The Landlord Lens - New 7% Rent Cap Bill Passed in Washington: Landlords and Renters in Trouble!

Episode Date: May 12, 2025

On May 7th, Washington state passed a historic rent control bill that caps annual rent increases at 7% plus inflation, or 10%—whichever is lower. With Governor Bob Ferguson expected to sign the legislation, this could mark a major turning point for tenants and property owners statewide. #rentcontrol #washingtonstate #In this video, we break down what House Bill 1217 means for:✔️ Washington landlords✔️ Renters struggling with skyrocketing housing costs✔️ Investors and developers worried about profit margins

What I think is very scary, this opens the door for additional kind of activist legislation. Any law, right, that is going to apply restrictions to what landlords can do with their personal property, I think is a slippery slow. Hey, everybody. Welcome back. I'm joined today by our favorite guest, Seamus Nally, our CEO, Hey, Seamus. Hey, John. Well, thanks for that. Yeah. I really like that applause. Sound effect, you added, Alex. John John, you pulled me in here because the state of Washington is kind of up to it again, right? They have a 7% rent cap bill past Senate, it's going to the House, right?

By the time we get this video out to our audience, right? Could be law. Could actually be a law, right? So, John, what is it about this 7% rent cap that has you in a bit of a tizzy? And then I'd love to share my perspective as a landlord. that has to think about raising rent all the time. Yeah, absolutely. A lot of my thinking was shaped by Sean Flynn over at the Rental Housing Association of Washington.

So let's roll some of the highlights there. Rank control simply doesn't do what proponents of rent control will tell you it does. What we find again and again and again is that rent control forces rent up, the average rent up in a city that it's implemented in. And it pushes the quality of the housing that's left in the city down. And then it also reduces the total amount of supply that's available. One famous economist said that rent control is the most effective way of destroying a city that they've discovered but for bombing. Love what Sean's doing with the association up in Washington, trying to get some really grassroots support for the needs of landlords, just like, myself and those individuals on turbotenet.

Yeah, it's really cool. It's typical that they're a voice at the table during these kind of legislative sessions about rental housing, but normally it's dominated by the big multifamily, you know, lobby and everything. So it's really cool that he's mobilized so many small landlords. Absolutely. Even if it's a small voice, it's a voice.

Yeah. Now, I was shocked when you basically said, this is a nothing burger to me before this call, before we hopped on here. So you want to expand on. that a little bit. Why do you think this isn't a big deal? Yeah. So the part that I do think is a big deal is any law, right, that is going to apply restrictions to what landlords can do with their personal property, I think is a slippery slope. So I think it's a very good argument as to why we should be

very aware and similar to like what Sean's doing in the association try to push back against these. I think in practice, as a landlord, however, there's a lot of things you can do that make it so this is not that big of a problem. And personally, I can say, I've never raised rent on an existing tenant at 7% or higher. And that's because I routinely, every single year as I do the renewal process with my tenants, we renegotiate rent. And I try to move it up bit by bit. So I'm never in a position where I have to make this large jump. The other thing that I do is I write into my lease agreements provision that allows me to with notice raise rent even during a fixed term, even during a 12-month lease. And so that kind of protects me so that as my expenses are changing,

I can make these incremental price increases without ever having a large jump that would exceed the 7% cap that is reflective in the state of Washington's bill. Interesting. Okay. So you think, okay, this is a 7% cap. Even if I'm affected, I'm never going to hit that number anyway. So this regulation actually does not apply to me based on how I manage my business. That's what you're saying. What I'm saying is that my goal is that I'm managing my business in a way so that I'm not worried about these sorts of rent caps. And I think 7% is really right on that edge of what becomes troublesome.

So once again, I do understand why fighting against it. But in practice, I try to remain in a situation where I'm not having to. to increase rent more than, you know, three to five percent per year to adjust for the increase in my expenses or to adjust for increased demand and market rate increases. Okay. So that makes sense as far as how to approach your own rental business. But I still think there's reason for some alarm here. The first thing is this being the first rent cap bill in Washington opens the door to add-ons

to this bill. You look at what happening in California. We did a video on it. It got pulled back due to the outrage. But these COVID-era restrictions and tightening on red cap in California paired with what I think is very scary for somebody who prefers to keep their portfolio semi-liquid and eviction protection bill. And they phrased it that way. But it's really you can't non-renew a lease without cause, right? And so in that case, if you've got a tenant under market and you try to sell that property,

