Hot Money and Seattle’s Growing Housing Crisis: Part One


Most tech workers I know have to share a one bedroom apartment, and many of them work without benefits.

"while the average salary for a tech worker in Seatle is about the same as in SF"

So I guess they don't get paid all that well after all, especially since most of them have to rent an apartment.
Most tech workers I know have to share a one bedroom apartment, and many of them work without benefits.

"while the average salary for a tech worker in Seattle is about the same as in SF"

So I guess, they don't get paid all that well after all, especially, since most of them have to rent an apartment.
"The problem is the reckless exploitation of a local housing market." Nah, it's a free exchange between the two parties involved. It's not exploitation as everyone is free to say "No I don't like that." What you failed to mention is the outrageous property tax burden. Who do you think is going to pay those ever rising costs? Like in any business, those costs are passed along. Vote for a property tax increase and you vote for higher rents due to higher costs.
lol @3, seattle has lower property tax rates than its suburbs.
#4 don't be a clown, I never suggested Seattle has "lower" anything. What I did say is a fact. Raising the cost of doing business is simply passed along. Try to keep up.
It's easy to chalk this all up to foreign boogeymen, but here in the United States we've got tons of example of good old red blooded Americans using property as an investment tool. It's in the DNA of the American dream. And we've set up all sorts of perverse incentives to encourage it - tax deductions for mortgages on second homes, up to $500,000 in profit from real estate transactions that goes completely untaxed. Don't blame foreigners for taking advantage of a system we rigged ourselves.

Charles' concerns aren't unwarranted, but the problem is that the narrative plays into a lot of fears and false dichotomies of the Seattle Left (Herbold), which then get co-opted and parroted by the Seattle Right (North Seattle, John Q Community Council). The idea that the laws of supply and demand aren't the fundamental framework underlying real estate markets. The idea that if we stop building luxury apartments the rich people will go away. The idea that rent control alone will save us. There's a lot of people that try to fight proxy wars against macro issues like global capitalism in the context of micro issues like local housing markets. I get where they're coming from, but their solutions only play right into the hands of the economic elite they loathe.
Holy Moses....This is again the most inept analysis of the Seattle Real Estate market to date.

The lack of understanding of the real estate, economics or the markets is astounding.

1) The demand is driving the market. This entire article is all about the "demand side" pushing up prices--Blackstone Investors, Chinese Investors...etc, etc. As prices rise, demand will reach an equilibrium with supply and the market will correct itself.

Will there be a market correction. Why certainly!
Will large corporations and investors be attracted to Seattle.... Why certainly!
Will they bid up the market and create competition.....Why certainly!

This may come as a surprise, but we are a free market capitalistic nation. While one might naively believe this is evil, it has worked quite well over time, subject to market corrections, recessions and even a depression or two. But it has worked well for centuries in the free market.

We all watched the great Soviet Union model collapse and fail. Thus the socialist market control concepts and methodology are not viable and have been thoroughly discredited.

2) Paying 30% of your income for rent is about right. 25% would be better, but in a hot market with a tight supply 30% is about right.

3) $2796 a month for rent = $33,552 a year..... Why not buy a house.

$600,000 @ 4% interest, 30 year amortization = about $2,800 per month.

Where is the world did you get your figures or concepts.

Plus you get all the tax deductions from owning a that is another reason why housing prices are makes more sense to buy than rent.
your $2800/month mortgage napkin math doesn't count taxes, insurance and maintenance and a number of other out of pocket expenses. The problem is the market demand is driven from outside the market and many of us that live and work in this market don't have the resources to compete against those buyers. So we'll become a nation of renters in a generation.
I have my disagreements with Charles a lot of the time, but here I think the key point is that the whole approach treats housing as a commodity. Houses, condos, and so on, are simply things that can be bought and sold. The trouble is, an awful lot of people have no interest in that stuff and just want a roof over their head: for them, housing is, you know, a house. The problem is that all this macroeconomic stuff conflates the two things so that if you want housing you have to act like an investor. The same thing is true in the medical business to some extent: it's viewed as an investment and of course profit is a perfectly natural thing in that context. The conflict between something people can make money off of and something OTHER people, poorer people, simply need, is at the root of it all.

