Housing Crisis Deepens as Tiny Units Dominate Market

During a recent government meeting, planning commissioners discussed the current state of rental housing, highlighting significant disparities in rental prices based on unit size. The conversation revealed that studio apartments have experienced a notable increase in rents, while one to three-bedroom units have seen relatively stable prices, with some declines in the rent-to-income ratio.

One commissioner emphasized the importance of understanding market dynamics, particularly regarding the Multifamily Tax Exemption (MFTE) program. They pointed out that while MFTE aims to promote affordable housing, its implementation in Tacoma has led to the construction of very small units that maximize allowable rents based on Area Median Income (AMI) calculations. This approach, they argued, allows developers to fit more units into limited space, but it raises concerns about the affordability of these tiny apartments.

The discussion also touched on the financial challenges developers face, including the need to meet specific debt service coverage ratios (DSCR) to secure funding. These financial metrics complicate the development of affordable housing, as developers must navigate investor expectations and bank requirements.

Additionally, the reliability of data sources such as Costar and Zillow was questioned, with commissioners acknowledging that while these platforms provide valuable insights, they may not always offer the most accurate information. The meeting concluded with a consensus on the necessity of implementing policies that encourage the construction of affordable housing, including potential grants and tax incentives to alleviate financial barriers for developers.