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Seattle landlord sues over city tenant protections
Oct. 23, 2024 at 10:00 am Updated Oct. 23, 2024 at 10:00 am
The Addison on Fourth in Seattle. Goodman Real Estate is suing the City
of Seattle, arguing a series of landlord-tenant regulations have made
the apartment building financially unstable. (Kevin Clark / The Seattle
Times)
Sean Flynn, executive director of the Rental Housing Association at a
press conference Tuesday morning at Addison on Fourth in Seattle. (Kevin
Clark / The Seattle Times)
1 of 2 | The Addison on Fourth in Seattle. Goodman Real Estate is suing
the City of Seattle, arguing a series of landlord-tenant regulations
have made the apartment building financially unstable. (Kevin Clark /
The Seattle Times)
By Heidi Groover
Seattle Times business reporter
A Seattle landlord sued the city Tuesday, claiming an array of tenant
protections has rendered an affordable apartment building in the
Chinatown-International District so financially strapped that it amounts
to a violation of the landlord’s constitutional rights.
Goodman Real Estate, through a subsidiary that owns a 254-unit apartment
building near Fourth Avenue South and South Jackson Street, filed the
lawsuit, calling for unspecified financial damages and a change to city
regulations.
“Our goal is to create the highest level of quality affordable and
sustainable housing in downtown Seattle for our residents,” CEO George
Petrie said in a statement, “but the city has placed so many
restrictions on our ability to do that, it is placing our residents at
risk.”
The city plans to defend the tenant protections but declined to comment
further while the case is ongoing, said City Attorney’s Office
spokesperson Tim Robinson.
It’s far from the first time property owners have challenged Seattle’s
tenant protections, mostly unsuccessfully. Landlords have attempted to
block caps on move-in fees, requirements that landlords rent to the
first qualified applicant and pandemic eviction limits, among other laws
passed in the last decade.
Goodman’s case comes after a rightward shift at Seattle City Hall and as
affordable housing developers sound the alarm about rising operating
costs and, in some cases, trouble collecting rent from tenants. Some
landlords have set their sights on convincing the Seattle City Council
to loosen or repeal landlord-tenant regulations in response to those
challenges.
At the same time, tenant advocates defend the regulations as critical to
helping tenants avoid homelessness, which reached a record level in King
County this year.
Goodman makes a novel legal argument that six city regulations together
“destroyed” the Addison on Fourth apartment building’s value and
amounted to a taking, a legal term referring to the government either
literally taking property through eminent domain or regulating it so
significantly that the regulations constitute a taking without compensation.
The lawsuit targets the now-expired pandemic eviction moratorium along
with five Seattle regulations still in place:
The Fair Chance Housing law, passed in 2017, prevents landlords from
using most criminal records to refuse to accept a tenant.
An ordinance passed in 2019 allows renters to add family members and
certain other roommates to their rental as long as they do not exceed
the occupancy limit.
The city’s winter eviction ban, passed just before the pandemic hit,
limits evictions of low- and moderate-income tenants from December to
March. Small landlords are exempt, and the limits do not apply in cases
of criminal activity, waste or nuisance.
Legislation in place since 2021 requires landlords to provide six
months’ notice of all rent increases.
Under the Economic Displacement Relocation Assistance program, when
landlords raise rents on low- and moderate-income tenants by 10% or more
in one year and the tenants opt to move out instead of paying the rent
hike, the city requires the landlord to pay the tenant three months of
rent as relocation assistance. That program took effect in 2022.
The lawsuit alleges those laws have forced the building to accept
tenants who caused safety issues, added new maintenance and security
costs, increased tenant and staff turnover, limited evictions and
discouraged rent increases that might help cover the increased costs —
all amounting to a “taking.”
Takings arguments can be difficult to prove in court. Constitutional
rules generally “do not require compensation for every decline in the
value of a piece of private property,” but a regulation that “deprives
an owner of all economically beneficial uses” of their property could
amount to a taking, the state Attorney General’s Office wrote in a
recent memo to local governments unrelated to this case.
To determine whether regulations violate the law, courts generally
consider how the purpose of a regulation compares to the property
owner’s rights and whether the government could have achieved its goals
in a “less intrusive” way, the attorney general’s office wrote.
Built in 1910, the Addison on Fourth was a hotel that a previous owner
converted into housing in 1970. Goodman Real Estate — an investment firm
that owns thousands of apartment units in the region and whose
executives frequently donate to local politicians — bought the building
in 2012 for $12.5 million and spent $26.5 million on renovations and
other costs.
Because the project taps into the federal Low Income Housing Tax Credit
program, rents for its studio and one-bedroom apartments are targeted at
renters making 60% of area median income, or about $63,000 for a single
person in Seattle. Rents in the building currently range from about
$1,000 to $1,500, below the $1,900 median for a one-bedroom apartment in
Seattle, according to Apartment List.
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The building was “full or nearly full” and met its financial projections
from 2015 to 2018, Goodman said in the complaint. By 2023, the building
was nearly 45% vacant and lost $2.7 million.
In response to security issues, the company said it pays about $487,000
a year for security and maintenance, up from $116,000 a year between
2015 and 2018.
To describe safety concerns at the building, the lawsuit points out that
the Seattle Police Department requires at least three officers to
respond to calls at the building. An SPD spokesperson said Tuesday that
requirement, not uncommon at apartment buildings, stems from tenant
behavior and from the fact that the landlord has hired armed security
guards to patrol the building. The presence of armed guards makes a call
“more concerning for us, so we have to add more officers,” sometimes
delaying response times, said Detective Patrick Michaud.
Facing rising costs and declining rent revenue, the complaint said,
Goodman has defaulted on the mortgage and the property is now “unsaleable.”
“Each one of these ordinances would have been problematic on its own,
but their combined effects have destroyed (Goodman’s) ability to
sustainably operate the Addison, to manage the living environment, and
to uphold the tenants’ rights to the peaceful and quiet enjoyment of
their residences,” the complaint said.
Sean Flynn, executive director of the Rental Housing Association, which
represents landlords, called the situation “a great example of why we
need change.”
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Others defended the tenant protections.
Katie Wilson, general secretary of the Transit Riders Union, which
advocates for tenant protections across the region, argued Seattle is
not alone in putting similar regulations on the books because they’re
important for tenants.
“There are really strong policy reasons for all of these laws for
protecting renters from discrimination, for making it possible to live
with your family, to make sure that you have a cushion if you get a very
large rent increase,” Wilson said.
While the financial hurdles facing affordable housing providers are
serious, “we need to find a way to support people better,” Wilson said,
calling for more behavioral health services. “If our best answer is
eviction, we’re really failing.”
The tenant protections in question include Seattle’s “Fair Chance
Housing” ordinance, a rule landlords have challenged repeatedly.
Co-sponsored by Mayor Bruce Harrell, then a council member, the
ordinance aims to help people with past arrests or convictions find housing.
After landlords sued in 2018 to try to block the law, a federal appeals
court ruled last year that landlords can ask about criminal history but
cannot take “adverse action,” such as refusing to rent to tenants, based
on that history. The city’s Office for Civil Rights now advises
landlords they can run criminal background checks and ask prospective
tenants about criminal history but they can’t require applicants to
answer and can’t categorically refuse to rent to people with criminal
histories.
Landlords may still refuse to rent to people on a sex offender registry
in some cases. The law does not apply in cases when a landlord is
renting a room or accessory dwelling unit in the single-family home they
also live in. Appeals in that case are still ongoing.
Heidi Groover: 206-464-8273 or ***@seattletimes.com.