As @7 points out above, this is just the nature of America. Profit trumps all.
No one adds how this wrecks subcultural communities that very much survive on city structures. No one ever talks about the disabled, witches, or queers. These are three groups that very much are prey to the system, and they have no systematic power to compete with breeder couples whose souls are vanilla and whose bank accounts are loaded, nor against all the angry, young, selfish atheists, and not against the big banks of CA and NY which decide to continue to rape other states as they rape their own. Yet, it's always the queers and magic and the "differently possessed" that all these neoliberals STATE they value, but at the end of the day its just lip service. Breeders who sold their souls for money and who are willing to displace other people don't deserve magic or the rainbow. Our survival and cultures are more important than your ego being bored with the Midwest. And we only focus on differences which are color-coded, and we can barely deal with that. I mean, after all, how many times do we have to chant "Black Lives Matter" until we have no more neonazis? Not gonna happen, but at least the national conversation has started opening up more for them. Cripples and witches wanting to live in the city and not be displaced? Who gives a shit, because they can't work and they're not real, respectively.
@3 That's ridiculous. The property tax is about 1% of assessed value. By what means does that manifest as these skyrocketing prices?
1. "If our only challenge were to build enough new rental apartments for our friends in tech while avoiding displacing people and communities, we’d probably be fine." How so? 70,000 new people since 2010, but we've only built 40,000 housing units since then. What happened to those other 30k people? Did they just give up and live in boxes? No, they outbid other people, which drove up housing prices enough to either make people get roommates, move to the suburbs, or give up and leave. This is not *we will be fine*. This is a crisis caused by locking down what and where we're allowed to build.

2. "If you use the very basic rule of thumb that says you can afford a house that costs 2.5x your annual income, that means you need to earn $234,000 a year to buy a median house" Wait. Someone earning $100k a year can only afford a $250k house? Where did you get this "rule of thumb"? At current interest rates with no money down that's $1,182/month, or just 14% of their income. Where on earth do people buy homes for 14% of their income?!
@8 The point being made is that its better to buy than pay rent at $2,800/month. The benefit of buying is that you have:

a) income tax deduction (tax savings) which offset the costs you indicate
b) your mortgage doesn't go up....while rents apparently pretty brisk rates presently
c) you build equity in the property - value over time and you have some skin in the game.

So your conclusion of being a "renter generation" is probably very apt, because you don't understand points (a) (b) & (c) or economics.
@7 Do you not care at all for your fellow man? Does not everyone have a right to housing? It's ok if your answer is "no". At least that'd be honest, and maybe better for the planet, too.

But, also, real quick, we're not a "free market capatalistic nation", never have been. And those depression's and recession you mention are proof that there's plenty of room for improvement on what we do have.

The collapse of the Soviet Union did not prove Marxism or socialism as economic ideas don't work. The Soviet Union failed for a variety of reason, not the least of which were an extremely oppressive and corrupt oligarchy (which goes against Communism by definition) and the most powerful country on earth doing everything in its power to undermine them.
@14 Whoa there Comrade Pooski...lighten up. I'm just pointing out how free market forces generally work. Is the US a pure capitalist society? and yes there is plenty of government regulation and room for improvement. So do get step down from your soap box agenda about "your fellow man".

Can you point to a successful "Marxist or Socialist" model which works better than the US:

Cuba? China? ....Seems those folks are flocking to the US to get out of the "worker's paradise" and if I read this article and understand your comments correctly they seem to be buying up property here and looking to live the American dream.

At least somebody out there understands things....oddly enough it seems to be the socialist!

Where's the mention of Vancouver and London's new taxes aimed at tempering the flow of foreign hot money?

Frankly, I'm too tired to repeat myself on the benefits of a progressive pied-a-terre tax on houses assessed above a threshold. Or land taxes. Or building more. Etc etc.

@6 Makes some great points about how this issue is politically abused.

@12 Hear, hear!
@ Mistral

Look at the World Happiness Index that year after year ranks countries with much more socialism in their governments as happier than U.S.
Did Mistral just step put of a time machine from the 80s? Cause those sure were some 80s level talking points against meaningful regulation of global real estate investors. There are more options than free market bullshit and commie Soviet Union bullshit (BTW, the main reason the USSR collapsed was due to aggressive expansionism and military spending it couldn't afford, and desperation resulting in extreme cruelty to its citizens. The US only won because we could outspend the USSR).

We could be adults and come up with meaningful solutions that specifically target the problem at hand. Sure, it's legal for these companies to buy rental property, but we could easily, ya know, make it illegal. We could also use perfectly legal and very constitutional methods like eminent domain to seize foreign owned property, or even include out-of-state owned property, until the demand falls because investors will assume they will lose their property. Yes, constitutionally, that would require compensation, but it's cheaper now than later. Those seized properties could make great sliding scale "middle income" homes for hardworking working class people that don't qualify for section 8 vouchers. Come back to Earth, Reaganaut, and see that the struggles of the working poor, working class, and even middle class professionals are leading to a surge in violent nationalism. We clearly need to do something about that.
What can the mayor do to actually curtail this? The Stranger needs to use this platform to put pressure on our elected officials to do something other than deflect blame since there are now case studies to reference. Ed Murray seems to be helpless or indifferent recently saying "It's a global problem, I can't help" to NPR. Token lip service is getting old, its your fucking crisis Ed.
@ 17 -- Then why wouldn't the Chinese and foreign investors flock to these countries?

