Small landlords in Seattle took a hit last year from a University of Washington study that said their complaints against the city were not valid. The study is hardly unbiased; to me it reads like a political hit piece disguised as social research. As a former business reporter who once covered the real estate industry here, I want to offer some pushback.
I refer to a 40-page Sociology paper, “ ‘Mom and Pop’ Landlords and Regulatory Backlash: A Seattle Case Study,” by Anna Reosti, Chris Hess, Courtney Allen, and Kyle Crowder. (The last two names are at the U.W.) The study says it aims to “provide a rare empirical interrogation” of claims by the rental-housing industry. (As an aside, the study’s repeated use of the word, “interrogate,” grates on the ear. The study uses the word eight times. Are sociology students imagining themselves hauling landlords into a police station? Is there something wrong with the words, “evaluate,” “consider” or “question”?)
The study challenges the claims that “tenant-protection laws disproportionately harm ‘mom-and-pop’ landlords.” These laws include Seattle’s ordinance of 2016 that owners must rent to the first qualified applicant, and the ordinance of 2017 that owners cannot screen out an applicant because of a criminal history. The study says it will “critically interrogate” the landlords’ argument that Seattle regulations have caused many of them to sell their properties and thereby hurt tenants.
Think about these arguments. If a law reduces the rights of owners to screen tenants, it stands to reason that it would potentially affect the owners of a few units more than the owners of many units. If you have only one unit to rent, you have a lot hanging on your choice of a tenant. If you get a bad one, you’re in trouble. But if you own 50 units, though you have a much higher risk of getting a bad one, it’s only one in 50. For the large owner, the problem of one bad tenant becomes a cost of doing business. Thus the core of a plausible argument that small landlords are hurt more by Seattle’s new pro-tenant laws.
The authors say the landlords’ argument is based on their claims that small landlords (defined as owners of one to four units) are more tenant-friendly — that they “provide housing on better terms for low-income and vulnerable tenant populations” by setting rents low, by being less diligent in screening tenants, and by evicting tenants less often. The authors find that it’s true that small landlords tend to raise rents less often. They also find that it’s not true that small landlords tend to rent to lower-income tenants.
Reading all this, I’m thinking that these sociology students don’t understand economics. They fail to grasp that having small landlords is useful to lower-income tenants in that they are there — they are in the market. The bargaining power of tenants is determined by the total supply of units offered for rent, and small landlords increase that supply. To reduce the supply reduces the bargaining power of all tenants. Which units — studios, two-bedrooms, units in houses, duplexes, fourplexes, in big complexes — matter in other ways, but if all are available to rent, and tenants can move from one to the other, it’s the balance between supply and demand that matters most.
The authors of this study also interrogate the claim that Seattle’s tenant-protection laws have caused small landlords to sell out. They dismiss the stories about this — anecdotes, not data — and instead compare annual summaries of sales of small rental properties. And they find, “in Seattle there was no increase in the likelihood of small rental properties being sold following the passage of these ordinances.”
This finding, they think, shows that the landlords’ arguments are specious. The academics pat themselves on the back: It is “incumbent on sociologists,” they write, “to interrogate [landlords’] ideas, lest they become mythology” and have a “chilling effect over future efforts to bring fair housing regulations to the rental market.”
Again, I remind these researchers of basic economics. What matters is not how many houses and apartment buildings have been sold, but how many units remain in the rental market. There are, in fact, statistics on that, but the sociologists don’t use them.
The statistics are in the Rental Registration and Inspection Ordinance Annual Report of the Seattle Department of Construction and Inspections, dated March 21, 2023. The city’s report compares rental units in July 2018 with August 2022. In that four-year period, it finds:
- For single units, including rental houses, a drop of 11.5 percent, from 21,174 to 18,740;
- For 2 to 4 units, a drop of 20 percent, from 13,529 to 10,678;
- For 5 to 20 units, a drop of 19.5 percent, from 30,951 to 24,951;
- For 21 to 50 units, a drop of 8 percent, from 27,503 to 25,353;
- For 51 to 99 units, an increase of 12.5 percent, from 20,112 to 21,633;
- For 100 to 199 units, an increase of 10 percent, from 21,291 to 23,428;
- For 200-plus units, a decrease of 0.3 percent, from 154,429 to 153,893.
The city’s report warns that these figures are not entirely reliable because there was little enforcement during the Covid years, and that some of the landlords may have thrown the city’s questionnaires in the trash. Still, there is a distinct pattern in the response: houses and units in small properties drop by one-fifth in the four-year period and units in large properties either increase or stay the same.
