A growing crisis in the cost of rental housing is a reflection of powerful market forces. It also represents a K-shaped recovery from the pandemic and is a harbinger of factors that will undermine the economy during that recovery.
The short explanation is simple economics: Supply is not meeting demand for housing throughout Clark County. The region is a desirable destination, and population is increasing faster than housing can be built — a formula for driving up prices.
Residents have noticed. In researching a recent article about rental prices, The Columbian asked readers on Facebook to share their stories about rent increases. The request produced more than 500 responses, including: “Housing is a major crisis that continually gets swept under the rug. Now we need a plan of action, and action to be taken, instead of shrugs and hand-wringing about the issue.”
According to CoStar, a real estate information company, the average rent for a two-bedroom apartment in Vancouver nearly doubled over the past decade, from $684 to $1,343. Meanwhile, the Consumer Price Index increased 17 percent over that period. Rental prices have quickly outpaced wage growth, placing pressure on the system.
The coronavirus pandemic has increased that pressure. Renters have benefited from a statewide eviction moratorium over the past 16 months, but that moratorium is coming to an end.
The moratorium has been a lifeline for people who had their employment limited or eliminated by the pandemic, but it has burdened landlords. One of the long-term impacts of COVID-19 will be small, private landlords leaving the market and selling out to commercial entities.
On top of that, CoStar reports that high-end rents have decreased during the pandemic while increasing for low- and middle-income renters. As columnist Catherine Rampell of The Washington Post wrote in March: “Low-income households are getting squeezed from both directions — less income and higher prices for what is usually their biggest single monthly expense: rent.” This contributes to a K-shaped recovery — growing wealth for those at the top and declining wealth for others.
The rental market paints a portrait that reverberates throughout the economy. Yet action is likely to give way to shrugs and hand-wringing; there are no simple solutions.
One issue that is relevant in the Northwest is land-use law. For decades, legislation has limited where housing can be built out of a desire to limit sprawl and preserve the region’s natural beauty. As Jenny Schuetz wrote for the centrist Brookings Institution in 2019: “The development process itself has become increasingly long, complicated, and risky over the past 20 years — all factors that drive up the cost of newly built housing and limit the market’s ability to respond to demand.”
Land-use laws are the purview of state and local government. But the federal government should get involved by considering federal tax credits for renters. By comparison, homeowners benefit from a mortgage interest deduction on their federal taxes, a provision that is particularly helpful for first-time owners early in their mortgage. Tax credits for renters, however, must be approached cautiously; in areas where demand exceeds supply — such as Vancouver — they would further drive up rents.
While other approaches should be considered, an increased supply of housing is the only long-term solution. Population will continue to grow, and there is no way around that. Housing must increase along with it.