A busy year for Bellingham apartment construction, but will it help renters?
Last year was a record-breaker in terms of apartment and residential construction permits in Bellingham, but it is unclear if it will put a dent in low vacancy rates and rising rents.
In 2021 the city’s permit department issued the most permits for dwelling units in 25 years, when Bellingham officially began tracking the permit totals, said Kurt Nabbefeld, development services manager. Last year the city issued permits for 1,286 units, more than double the 2020 total, which was impacted by the arrival of COVID-19. It was the first time the number of units topped 1,000 since 2004, according to data from the city.
While plenty of residential permits were issued in 2021, it may not be until well into 2022 or early 2023 before all those units become available, given the time it takes to build multi-story apartments.
In the meantime, apartment vacancy rates remain very low in Bellingham. In the fall of 2021, the apartment vacancy rate in Bellingham was estimated to be at 1%, according to a survey done by the University of Washington’s Center for Real Estate Research. The state average apartment vacancy rate average was 3.6%; a balanced rental real estate market is typically around 5%.
The low vacancy rate, landlords paying more in property taxes through higher valuations and the end of some pandemic restrictions has led to rent increases in Bellingham. It’s become an active topic on social media sites: On the Facebook group Bellingham Living, a discussion about rental increases resulted in nearly 150 comments. Some said their monthly rent increased between $50 and $150 a month; one commenter said their rent jumped $400 a month.
The $50-$150 a month increases appear to fall within the data put together by Zumper, an online resource for apartment rents. In January, Zumper estimates rent for a one-bedroom apartment in Bellingham rose 6.3% year-over-year to a median price of $1,180 a month. For a two-bedroom apartment, rent rose 7.9% to $1,500 a month.
Will the new units make a dent?
Nabbefeld noted that in order to raise the vacancy rate, new construction needs to outpace the number of people moving into the area. Over the last 20 years Bellingham has averaged about 1,400 new residents a year, so approximately 600 new dwelling units are needed to keep pace.
While the 1,286 new permitted units should help, there have also been years where the number of units permitted was under 600. The slowest year on record came in 2009 and 2010, when the global financial meltdown put a stop to residential construction. In those year only 77 and 72 units were permitted in those years respectively.
Along with people moving here, Bellingham is also dealing with a very low inventory of homes for sale. With home prices continuing to rise and not as many available to buy, fewer people can make the jump from a rental to home ownership. A recent study by the real estate website Attom concluded that having a mortgage eats up more of a monthly wage in Whatcom County than renting, although homebuyers do gain an asset they can eventually sell.
Braden Gustafson, an appraiser at Gustafson & Associates, expects the vacancy rate to increase slightly by the end of 2022, but not hit the balanced market of around 5%
“Nevertheless, this is helping satisfy the demand that has built up over the past few years,” Gustafson said.
Based on permits already applied for and pre-application meetings to this point, 2022 is shaping up to be another busy year for construction activity. Nabbefeld said some are taking advantage of density bonuses allowed in cluster zones, leading to more housing options for residents.
The city’s permit dashboard also indicates that activity is trending toward a similar year to 2022. In the past six months, 597 residential units were finished while another 1,401 units are currently under construction. That is similar to the total activity in early February 2021.
Factors that could slow down construction activity include the supply chain issues that have happened throughout the pandemic, as well as a shortage of workers. Rising interest rates could also delay construction. It’s not uncommon for developers to get land use approvals first and then wait until market conditions improve to submit actual building permits.
“Right now I don’t see that happening on a large scale,” Nabbefeld said in an email.
