Why are rents so high?

Why are rents so high?

High rents perplex both tenants and policymakers alike. Casual reading in social media makes one think it's all about greedy landlords, or losses of inventory due to short term rentals. The surge in rents stems from several key factors:

Population: Population growth outpaces construction in Clallam County by far. Population growth was 9.5% in the last census (10 years). Our current population is roughly 78,000. Household size is an average of 3, so the number of new units per year should be about 2,600.

Construction: Expenses for land, permitting, materials, and labor inflate housing development costs. Building permits for the past 4 quarters added up to 212, about 90% less than the new households moving in.

Interest rates: The costs to carry a mortgage roughly doubled in 2023, not to mention "healthy" increases in taxes and insurance. Investors need to earn enough money to pay their expenses, or they will sell to owner occupants.

There is a significant segment of our population who still enjoy 3% interest rates, and aren't moving as they might have done before. This is reducing inventory for both rentals and sales.

Income: Rents become unaffordable, as wage increases lag behind the cost of living realities. Doesn't everyone know by now that inflation rates as quoted by the US government are wrong? Check out www.shadowstats.com to see data closer to reality.

Government: Interventions like the Covid mandates, just cause tenancy and not-passed-yet rent controls drive landlords out of business. Some of them indeed have opted for vacation rentals, with their perception of it as a safer investment. But from personal experience, these furnished and burnished rentals will not return to "affordable housing" ever again.

If a landlord is stuck with a bad tenant, it can sometimes take years and 10's of thousands of dollars to remove them. Fortunately, with the high demand-low supply issue, your faithful property manager has set extremely high standards for application approval.

Summary: Rising rents are a function of population, housing supply, carrying costs, and legislation. Improving the situation may involve moving the pendulum back with respect to building costs and landlord-friendly legislation. I do not know how we can limit population growth or interest rates.