Government over-regulation is reducing housing units, forcing increased rent
On a recent segment on her [un[Divided podcast, Brandi Kruse examined a current court case on how over-regulation by the City of Seattle has turned once profitable rental properties into investment losses. As a result, many property owners (especially smaller ones who can’t absorb the costs) have pulled their units from the market and investment in developing new rental units appears to be declining. This will mean higher rents in the future.
In late April, the Washington State Court of Appeals heard arguments in the GRE Downtowner v City of Seattle lawsuit. The plaintiffs, the owners of the Addison Apartments on 4th Avenue South (a block north of Union Station), argued that the way the city quickly passed regulations onto landlords turned profitable properties into ones that are losing money. The owners of the Addison contend that this amounted to a “regulatory taking” and the property management company should be compensated for its losses. They contend they should not be one of the few who pay for the “societal benefit” regulators are attempting to achieve.
The Addison has 254 units available for low-income housing. The building had a good reputation for being well-maintained and had many long-term residents who received public assistance.
The case was originally filed in November 2024 and was dismissed by King County Superior Court over a technicality. Yet the Court of Appeals found enough merit in the case to hear arguments on whether this lawsuit should be heard by a jury.
In court documents, the lawyers for GRE Downtowner outlined the six regulations imposed on its property, which have cost them millions of dollars.
- February 2018 – Fair Chance Housing (prohibits denying a prospective tenant due to a criminal record)
- September 2019 – Roommate Ordinance (prohibits denying occupancy to any loosely defined “family member”)
- March 2020 – Pandemic eviction moratorium (both city and state moratorium on evictions until end of the COVID pandemic, City lifted on March 31, 2022)
- November 2021 – 180-day notice of rent increase (longest requirement in the country)
- July 2022 – Economic Displacement Relocation Assistance (landlords must help with moving costs if rent increase is 10% or more)
- June 2023 – Late fee cap (fees cannot exceed $10 a month and the tenant cannot be forced to pay for administrative costs associated with late fees and notices)
At the Addison, the result of these regulations is that many unchecked tenants refused to pay rent and caused significant damage to the units. Moreover, many long-term good tenants moved out due to safety concerns and the deteriorating condition of the building.
The once profitable Addison Apartments, which annually made $170,000 to $450,000, turned into an investment, losing $2,700,000 a year. While it previously collected rent from 93% of its units, after regulations, it was down to just 45%. Maintenance and security costs jumped 500%. They went from carrying $40,000 in bad debt to having more than $500,000 by the end of 2022.
In the Seattle rental market, the impact has been significant. Fewer investors are interested in funding apartment development, and thus, new unit construction has declined 50% (30,000 built in 2023 to just 15,000 in 2025). Smaller landlords (1 to 20 units) are selling their properties instead of renting them. This caused a 14% decline (4,000) in units available. With fewer units available in an already tight market, Redfin analysts concluded that reduced supply will cause rent to increase in the city.
If GRE Downtowner is successful in having its lawsuit heard and if they prevail in court, it will have a huge impact on Seattle’s rental market. Depending on how the court assesses the penalty and which of the city’s 1,500 landlords will be able to claim they should receive payments, this could be very costly for the City. There are many apartment complexes that have been impacted by the recent rush to regulate.
No matter the outcome, the data on the declining number of units available should raise concerns with city officials. Seattle currently ranks ninth in the country for being the most expensive city for renters (behind six California markets, Boston, and New York). These regulations have reduced the number of units available, and this will increase demand and rent costs, making Seattle too expensive for many current residents to afford.
The problem is that the landlord/tenant pendulum has swung so far towards the renters’ side that it is now hurting renters (especially those who are low-income) due to the reduction of housing units available.
City councilmembers should work more closely with those who invest, build, and manage rental properties to develop commonsense solutions. Together, they can figure out a method to ensure everyone is treated fairly in the application process while allowing landlords to have enough control over their property to ensure it is safe and well-maintained.
ChangeWA will continue monitoring the GRE Downtowner lawsuit. The case has already raised the public’s awareness of Seattle’s serious rental housing problem and how well-intended government regulations have backfired. As is often the case, more voices and perspectives need to be listened to in order to arrive at better solutions.