@ 18 - I stand reproved....I was doting on such an old concept, envisioned by our forefathers namely, the thoughts on life, liberty and the pursuit of happiness. Not the government confiscation of our property, rights and enforcing of policies aimed at depriving us of our freedom.

No you have a real solution besides confiscation....which isn't going to work. It just silly.

@18 Hear, hear.
I have my disagreements with Charles a lot of the time, but here I think the key point is that the whole approach treats housing as a commodity. Houses, condos, and so on, are simply things that can be bought and sold. The trouble is, an awful lot of people have no interest in that stuff and just want a roof over their head: for them, housing is, you know, a house. The problem is that all this macroeconomic stuff conflates the two things so that if you want housing you have to act like an investor. The same thing is true in the medical business to some extent: it's viewed as an investment and of course profit is a perfectly natural thing in that context. The conflict between something people can make money off of and something OTHER people, poorer people, simply need, is at the root of it all.

As @7 points out above, this is just the nature of America. Profit trumps all.
Regarding those 1500 homes Blackstone bought, 90% of them were in SW King County. Places like Kent, Auburn and Federal Way. Only a handful were in Seattle and Bellevue. Nearly all of them were rented out. While it certainly had an effect on the supply of homes in neighborhoods 20 miles out, it had no effect at all on Seattle.
We can only guess, because the city or county doesn’t track who is buying what.

Hey guys? Let me introduce you to the Property Research section of the Seattle Municipal Archives!

There's all sorts of neato data in there, including public records of every real estate sale in the city, which in turn include the names of both the buyer and seller. Just in case you've got anyone there at The Stranger who might ever take an interest in, I dunno, doing some sort of "investigating" or "researching" and then writing up some "summarizing" or "reporting" about what's in there!
How much does an average tech worker earn? $108,000—even tech workers can barely afford a basic 2-bedroom rental.

Just out of curiosity, what do you suppose single-occupant single-income tech workers are using that second bedroom for? Why do they all need two bedrooms? Is it extra space for their hundreds of computers, or something?
A few thoughts....

This article does not dispute the basic economic law that if enough apartments are built (of any grade) then housing prices will eventually drop.

We have a massive trade deficit with China, and they have loaned us over a trillion dollars. We pay those loans back with interest. This gives them large holdings of US currency which they use to buy up physical assets because our dollar is of dubious long term value. They own this country (and apparently Canada too.) It's just now starting to look like it.

It does not make sense that foreign investors would purchase property and leave it vacant. I'm not saying this isn't happening, but it doesn't make economic sense. This is a head scratcher.

Many people hold REITs in their 401(k) or pension fund. Some of those greedy investors are just your neighbors hoping to retire some day.
Charles has been beating this drum for awhile now. While it is certainly a factor, I've read other sources that minimize the true impact of this type of speculative investment.

But as a local houser, I don't recall coming across Cary Moon's name all that often in the current deliberations on housing (the tunnel? Yes, of course. And I may have just missed her housing contributions). I have respect for what Cary has to say so I hope there is a way to distinguish who contributed to what in this series (again, no offense to Charles).

Looking forward to the entire series...
David @26 writes:

It does not make sense that foreign investors would purchase property and leave it vacant. I'm not saying this isn't happening, but it doesn't make economic sense. This is a head scratcher.

As I understand it (and I could certainly be wrong), the problem is that Chinese money belongs to the Chinese government, really, so if one has accumulated a lot of Chinese cash, one can't just squirrel it away in a bank somewhere -- the government can claw it back no matter where it is. If you convert that cash to some physical thing, however, that makes it more difficult for the government to repossess it. Things like gems are easy to get back, but how's the government going to claw back towers of condos?

Anyway, as I understand it this is a way to convert cash to non-mobile assets. They're not for living in, or generating income, they're just for storing money. Sitting empty probably retains value better than renting them out to tenants who might screw them up, too.


It does not make sense that foreign investors would purchase property and leave it vacant.

It makes economic sense for very high-end properties where maintenance costs are huge (higher than rents most people can afford) and the pool of potential renters is so small that the market price is driven to below that maintenance cost. The crumbling London mansions mentioned in the piece might fall into this category.

