Living expenses in seattle8/18/2023 Utility connection charges paid to city and county were $530,000, adding an average of $7,100 to the cost of each apartment. Permitting and water/sewer/electrical connection fees: $43/month (2.0 percent) A typical $175 per month parking charge leaves an average $43 per month for each apartment renter to cough up. That means apartment tenants end up subsidizing the parking through higher rent, whether they own a car or not. What owners charge for parking usually isn’t enough to cover the cost of constructing it-a staggering $50,000 per stall for underground parking in the present example. These folks spread the word about the building and get tenants in the door. As illustrated in the graphic above, here’s what a $2,200 rent check pays for, listed from the smallest to biggest portion: Marketing consultants: $12/month (0.6 percent) Typical rent for a new one-bedroom apartment in this type of building located in a close-in Seattle neighborhood is $2,200 per month. I assume developers launched the project in mid-2014, finished construction three years later, and took another six months to fully lease it up. As is common in Seattle, it’s constructed of five wood-framed floors built on top of a concrete bottom floor. My test case is a generic 75-unit, six-story apartment building with 50 stalls of underground parking and a small street-level retail space. Original Sightline Institute graphic, available under our free use policy. There are, however, ways to chip away at it, and those ways add up. Overall, the analysis shows that there’s no single solution for big cuts in the cost of homebuilding, which also means there’s no silver bullet for lowering rents in new housing. But on the whole, their paychecks reflect their entrepreneurial risk and effort-just like any other business. Some developers may be less ethical than others-just like any other business. So, contrary to the “greedy developer” narrative, developers aren’t getting half the rent they’re getting around a tenth of it. The developer and equity investors together take 13 percent, which is more than our Portland example’s 8 percent, but in the same ballpark. Construction is the biggest single cost, consuming 39 percent of the rent check. ![]() That’s such an important truth that I repeated the exercise for Seattle, running the numbers for a typical new six-story apartment building based on data provided by local Seattle developers. ![]() The rest of the rent covers a laundry list of expenses including the land purchase, permitting fees, design services, interest on loans, property taxes, and more.īottom line: the rent is what it is because the cost of the new building is what it is. Add the equity investors-the early-stage, financial backers who are also commonly thought of as developers-and the total portion of the rent check that goes to the “developers” comes to 8 percent. In comparison, the developer-that is, the team that manages the whole project-gets just 3 percent. Michael found that for a typical new apartment in Portland, Oregon, the biggest chunk of rent-one third-goes to covering the cost of physical construction. My Sightline colleague Michael Andersen recently devised an auditing method that boils it down to this question: What is the rent check actually paying for? For privately-owned housing, rent income has to cover every cost: no proposed apartment building will move past the idea stage unless investors believe that it will bring in enough rent to pay for all of its development and operating expenses. But an audit of the typical costs to create and run an apartment building tells a much more mundane story: new housing is expensive simply because it’s expensive to build and operate. When people see new apartments with high rents, many assume it’s because developers are making a killing. And in booming Cascadian cities such as Seattle, that belief creates a political environment hostile to homebuilding, which worsens an affordability crisis caused by a shortage of homes. A recent UCLA study found that the most powerful catalyst of opposition to the construction of new homes is the conviction that developers pocket too much profit. The notion of the “greedy developer” is alive and well in North America.
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