
Rents dropping significantly across the Seattle area after new construction - jseliger
https://www.seattletimes.com/business/real-estate/seattle-area-rents-drop-significantly-for-first-time-this-decade-as-new-apartments-sit-empty/
======
seltzered_
Some things to note as a seattleite:

Just because rent is decreasing on the high end doesnt mean it’s decreasing on
the low end apartments.

Apartments are built to a less restrictive code than condos. There aren’t many
condos being built in seattle from reading other articles. Similarly there’s
much debate about building more homes / townhomes / improving transit.

Amazon supposedly had a hiring freeze recently, and close by (in SLU) I’ve
seen folks dancing with “now leasing” signs.

~~~
refurb
_Just because rent is decreasing on the high end doesnt mean it’s decreasing
on the low end apartments._

There is a knock-on effect although depending on the spread it might be small.

Ontario (Canada) just raised minimum wage by 20%+ in one shot to $15/hr. Lots
of drama happening now as business owners try to adjust.

What I found interesting is that workers who were making $15/hr before the
increase are now asking for a raise. It was a restaurant where the front-end
made $15 and the dish washers $12. Now the front end says "I should be making
more than the dish washers" and it goes all the way up the chain.

~~~
dvanduzer
The psychology of relative status garners a lot of attention to understand
inequality. Of _course_ there is backlash to front-of-house folks seeing their
relative status decrease, despite the fact that nothing has changed for them.
A difficult, but crucial adaptation needs to happen in a wide variety of
industries: The people working the less glamorous, less visible, but equally
crucial roles in operating these businesses should have been treated as peers
/ relative equals all along.

The converse is also true in software engineering. Questions like whether
programming is "more difficult" than graphic design are largely irrelevant.
Humans will _always_ be playing status games, but denigrating labor based on
some perceived skill level is a habit we should actively be trying to get rid
of. Meanwhile...

> There is a knock-on effect although depending on the spread it might be
> small.

Can you provide more specific detail where knock-on effects like this have
been observed? It's nearly guaranteed that a decrease on low end rents will be
vanishingly small. Margins can only go so low, which is why developers are
attracted to luxury projects in the first place.

(Likewise, a million dollar paycut from a CEO can only raise 480 person-hour-
dollars in wages. But those margins matter a hell of a lot more for the line
worker's lifestyle than upper management's.)

~~~
zeveb
> Of course there is backlash to front-of-house folks seeing their relative
> status decrease, despite the fact that nothing has changed for them.

Well, their purchasing power is about to go down because when _they_ go out to
eat they're going to be paying for $15/hr dishwashers instead of $12/hr
dishwashers.

> A difficult, but crucial adaptation needs to happen in a wide variety of
> industries: The people working the less glamorous, less visible, but equally
> crucial roles in operating these businesses should have been treated as
> peers / relative equals all along.

But they're not really. A dishwasher needs to be able to scrub dishes, load &
unload a mechanical dishwasher, show up more-or-less on time, not get into
fights with the other employees — that's about it (incidentally, I know
whereof I speak: my first job was washing dishes).

The front-of-house staff need to speak the local language, be polite &
friendly to customers, have good memories, have attention to detail, be able
to manage relatively complex situations, be reliable &c. It's a very different
— and rarer — skillset.

You don't even really need to have a functional IQ to be a successful
dishwasher; you need to be reasonably sociable & quick on your feet to be a
successful waiter or maître d'hôtel.

It's eminently reasonable and fair that a job anyone can do will pay less than
a job fewer people can do.

~~~
dvanduzer
> It's eminently reasonable and fair that a job anyone can do will pay less
> than a job fewer people can do.

No, it isn't.

You don't have to agree in any substantial way with anything else Marx says,
to recognize that "from each according to his abilities, to each according to
his needs" is eminently reasonable and fair.

Everything you're saying to glorify front-of-house roles is also true of back-
of-house roles. True, the best possible server in a restaurant can improve the
bottom line X% more than the best possible dishwasher can. But comparing the
worst possible dishwasher with the worst possible server is also important.
Can you say with any confidence which "problem employee" will have a larger
negative effect on the bottom line? Probably not.

What if it's just a slightly below average dishwasher? What if the server is
"only" sexually harassing coworkers a little bit? Gauging the range of human
performance by the wages they use for sustenance is stupid, but apparently
necessary.

> Well, their purchasing power is about to go down because when they go out to
> eat they're going to be paying for $15/hr dishwashers instead of $12/hr
> dishwashers.