It also makes sense for currently uninhabitable properties with high repair/rehab/relicensing costs.

And finally, it might make economic sense for some of the 1% to keep many places like this around the world, occupied for only a few weeks of the year (possibly by friends or business associates) on an unpredictable schedule (with the assumption that hotels or short-term rentals can't meet their weird specific needs).

I don't think we have much of any of these in Seattle, though.
@28: Your explanation for why Chinese people might buy foreign real estate makes sense, but that doesn't explain why they might let it sit empty. They parked their cash in a building, great! But now holding that building requires payment of property tax and maintenance, whether there's someone living in it or not. If someone lives there you'll probably need to spend a little bit more money on maintenance than you would if the house was vacant, sure, but the rent you'll charge will more than compensate you for this extra cost.

So the question remains: why would these foreign investors choose to forego the easy income stream that comes with renting out the buildings they already own? Surely some property management companies would be happy to handle all the details and just send the investor a check every month.
Again, @mistral

"Then why wouldn't the Chinese and foreign investors flock to these countries?"

Read the article. These properties are not being bought to be lived in. And learn the difference between wealth and happiness, greed and prosperity.

Also, @18 I thought the same thing about Mistrals examples being dated, but abandoned my pithy sarcastic comment. Thank you for making one.
@28 - I understand what you are saying about "storing money" but that alone doesn't explain letting the property sit vacant. Generally landlords prefer to have their properties occupied. An unoccupied property can become a disaster very quickly (undetected water damage, insect or animal infiltration, squatters, etc.) This may be less of an issue in professionally managed condominium than it is in single family homes but still a concern.

@29 - I didn't consider tear-down properties and that is one area where you may be on to something. If the house has no value and was purchased only for the land, then letting it sit vacant could be a wise economic choice. But many of the properties being purchased by foreign investors are high end condominiums. The maintenance costs for those units come every month, whether occupied or not. Rent only has to cover the marginal increase in maintenance (cleaning apartment after a short term rental for example) in order to make economic sense. Even if the owner is keeping it as a vacation rental, economics would suggest they would rent it via Airbnb when they are not using it. Even laziness isn't really a factor as there are services that will manage your Airbnb units for you.

Seattle and Vancouver are huge markets for Airbnb. So I'm still scratching my head.
Mistral is such a hilarious ideological tool. He's like a pastiche of National Review and WSJ editorial page cliches.
We need a Soviet equivalent of Godwin's Law. In any discussion that is critical of some aspect of contemporary capitalism, it is inevitable that someone will eventually employ the straw man of Soviet communism in its defense.
Entire cities in China are newly-built ghost towns. "They buy land on the outskirts of cities at the low rural rate; rezone them as urban; then sell it on to developers at the high urban construction land rate."

People are scratching their heads trying to understand unused properties. I remember a chilly stroll after Christmas dinner in a lovely neighborhood in Vancouver, but something was not right...most of the neighbors' lights were dark. My host told me most of her neighborhood was uninhabited Chinese investment properties. It was like a Hitchcock film.

Vancouver is becoming a place where people have jobs in the city but the city has no place for them.

Moving on to Wall Street-- do you see how the 2008 burst mortgage bubble has morphed into this rental monster? On the backs of so many people losing their homes the same Wall Street firms that created that crisis hoovered up the real estate they bilked us out of and now with a straight face rent it out at massively higher rates. Someone please get a clue that this is not capitalism. This is not supply and demand. It is certainly not moral. We are told it is legal-it shouldn't be. No wonder so many people walk around with sleeping bags under their arm.

I suspect the impetus behind HALA is some of the players or their proxies want to crack the rich nut of neighborhood zoning and eat the riches within. (Tasty. More.) One Ballard neighbor told me he keeps a stack of offer letters-- 2 inches high from the last 12 months alone.…

And as a corollary, we can safely say that in an internet discussion even tangentially involving economics, for every perceived problem there will be at least one person claiming it is caused by Capitalism.
As a real estate agent, I saw so many deals go begging, especially in the suburbs back around 2010 to 2015. I can not tell you how many clients told me they were afraid t obuy for fear it would e worth less, or that they wanted to wait until the price wsa even lower. These were obviously great deals. My sister got a few. when I heard about a few large corporations bying up houses for rental, I thought it was pretty smart and would have great results, but i was saddened at the thought of all that housing being shifted to corporate control instead of home ownership. But so many people missed the boat out of unrealistic fear or greed. So who is really to blame that a large corporation or two, and a lot of private investors now own a bunch of rental houses? But it is still not too late. Rates are great. But I still hear people say they want to wait until "prices come down" Good luck with that.
On prices coming down - if I remember right, that Walrus article suggested that the BC govt was a little afraid to intervene in a major way, because people who had bought a house just to live in could lose a million if prices came back down to earth. Recognize the problem and do something about it early - in Olympia, better than Seattle.
@33 Actually on one thing we agree. You've resorted to name calling.....which suggests you are being defense and find my point valid.

