SOARING HIGHER
Amazon’s presence in Seattle has contributed to staggering jumps in housing prices there
SEATTLE — When Chris Heinrich moved from New York City to Seattle about six months ago to take a job at Amazon, he got quite a jolt. But it didn’t come from the coffee.
What stunned Mr. Heinrich were the housing prices. While they didn’t quite approach Manhattan proportions, they were eye-opening.
“Having been in New York for 21 years, where I watched real estate climb every single year — it never took a dip — I thought I had seen it all,” he said recently while standing in the heart of online retail giant Amazon’s campus in South Lake Union.
“That’s why I’m surprised to come out here and not to see prices be what they are but to see that they’ve escalated so quickly. It’s a clear sign of a bubble.”
Mr. Heinrich isn’t the only one with a bad case of jitters over housing prices in Seattle. Fueled in part by Amazon’s rapid expansion in the city — from about 5,200 employees in 2010 to 40,000 today — housing prices and rents have skyrocketed.
Some say the increases have displaced residents, pushed others out of Seattle altogether, and helped to fuel a huge increase in the city’s homeless population.
It’s an issue that could have big implications for countless cities like Pittsburgh bidding for Amazon’s second headquarters, with its promise of 50,000 jobs and $5 billion in investment. All of those people have to live somewhere, and Pittsburgh already is struggling with affordable housing issues in neighborhoods such as East Liberty and Lawrenceville.
According to Seattle-based Zillow, the median price of a house in Seattle has soared 84.6 percent — from $373,800 in August 2010 to $690,200 in August of this year. That compares with the country as a whole, where the median price has increased 25.2 percent to $201,900.
In the broader Seattle metro
area, prices have shot up 55 percent — from $292,300 to $453,100. In Everett, nearly 29 miles from Seattle, they have gone up 54.8 percent to $337,700, as some homebuyers have moved farther out in search of more reasonable prices.
Apartments have also become more expensive.
Rents in the city have jumped 47.2 percent — from $1,748 a month in November 2010 to $2,573 in August 2017. In the metro area, they have climbed 40.2 percent to $2,176. The U.S. median is $1,430.
“It’s more like a fright show out there,” said Svenja Gudell, Zillow’s chief economist.
A real estate bubble?
A combination of low inventory and high demand are behind the rapid escalation in housing prices, Ms. Gudell said. While she doesn’t single out Amazon and its Seattle expansion for that situation, she said the online retailer “is a huge driver of that. It’s certainly fair to say that.”
Not only has Amazon recruited tens of thousands of people to work in Seattle, other companies have gravitated to the city to be close to the e-commerce giant, she said.
While high prices might be good for sellers, it’s the opposite for those trying to find a home.
“There certainly are people being priced out of the market and who can’t even consider buying a home because the prices are too high for them,” Ms. Gudell said.
The rapid increase in housing prices has unnerved Mr. Heinrich so much that he isn’t even thinking about buying. He rents a place for $1,800 a month in Seattle’s Fremont neighborhood.
“People think it’s normal that you just throw out an extra $200,000 to $300,000 because you have to do it. In New York, it never got that frenetic. It was always pretty steady,” he said.
“Here, to think you have to go into a bidding war. I don’t know. I guess if you just have cash to burn, why not? That is my biggest complaint about being here is that real estate is in a bubble.”
Based on the median price of $690,200, the downpayment needed to buy would range from $20,706 at 3 percent, to $69,020 at 10 percent, to $138,040 at 20 percent — or what you could buy a decent house for in Pittsburgh.
Home prices at those levels have helped keep demand high for apartments.
At Rollin Street Flats, an apartment complex in the heart of Amazon’s South Lake Union, one-bedroom units rent from $2,370 to $3,588 a month. Two bedrooms go from $4,165 to $4,425 a month.
Ten years ago, rents in the area — a former warehouse district — probably would have been half of what they are today, said Stephanie Moores, a Rollin Street Flats leasing manager.
Yet there has been no lack of takers.
The building is 94 percent occupied after reaching a high of 99 percent in the summer. Many who rent are Amazon employees.
One who can’t live in the development is Ms. Moores. She pays $1,350 a month to live in West Seattle. “I wouldn’t be able to afford to live here even with the [employee] discount,” she said.
Rising rents, rising homelessness
With the rapid spike in housing prices has come a huge surge in homelessness in Seattle and King County.
Based on annual counts, the number of people sleeping outdoors has jumped from 2,594 people in 2012 to 5,485 this year. In all, 11,643 people, including those in shelters, transitional housing or safe havens, are homeless.
Zillow, in a recent study, found that a 5 percent increase in rent prices in Seattle would push another 258 people onto the streets.
Knute Berger, a Seattle native and historian who is a columnist for Crosscut.com and editor at large for Seattle magazine, said affordable housing and homelessness have become major issues in Seattle’s mayoral race this year.
“I don’t think there’s a single source [for homelessness], but I think the rising rents have accelerated it,” Mr. Berger said, adding that surveys have found as many as 70 percent of those who are homeless are from Seattle.
Even the city, in its proposed 2018 budget, acknowledged Seattle is “facing a homelessness crisis of unprecedented proportions.”
While drugs and mental illness play a role in some cases, it goes beyond that, Mr. Berger said. “You find homeless people are families, people with kids, people living in their cars, people who had houses who no longer have them.”
Amazon has taken steps to help by donating 47,000 square feet of space in a new office complex now under construction near its Day 1 building to Mary’s Place, a nonprofit emergency shelter provider. The new space will be enough to house more than 200 people in 65 rooms.
During the past year, the company has committed more than $30 million to support homeless families, STEM education and jobtraining programs in Seattle.
Poverty rate relatively low
Although Seattle is teeming in new apartment projects, what is getting built isn’t affordable to all, council member Lisa Herbold said.
That not only has had an impact on homelessness but has affected diversity as well, she said. As housing costs go up, artists and people of color are being pushed out of the city, she maintained.
The city, Ms. Herbold said, has moved to address some of the issues by creating a new program under which residential and commercial developers will have to contribute to affordable housing.
But Mike McGinn, Seattle mayor from 2010 to 2014, said the city hasn’t helped matters by all but legislating away micro apartments — units shared by multiple residents.
“They were really popular. They were filling up because a lot of people just want a place to sleep at night,” he said.
Seattle’s poverty rate was 14.5 percent last year, among the lowest of any major city, according to the Seattle Times newspaper. The University of Washington reported in September that the poverty rate for the Seattle-Tacoma-Bellevue metropolitan area had dropped from 10.2 percent to 9.6 percent between 2015 and 2016.
In bidding for the second headquarters that Amazon is calling HQ2, Pittsburgh must consider issues like affordable housing and transportation, said Ms. Herbold, who was born in Allegheny County.
“If Pittsburgh’s ready to negotiate from a place of strength and really focus on those things and getting them in place first … those are the things that will make the city more resilient and less vulnerable to the growing pains that Seattle has experienced,” she said.
Given some of the headaches that have come with Amazon’s rapid growth, Jeff Reifman, activist and a founder of startup MeetingPlanner.io, who has lived in Seattle for 25 years, has his own counsel for the Steel City in its drive to land the online retailer.
“My advice is to let another city take it,” he said.