Again, a claim missing some crucial substance. How _much_ is their purchasing
power going to go down? Will the price of a hamburger or an apron really go up
more than a couple of pennies?

~~~
Clanan
That's a whole lot of stretching to justify the communist approach. Are you
really arguing that a dishwasher is worth just as much as a server? I don't
think any businessperson will agree with you.

You might be more successful by just arguing that value shouldn't be tied to
wages (which is what your quote is really pushing.)

~~~
dvanduzer
It is interesting that you are gauging my "success" on whether my comment is
changing minds about economic theory. Please consider that I explicitly
_excluded_ anything else Marx wrote from assent, to reduce the likelihood that
anyone would mistake my argument for Fully Automated Luxury Communism or
whatever the kids are calling it these days.

I am explicitly arguing that value and wages _are not_ tied to each other,
today, with examples.

Generally speaking, we treat the value of labor in accord with the cost of
developing a skill. Whether by correlation or accident, this seems to mean we
dramatically undervalue softer skills involved in working with other people.
(NB: This is related to, but very different than the customer service face
front-of-house puts on.) There are kitchens where the entire morale of the
restaurant staff rests on the good natured attitude of the dishwasher. That
person leaves, and soon afterwards, everybody hates working there, and nobody
can figure out why.

I think any sane businessperson knows this, and does agree with me. Most
businesspersons also know that _everyone_ in a restaurant is completely
replaceable. Right?

~~~
MR4D
Respectfully, I believe you are wrong about value of labor.

It seems to be much more based on supply & demand.

If everyone could do it, and there were no demand, the value would be low.

A quick way to check this is to look at expensive college programs where
people come out making much less than the cost of their education. If you were
correct, then such situation would not occur.

(And yes, I’m aware you said “generally”, because must even generally I think
it’s incorrect. )

~~~
dvanduzer
How does anything I typed conflict with the basic macroeconomic pressures of
supply and demand? Labor markets have those tensions, and the useful thing to
understand are the factors _influencing_ supply & demand.

Applying market theory to labor/employer relations, says that wages should
tend to go up, if the demand (job openings) for a particular kind of labor
exceeds the supply (pool of people who can & will do those jobs). But talking
about how labor gets _priced_ by markets doesn't explain anything about why
governments choose the minimum wage (if any) that they do. Minimum wage is an
explicitly moral consideration where we compel the demand side to observe a
floor on the price of your time.

> If everyone could do it, and there were no demand, the value would be low.

That just muddles the separate mechanisms. If everyone has the skill for a
job, the potential labor pool is as large as it possibly can be, so _supply_
pressure is naturally higher. You are correct to say that _demand_ pressure is
what then drives a negotiated wage. But that's just table stakes to understand
what an economy is actually composed of. Does this region have a highly
skilled workforce, with demand outpacing the supply of workers, thus driving
wages up? Congratulations! This means your region has a proportionally lower
supply of low skilled workers, which creates upward market pressure on wages.
Using the lens of supply and demand means you now need to look for
explanations when the demand for unskilled labor doesn't go down, which is
what it would take to keep wages constant.

And the _value_ a supplier (worker) assigns to their own time? Demand pressure
only indirectly influences a person's perception of value. People get born
into a variety of different financial circumstances that alter their
negotiating position.

> A quick way to check this is to look at expensive college programs where
> people come out making much less than the cost of their education. If you
> were correct, then such situation would not occur.

As respectfully as possible: this is nonsense. There are all sorts of
externalities involved in paying for an education that would never be captured
by the labor market model. If somebody is paying a lot of money to develop
some skill that has low ROI in the labor market, the only thing that signals
is that the person getting the "useless" degree must value having that skill
for non-monetary reasons. This kind of thing is always a problem when talking
about economics as the science of rational agents. Even if the market demand
for a particular skill is zero, some people will use money to develop that
skill anyway. This observed fact does not remotely invalidate anything I've
said.

~~~
MR4D
In answer to your first question, I keyed in on this comment that you made in
the OP: "Generally speaking, we treat the value of labor in accord with the
cost of developing a skill."

Physics degrees are awfully hard to get, and yet for every physicist, there
are surely many more sales people who get paid more.

So this is what I disagreed with.

------
gumby
OMFG the market works the way you'd expect. Actually, I shouldn't be so
sarcastic: the news in this article is that Seattle _let_ the market work. If
only we could get this message through the Bay Area NIMBY's numb skulls.

~~~
djsumdog
The market didn't "Just work," in Seattle. There is a long history of things
not going right. The city had to do a lot to get this current housing boom to
get going, including a lot of subsidization.