That said, the points I've raised are as valid today as they were as you suggest in 1980.

And still , you've pointed to no successful model for your solution.

@33 - It is perhaps no irony that mistral is the French word for «a strong wind that lasts for days».
@37 "Missed the boat"... oh the privilege...
#39: The solutions are policies that mandate affordable housing or create the preconditions for it. It has nothing to do with communism. It's a public policy that's perfectly compatible with US capitalism. The government is already actively involved in economic activity, and pretending that simply incentivizing affordable housing or offering publicly subsidized housing from a policy perspective is the road to socialism or communism is a slippery slope of epic proportions. There is not a single economy on the planet that doesn't have proactive government involvement in the market. If affordable housing is communism, there's a whole lot of communist regimes on the planet, including nearly every developed country. That's why your entire argument is bogus. You pretty much have to live in a fantasy world to agree with it.
#36: I'm not blaming capitalism; I'm blaming an aspect of the market that exists right now, a blip on the flowchart of economic history. I'm not taking on Adam Smith. The housing market is a product of our weirdly unique, historically-situated economic condition. Something can emerge within the capitalist system without being capitalism itself. A critical look at the housing market is not an attack on capitalism.

But that's the problem with America's unique "free market" ideology: capitalism as a system is used to justify any economic phenomenon (even if it's a distortion or a subtle manipulation of the market), even if it's brand new, acting as if any new economic activity is a universal law of capitalism. Instead of acknowledging that we're on new ground here, it's as if this kind of housing market always existed.
By the way, the Stranger is included in the Sightline Institute's local audit on the media coverage of Seattle's housing affordability crisis:…

I guess this piece falls squarely into the *crisis* (out of control) category. Would be curious to see if other parts of the series go in another direction...

No, you're not blaming Capitalism, I agree. But it sure looks to me like Charles and Cary are.
@45 How could you not point the finger at neoliberal capitalism for creating globs of fake money through financialization, and private equity treating housing just like another speculative commodity? Did I forget to mention the systematic defunding of public housing since the 70's? (i.e. the beginning of deregulation)
This article sheds more light on where the competition for homes is coming from. Certainly "parked" foreign investment money is part of the picture. I'm looking forward to reading the other three parts. Hopefully there will be more emphasis on the difference between the private market for houses and condos and the need for subsidized housing for anyone with an income less than 60% of area median, both for seniors and people with disabilities who can't work and for those in the service sector who make less than $18/hr.
Why would Chinese investors purchase properties and not rent them you ask? Because, the reason they bought the properties in the first place, as other commenters have noted, isn't to generate revenue, which can be taken back by the government either by taxing foreign income generated by resident citizens, or by seizing the capital assets of non-residents if it's determined the money was removed from the country illegally (which is - or until recently was - apparently ridiculously easy to do), but rather to isolate wealth FROM the government. If they rent or lease the properties they've purchased, then the income derived from that activity is subject to taxation or outright confiscation - it being much easier to seize fungible assets such as money deposited in a bank account than it is seizing real property (although the Chinese government is now attempting to to do just that as well). And meanwhile, because of the gross imbalance between supply and demand in the market the valuation of their real estate investments continue to increase at spectacular rates with literally no additional work or investment required. It's like having a high interest-bearing savings account made of wood, brick, glass and steel instead of cash; in short, a relatively protected, highly lucrative passive investment, where the additional cost of overhead and maintenance has been virtually eliminated.
Upzoning and fake "affordable housing" required in developments are just feeding these rising prices. I'm baffled that anyone thinks giving developers a freer hand will somehow lower rents and the cost of homes. Taking one two bdrm bungalow out in exchange for 3 townhomes isn't supporting lower housing costs.
""while the average salary for a tech worker in Seattle is about the same as in SF,"

Clearly neither of the authors have EVER worked in IT. You make a lot more in SF than Seattle. After adjusting for cost of living it is true that your probably better off here but it's ridiculous to claim that the raw $$ amounts are the same.

If we really want to lower housing costs we need to ease regulation and let developers build up. It's amazing how many people in Seattle love to whine about affordable housing and simultaneously complain they don't want big buildings.