of payment delays.

“The encouraging thing is the number of tenants and landlords that have worked things out,” he said.

‘Not a quick fix’

In Spokane County, more than 1,054 new apartment units were completed last year with another 1,084 units were under construction as of December, according to an NAI Black’s 2021 market report for Spokane and Kootenai counties.

“Right now, we’ve seen an uptick in multifamily permits, so people are seeing that need and demand, and part of this is caused by the overall cost of housing,” said Joel White, executive officer of the Spokane Home Builders Association.

Although the number of multifamily building permits is increasing, it can take two to three years until developers complete projects because of supply chain and labor shortages largely tied to the pandemic, White said.

Lumber prices have skyrocketed nearly 250% since April 2020, causing the average price of a new single-family home to increase by nearly $36,000, according to the National Association of Home Builders.

In addition, new state energy codes that went into effect in February are increasing the price of new homes by $20,000 and nearly $7,000 per rental unit, White said.

Both also have an impact on multifamily housing like duplexes and apartment buildings.

Because there’s a lack of entry-level housing types such as townhomes and condominiums in Spokane, people priced out of single-family homes will typically stay in the rental market, White added.

“The rental and single-family housing markets are very tied together,” White said. “When people can’t afford a home any longer, the next option is to rent.”

There’s also a labor shortage in skilled trades and the construction industry, resulting in a backlog of housing development, he said.

“We don’t have enough skills people to build the homes that we need. We are working on that, but it’s a generational challenge … there is not a quick fix to this problem,” White said.

Young, of the Washington Center for Real Estate Research, said the lack of rental and housing supply could take years to address.

“At this point, you cannot get enough supply on the books in the next 12 months … whatever solution there is going to be is going to take months, if not years,” he said.

A regional approach for housing needs

The multifamily market in Spokane will remain strong with rental rates expected to increase as new apartment developments are completed and residents move out of units instead of renewing leases, according to the NAI market report.

Vacancy rates are predicted to be about 5%, with the exception of the student housing market in Cheney. However, further extensions of the statewide moratoriums on eviction and rental rate increases will likely have “a dampening effect on future rental rate growth and rent collections,” the report said.

Anderson said a bright spot for tenants is a bill signed into law by Gov. Jay Inslee in April that makes Washington the first state in the nation to guarantee free legal representation for low-income tenants facing eviction.

In addition, the state Senate passed a bill that would require landlords to provide a legitimate reason for ending a tenancy. Current law allows landlords to end a tenancy without reason by giving a 20-day written notice.

“That will end no-cause notices, which would have been a huge fear with these rent increases because it would have been so easy for landlords to give a 20-day notice and then raise rent,” Anderson said.

She would like to see the city consider anti-displacement policies and address the need for more affordable housing by looking at zoning changes.

Corker, of the Landlord Association of the Inland Northwest, said a regional approach is needed.

“It has to be a countywide solution to deal with the housing needs we have in this region, and we need to have consistent policies and building standards that encourage active development,” he said.

Breen, who is planning to remain in his apartment through June, encourages his fellow renters to familiarize themselves with new landlord-tenant legislation.

“It has some protections that normally we weren’t afforded,” he said, referring to the bill that would end no-cause evictions. “I think hyperlocal legislation to protect the unique needs of residents would go a long way, so I encourage people to tune into that conversation.”