They also got a lot wrong (no where near enough low-income housing .. and a
lot of the decent low income housing requiring you to be below the poverty
line -- leaving the middle class in really tough spots paying Amazon employ
rent while barely making enough to pay it.)

It's still not really working. The homeless problem is still insane. There are
still a ton of one unit dwellings that no one is bringing up to code; the ones
that use to house the very low income around places like Belltown.

Another thing that didn't "just work" was Amazon giving new employees
discounts in certain condos. Turns out someone in HR didn't realize these
types of deals were illegal, since private groups can't offer housing
discounts or subsidizes or it violates various Fair Housing laws.

~~~
TulliusCicero
> The market didn't "Just work," in Seattle.

It is literally illegal to add to the housing supply in most of the city; a
majority of Seattle land is zoned exclusively for detached single-family
hones.

~~~
BearGoesChirp
I wonder, if you count agents in a market economy as having not just money to
spend making rational purchases, but also political power as a sort of
alternate currency (represented by a vote each), is NIMBY really a rational
market reaction. If you start in a fully free market state, and enough actors
combine their political power to limit the market, then that results seems
just as important, if not more important, than one where there is a limit
placed on the system to prevent such actions. Even the US Constitution, which
could be considered a very strong limiter in what combined political power can
do on a city, state, or even federal level, can be modified by enough people
combining their political power.

~~~
philipodonnell
I wish more people though this way.

If something is a rule then the majority decided it should be that way. If you
don't like it, then you are in the minority. If that surprises you, then you
may not be accurately measuring the real majorities and minorities, and it
would benefit all of to try to understand what the real rules are.

~~~
TulliusCicero
Yes and no:

\- People often want to limit housing in their particular city/neighborhood,
but

\- They agree that there should be more housing built _somewhere_ , just not
near them

It's like being for pollution regulations, except that you demand that you
yourself (and your buddies) be exempt. Normally that wouldn't work in a
democracy, but imagine that only the polluters get to vote: that's how land
use regulations get decided (because the beneficiaries of lower housing costs
would be largely potential residents, and you have to live there to vote).

In practice, the solution is to have zoning decisions made at a higher level;
at the metro area level is probably the best one, since they tend to function
as economic units, and that mimics how people tend to choose housing.

------
weeksie
Holy shit, supply and demand is still a thing!

Last year I was in Seattle and all I heard was complaints about all of the
highrises going up as if that was what was causing the high rents. _headdesk_

~~~
smelendez
It is complicated, though.

Rich people moving in to a working class neighborhood makes the neighborhood
more attractive to other rich people, both directly and by bringing in rich
people amenities. So building high end housing can ultimately cause more
demand and higher bids for the existing housing in the neighborhood.

~~~
Lazare
Yes, but many of those people will be moving from other neighborhoods in the
same city; when they move they vacate an older, less attractive, _lower rent_
dwelling.

The history of US housing is (with a few exceptions, notably the post WWII
housing boom) a story of people building premium housing that, as it ages,
becomes affordable housing. Thing how many big old houses end up converted
into duplexes or townhouses.

But lately we've 1) used zoning to stop the conversion of premium housing into
cheaper housing and 2) used zoning and planning permission to stop the
construction of premium housing and then wondered why we don't have enough
affordable housing. What a mystery!

> It is complicated, though.

It's a complex system with many different forces in play, yeah, but it's not
_that_ complicated. If you build more housing, the price of housing drops.
Building expensive apartments in a neighbourhood doesn't magically create
affordable apartments in the same neighbourhood, but it certainly doesn't
hurt.

The exception would be if, somehow, building 100 units of housing somehow
attracts more than 100 families into the city from outside the area, which...I
dunno, it could happen, but is it? Has it ever? It sounds unlikely at first
glance.

~~~
toyg
_> if, somehow, building 100 units of housing somehow attracts more than 100
families into the city from outside the area_

The problem in some cities (London) is that this does happen at some level:
100 units of housing attract enough _investors_ to start a speculative price
rise, as they buy multiple units each. Maybe 50 of those units will stay empty
forever, but average prices in the area will have been pushed up for good,
compounding the problem.

~~~
Retric
That's an easy 'problem' to solve. Empty housing has no need for public
services like roads / schools and they still pay property taxes. Just keep
building housing and let the speculators subsidize city services. Until, the
bubble bursts and suddenly you get lot's of cheap housing on the market.

~~~
nkoren
Doesn't work that way in London: there's public revenue in the form of "stamp
duty" for the sale of a property, but no ongoing property tax from an empty
property. City services are funded by "Council tax", which is levied on
residents, not properties.

So, yeah, "easy" to solve if the market is structured right. It often isn't.