In its report, the city treats this as a notable finding. It says that possible causes include “removal of smaller rental properties and especially single-family homes from the rental market.” It says that this loss of units for rent “may point to policy questions about the supply of rental housing stock.”
I conclude that the city’s Department of Construction and Inspections understands economics better than the UW’s Department of Sociology.
It would also be useful to know how many rental properties were converted from longterm to the short term rental market.By recent estimate there are now over 5000 “STRs” in Seattle alone. An STR owner receives screening assistance from the booking company and can adjust rates with much greater flexibility. As few as 10 rental days a month are often sufficient to produce profitability. In addition to competing with a challenged hotel industry, the STRs remove inventory from the longterm housing market.
I have 3 immediate neighbors — all ultra liberals — who have units listed on AirBNB (the “STR” market). These neighbors, all in a lower income, majority-minority neighborhood, chose to go the STR market because of the onerous, anti-small-landlord legislation the City enacted.
I had originally planned on building a DADU on my property. But between the ludicrously long and expensive permit process, and the hugely expensive construction cost in our current market, I realized I, too, would be putting that DADU into the STR market rather than take the risk on getting a bad tenant.
The new City Council simply MUST repeal the two ordinances, Bruce Ramsey cites, and a whole bunch more, if the City is going to convince people like me and my neighbors to take a huge financial risk by becoming landlords.
Please communicate this to new council members (including Cathy Moore, who it appears will be chairing the Housing committee) and whoever your district representative is. I’ve been collaborating with other small LLs for several years now to convey pragmatic stakeholder feedback to council, to no avail. Let’s hope this new ‘centrist’ council is ready to focus on balanced problem-solving around rental housing regulations.
I really appreciate this opinion piece. As a small landlord, it was very disheartening reading the painfully biased and unprofessional UW “study” (and seeing it cited in the new City Auditor’s report on RRIO). I’m in the midst of drafting detailed stakeholder feedback to send the researchers, who seem caught in a very unfortunate echo chamber that isn’t helpful to the local rental housing ecosystem nor the causes they purport to be interested in. We will step through similar criticisms to what you noted and more.
I wish Seattle Times and Puget Sound Business Journal would start covering these issues. They’ve really been absent in shedding much-needed light on rental housing ownership/operation issues.
Thanks for the research and writing you are doing. It’s appreciated.
Thank you, Bruce. I have written to Kyle Crowder, no response yet to my critique of his study. Maybe I’m naive, but I am hopeful for some sanity restored to the Seattle City Council.
“Interrogate” is a telling glitch in the chip. To use the language of the struggle session is the language of the ideologically captured institution. The fact it gets rewarded with publication and maybe even a passing grade is all one needs to know.
Im also sitting on the sidelines, wanting to subdivide my house and do my part for the housing crisis but cannot put my livelihood on the line for a dysfunctional policy. Does Council really want to consolidate housing units to corporate landlords? How is it possibly a “win” to increase the market share of inflexible, out of town owners? How can progressives not see that housing suppliers (“good” for alleviating the crisis) and landlords (“bad” for renters) are actually the same entity?
Thanks for the analysis, let’s hope we get some more credible researchers on the job.
Absolutely. We’ve been renting my wife’s house for the last 15 years. It has a large apartment in the basement that’s non-compliant, so when RRIO came along, we told renters it was an inhabitable space (specified in the lease). Of course, they filled the apartment to defray costs and when our inspection came up, the inspector went nuts with violations and I showed him the lease provision. He told be they had to be evicted, move upstairs, or I had to make the apartment compliant. The renters opted to move out. To avoid the issue going forward, we blocked off the basement entirely (a very useable space). Also, our realtor friend recommended we remodel the kitchen to raise the rent, as steep rent is really the only mechanism left to find qualified renters. So, bottom line, half the house is rented for a $1000 more per month. Wonder why Seattle has housing issues?
Can you please share this example with Councilmember Cathy Moore? She is newly elected and will be heading up the Housing Committee. New city council members need to hear from as many small housing providers as possible, to understand the scope and nuance of how a decade of terribly constructed regulations are playing out. Her new city email is cathy.moore@seattle.gov and if you copy council@seattle.gov it’ll go to other council offices, as well.
I’m not at all sure that I would share the Risk Adverse post with any decision maker. Stipulating that he knowingly rented a unit that was at least partially non compliant is nothing to boast about. Many of these units lack a safe exit and can become fire traps. Better to either make a unit compliant or padlock it.
As for the larger issue, it does seem the study was commissioned for purely political purposes. Too bad. There are a number of experts who could have shed real light on the topic.