Seattle is unusual among major metropolitan cities like Manhattan, San Francisco and Los Angeles in that it does not have a rent control ordinance.
That’s because rent control is illegal in Washington state. No, really: In April 1981, the state Legislature passed Substitute House Bill No. 264, which declared that “the imposition of controls on rent is of state-wide [sic] significance,” and “no city or town of any class may enact, maintain, or enforce ordinances or other provisions which regulate the amount of rent to be charged for” any privately owned rental properties. The only time a municipal government could control rent was if the property was a “floating home moorage site” — i.e. a houseboat marina — publicly owned, or managed under private-public partnership.
That worked more-or-less well enough for Seattle’s largely sleepy housing market over the subsequent decades. But more than 30 years later, the lack of rent control legislation on the books has collided with a flood of new, high-income residents to create a situation where rents have risen astronomically.
But that doesn’t mean Seattle’s rental market is an entirely unregulated and owner-friendly Wild West.
The Seattle City Council likely would have enacted rent control long ago, if it weren’t for the state prohibition. But that doesn’t mean they’ve resigned themselves to sitting on the sidelines while lower-income renters get pummeled.
Recently, the Seattle City Council passed new legislation within our city limits with the intention to allow tenants a more even playing field in a competitive rental market, without enacting rent controls.
The question is, what does this legislation mean for investors and landlords?
CAPPED MOVE-IN FEES and PAYMENT PLANS (Effective January 17, 2017):
This regulation states that a landlord can only collect a security deposit and nonrefundable move-in fees that, combined, are equal to no more than one month’s rent.
Those move-in fees include fees for unit cleaning, tenant screening reports, criminal background checks and credit checks. They do not include fees paid by a tenant to reserve a unit before moving in. The landlord is now required to accommodate payment plans for the security deposit, pet deposit, move-in fees and last month’s rent if requested. The payment plan can be as few as two equal installments if the tenant is month-to-month, or as many as six equal installments if the tenant has a lease six months or longer.
There are also new restrictions on pet deposits — which may now only be a quarter or less of one month’s rent — as well as application of funds whereby they must be applied to rent due first before other debts owed such as late fees, penalties for insufficient funds, utilities, etc.
SOURCE OF INCOME PROTECTION (Effective September 19, 2016):
Landlords are now prohibited from discriminating against a prospective tenant’s income, if said income is legal. The law was enacted in part to preserve housing for the rising number of technically self-employed independent contractors in Seattle’s workforce, but also protects sources of income like Section 8 vouchers, social security benefits, unemployment benefits, charitable assistance, maintenance or child support, as well as any federal, state, local government, private or nonprofit administered benefit program.
‘FIRST-IN-TIME’ RULE (Effective January 1, 2017):
The above Source of Income Protection Ordinance also included a rule requiring landlords to process all applications on a first-come, first-served basis once a completed application is received.
That means that the landlord is required to accept the first tenant application that meets their criteria. In addition, there are new rules regulating the amount of time allowed to screen prospective tenants, as well as how much time they have to sign the lease, once received. Landlords are also required to provide reasonable accommodation when applicants request extra time to apply for a rental property or sign a lease.
Why all the restrictions?
The city of Seattle wants to increase the supply of affordable housing within city limits. The above restrictions push landlords to open their tenant selection process to a broader pool of tenants. In addition to these restrictions, we have seen the City lighten the requirements for backyard cottages and ADU for rental purposes. Thus allowing smaller and more affordable rents.
All of this is positive in keeping the city of Seattle diverse and affordable, which are ongoing challenges. But investors and landlords would be well-advised to work with a competent property management firm who can help them understand all these new restrictions.