~~~
Retric
London has direct property taxes. They are set low, but empty property does
not require a much in the way of city services.

Granted, increasing property taxes would put pressure to rent out empty
property. However, the occupancy rate is also very high so it's not currently
a meaningful issue.

------
Tiktaalik
The significant takeaway for me as a Vancouverite is that these are
_apartments_ and they're reaching renters and rental vacancy is increasing.

In contrast Vancouver is _also_ building more substantially more multi-unit
residences than ever before, but somehow Vancouver's vacancy rate remains sub
1%. In a reverse from Seattle, Vancouver predominantly builds condos, and this
could be a factor.

Vancouver, likely needing the assistance of the provincial and federal
government for legislative changes, needs to start doing things differently,
and Canadian governments need to find a way to incentivize developers to build
rental apartments instead of condos.

~~~
b4lancesh33t
Then they just aren't building enough. To be sure, if Vancouver added ten
million units, vacancy rates would go up. If vacancy rates are staying flat
now, that just means the number of units being added now is insufficiently
close to ten million to effectively meet the demand for housing

~~~
Tiktaalik
The problem with the "simple" solution of "just add more supply" is that
supply creation is physically restrained by real world factors. It's not lines
on a chart like in econ 101 class.

New development is constrained by available trades, construction times, design
time, and city review time. Already the City of Vancouver has increased
development application fees in order to hire more persons to review
development applications faster.

In my neighbourhood there is a high rise under construction that is still not
completed but already one year over due. The development industry is
continuously stating that more supply is required, but they can't even finish
building their own buildings.

~~~
TulliusCicero
> supply creation is physically restrained by real world factors.

Yes, but regulatory factors usually dominate those in these high-cost markets.
Like in Seattle's case, it's literally illegal to add to housing supply in
most of the city; a majority of land is zoned exclusively for detached single-
family homes. What new density there is comes in little strips, which means it
tends to come in larger buildings, which have higher base costs to build. It's
impossible to make "affordable housing" in a skyscraper.

If more cities allowed more "missing middle" type housing throughout their
area, they could make a serious dent in housing prices. But, SFH areas are
sacred cows in America (and I'm guessing much of Canada too).

~~~
Tiktaalik
Vancouver multi-unit under construction is about 33k units, which is 10k above
the 23k Seattle had under construction in July of 2017 (the first figure I
found on google).

Vancouver is _seriously_ building wildly more units than the historical norm.
[https://twitter.com/YVRHousing/status/950813525403774976](https://twitter.com/YVRHousing/status/950813525403774976)

At some point if this isn't working we have to stop saying well let's add even
more supply" and start looking to other solutions.

~~~
TulliusCicero
"Units under construction" seems like a pretty useless metric. Like,
skyscrapers take way longer to build than, say, townhomes, so they'll remain
in the under construction pool a lot longer.

Why not use "units started" or "units finished" instead?

------
keyboardhitter
After apartment hunting for months last year, I came to the conclusion that...
a lot of the new apartments being built are tragically boring. Many units are
alike -- cave-like, and give the impression that construction was rushed while
passing off the design as "urban".

So I found "fancier" places alluring, but in reality they are just apartments
with a bit more than the bare minimum design. I sometimes wonder if there is a
business scheme behind this contrast but I try not to feed into my paranoia.

------
thinkythought
Anecdotal, but in my building and several of my friends the landlords are just
letting units sit open for months, as they flat out refuse to lower rents.
They're actually remodeling one of them in an attempt to justify the(really,
honestly ridiculously high) rents.

So they may be dropping on the high end, but across a lot of people i've
talked to the low to mid end is stubbornly holding strong and refusing to see
the writing on the wall that a beat up older apartment building just... isn't
worth this much.

I have seen rents overall dropping on craigslist, especially for larger harder
to rent units. They're down quite a bit from this summer if you're willing to
split a 3+ bedroom apartment or house, when they were absolutely stratospheric
before(often close to the same as just renting multiple cheap studios)

------
the_cat_kittles
arent a ton of people gonna move here when ali babba opens in that building
downtown? (assuming the person telling me that wasnt full of shit) seems like
10k more tech workers could probably have a pretty big effect on the rental
market

~~~
seanmcdirmid
Alibaba isn’t going to employ 10k in Seattle, and probably not enough to move
the needle on housing. They have about 40 (in Bellevue no less).

~~~
djsumdog
I thought the poster was saying "Alibaba" to make fun of Amazon.

Also I like calling those new buildings The Amazon Testicles.

~~~
keyboardhitter
Same. Bezos' Balls of fury.