nobody's going to want to buy your property because they can't remove that tenant and they can't raise the rent to raise it to market. And that makes the whole rental market much less liquid than it already, I mean, it already isn't that super like super liquid. And it makes it even less liquid, which, you know, will hurt the market overall. So those are my two big concerns is this opens the door for additional kind of active. legislation. And second, it makes the market much more susceptible to smaller changes, throwing it all out of whack because the price can't be is inelastic. I completely agree with you there and the idea of slippery slope, opening the door, and some of the other legislation that you've mentioned can be wildly damaging to the

freedom a landlord has to operate their rental business, right, and how they manage their own personal property, which is this rental, right, that they've purchased. So don't just agree with you at all there. I really would love to see these legislations actually start to address what I know we believe is the primary issue with housing affordability, which is supply. Yep. And the more and more I see what I would consider price fixing, right? Even if I think there's very valid ways to work around it as a landlord, the more I see price fixing, the less hopeful I am that they address the actual issue, which is some of the supply constraint. And the reality is a lot of that supply constraint is actually based on different regulation that could

be changed from a legislative standpoint, right? It could be helped. But instead, we're spending our time trying to fix prices on landlords where 40 some percent of the rentals in the state of Washington and throughout the country are owned by individuals with one to 10 units, right? They don't have their own legal teams and are completely at the mercy of increases in property taxes and insurance prices, and they're going up all over the country. Yes, and this is why I'm so mad. Like, there was an analysis that came out last year that it is two and a half times more expensive to build a property, a rental property in California than it is in Texas.

Two and a half times more expensive. Yeah, so look, Washington State is dead last in housing production, right? We're either 49 or 50th. I mean, it's, we're not, we've not done a great job of producing the amount of housing that we need in our state for like literally the totality of my life. And I'm old. Yeah. And Washington's got the same exact problem as California. And I bet Portland has similar issues.

And it's all related to this, this regulatory environment that makes it really, really hard to build stuff or take really, really long and turn developers off. Meanwhile, where has rent decreased the most in America among metro areas? Austin, Texas, because they can build there. And they build actual housing. And is there a rent cap law in Austin? No. So this stuff really frustrates me because it's, it gives the politician a story to say,

I solved affordability or I tried to solve affordability, send me to Washington next or something. But it actually locks renters into a renting situation for way longer because there's no actual single family stuff coming on or condo units they might want to buy coming online. And so this, this is kicking the can down the road of what has, at least for the last,

what, 80 years been America's primary wealth building tool, which is buying your own house. And so it's frustrating because all these renters are like, yay, yay, yay, but by creating this smoke screen of rent caps, right, they're actually like voting against their interest of being able to own a home in the future because those regulations, there's zero incentive to actually solve them. What you're also touching on is just the fact that in the future, it's not going to be a great option at times to invest in your own backyard, right? Yes.

If you live in the state of Washington, if you live in California and Oregon, even here in Colorado, I was at an event speaking to a lot of landlords here in Colorado, and I was blown away that 40% of them actually owned rentals outside of the state of Colorado in places like Texas, right, in the sunbelt, places like Florida, where it's a lot easier to operate, right? There's more landlord-friendly laws. There's less regulation when it comes to building. And so Sean's comments don't surprise me one bit as to how people are changing, how they view being a real estate investor in the state of Washington as a result. And we're just going to see real estate investors are all going to flood to those states.

And it'll be really interesting to see how that changes the inventory in those states. And whether states like Washington actually respond because they realize that it's a lot of dollars and it's a lot of housing supply that is actually leaving. the state of Washington. Yeah, exactly. It's just when will they see that? Because it's been five years of this trend, more than that, if you take California into account or Santa Monica, that story is like 60 years old and nobody's learned from that.

So it's, it's, I am, I'm maybe not as hopeful as you are that these states will recognize the harm they're doing to their own economy. The number one thing that makes me hopeful, though, is that we actually have associations that are speaking up and trying to fight against this. Because that's the only way that they're going to realize,

it, right? When you view as a politician your constituents just to be the renters, you're not listening to a big voice, right, a big portion of your constituents. And so my hope is that that can be amplified with the megaphone of local associations and helps to protect landlord's interests when it comes to this sort of legislation. Well, we'll see how this all shapes up. Like and subscribe so you can see more of our content. And thanks so much for coming. Appreciate you. Bye. TurboTenant is the all-in-one platform for landlords to manage their rental properties. From vacancy to tenancy, we have you covered with industry-leading tools and expert advice. Landlord better from anywhere for free at turbotenant.com.