Elected officials have struggled to come to terms with the causes of Washington’s housing crisis. No matter how many promises are made in Olympia, the problem persists. Prices keep going up, and the state falls further behind in building homes to support our growing population. If anyone was expecting relief this year, think again; leaders in Olympia have joined forces with President Donald Trump on housing policy, a concept that only promises more broken housing promises here at home.
In the same week, Trump and Olympia lawmakers announced proposals to restrict large investors from ownership of single-family homes.
It’s easy to fall into the trap of believing that greedy big businesses, run by out-of-state players, are the reason housing is so expensive. But the simple reality is that our state hasn’t built enough homes to keep up with demand. This imbalance is increasing prices for everyone.
The problem with “feel-good” solutions like this is that every home provided by these investors is rented by real people who may be unable to afford to buy a similar property by themselves. My wife and I were in the same situation before we could afford to buy. Thankfully, having conveniently located rental options in desirable neighborhoods with high-performing schools was a reality – one that lawmakers are now trying to take away.
Institutional investors are a minuscule part of the housing market in Washington, accounting for only 1.1% of single-family homes statewide. This figure is significantly lower than the – already negligible – national average of 2.8%. Meanwhile, about 90% of single-family home rentals are owned by “mom-and-pop” landlords with five or fewer properties. Therefore, any legislation targeting institutional investors in the housing market would leave mom-and-pop landlords worse off.
Additionally, housing prices don’t seem to be rising faster in places where big companies are buying the most properties, particularly in Washington. The Seattle Metro Area, which has an institutional ownership share of 1.2%, saw a 1.9% decrease in its median single-family home price over the past two years. In contrast, the Spokane Metro Area, with an institutional ownership share of less than 1.0%, saw prices increase by 11.5% over the same period.
The data is clear: There is no correlation between home prices and the share of homes owned by investors.
Yet, Washington state lawmakers, led by state Sen. Emily Alvarado, are plowing ahead with legislation that would restrict institutional ownership of single-family homes. During last year’s legislative debates, lawmakers cited a recent report by the U.S. Government Accountability Office that shows institutional investors own around 9% of single-family homes for rent in the Seattle area. It might sound bad, but that’s only counting homes for rent, meaning that mom-and-pop landlords own 91% of single-family rentals. In reality, institutional ownership of single-family homes has little impact on home prices. In fact, there has been a slight decline in housing prices in the Seattle area.
Banning these large institutional investors from owning or purchasing single-family homes will not make homeownership more affordable, and it could have severe consequences. Restricting access to these homes will likely lock many young families and renters out of high-opportunity neighborhoods. Professional housing providers have the capital to revitalize dilapidated homes and/or invest in communities by building more homes, putting more affordable homes on the market.
Populists would have you think that these investors are elbowing first-time homebuyers out of the market, depriving them of a chance to get their piece of the American dream. But the reality is that most young families aren’t able to spend $750,000 on a house. They are renters because these days, it is significantly cheaper to rent than to buy.
If our legislators in Olympia want to make housing more affordable, then they shouldn’t copy Trump’s misguided ideas. Our state legislative session is short, and we should not waste time on proposals that do not effectively address the state’s housing shortage. Real, pragmatic solutions like reforming exclusionary zoning, streamlining permitting processes that add years to construction timelines, and making it easier to finance new construction are solutions to help bring down rental costs and home prices here and in other states. They’re working in cities like Austin and Minneapolis, and they’ve been starting to work in Washington. We shouldn’t give up now.
As the Tri-City Chamber of Commerce notes, “Ultimately, Washington cannot resolve its housing shortage by redistributing the same limited supply of homes among various buyers.”
Erik Nielsen is a member of the Seattle Freight Advisory Board and Chapter Lead for the Seattle New Liberals.
