by Dr. Kelley Cullen
Affordable housing, in the form of both single and multi-family dwellings, is important not only to attract and retain workers, but also to better provide opportunities for residents to engage in their community. While much attention is often paid to rising house prices, it is equally imperative to monitor fair market rents, as increases in median home prices could push some potential homeowners into an already crowded rental market.
Walla Walla, like many counties around the state and even the country, has seen a steeper increase in apartment rents over the past five years – outpacing increases in incomes. While median household income in the metro area (Walla Walla and Columbia Counties) has increased over 20% between 2017 and 2022, fair market rents have increased more than 50% -- more than twice the rate of incomes over the same period.
WWT 5.1.11 Annual Income Required to Afford Fair Market Rent provides data on the fair market rent for both one- and two-bedroom apartments from the US Department of Housing and Urban Development (HUD) for Walla Walla as well as for the counties of Benton & Whitman, for purposes of benchmarking.
Unlike median house prices which looks at the middle of the distribution, fair market rents are calculated at a slightly lower level, the 40th percentile of all rents charged in a geographic area.
Currently, the fair market monthly rent (FMR) for a one-bedroom apartment in Walla Walla is just over $1,100. For a two-bedroom apartment, FMR is over $1,400 per month. The income required to be able to afford the fair market rent is imputed assuming households spend no more than 30% of their income on shelter costs. The 30% level was set by federal housing authorities as the threshold below which housing is considered affordable. In 2024, a household needs to earn just over $44,000 to be able to comfortably afford a one-bedroom apartment and over $58,000 to afford a two-bedroom apartment in Walla Walla.
In neighboring Benton County (BFT 7.2.4), where fair market rents have risen at a similar pace, renters need $48,000 in income to afford a one-bedroom apartment and close to $60,000 to afford a two-bedroom apartment at the current fair market rent. To the north, Whitman County (WCT 6.2.7) has also seen increases in rents outpacing incomes, albeit at a lower rate of 33% for one-bedroom apartments and 40% growth in two-bedroom rents. In Whitman County, an annual income of $35,000 suffices for a one-bedroom unit, but an income of $47,000 is needed for fair market rent of a two-bedroom apartment.
What is even more concerning is that in just the past year, from 2023 to 2024, fair market rents for both one-and two-bedroom apartments in Walla Walla jumped 17%. Yet, Benton County saw an even bigger increase in one-bedroom (40%) and two-bedroom (31%) apartments!
Some of the surge in fair market rents can be explained by the single-family home market, as posted earlier. Median home resale price in Walla Walla nearly doubled from $210,000 in 2017 to $410,000 in 2022. Households that are outpriced in the single-family home market may find themselves in the apartment rental markets and contribute to increased demand.
With rents increasing faster than incomes, it is not surprising that vacancy rates are rising as well. The Washington Center for Real Estate Research (WCRER) provides data on the number of occupied and unoccupied apartments across the counties of the state. In Walla Walla, the current vacancy rate for one-bedroom apartments is 7.4%, up 2.1 percentage points from the previous year. For two-bedroom apartments, it is even higher at 9.3%, an increase of 2.3 percentage points from last year. In comparison, the statewide average vacancy rate is 5%.
This seems to suggest that some households might not be able to afford the recent uptick in fair market rents. Whether these extra vacant units (above the 5% natural turnover) will put downward pressure on rents remains to be seen. It is also possible that incomes have risen as much. Updated data on median household incomes is forthcoming in late September. Let’s hope that rising incomes will help ease some of the cost burden that renters in the county might be currently feeling.
And although it is still early, first quarter data for this year from the WCRER suggest that Walla Walla average rents (at the 50th, not the 40th percentile considered for fair market rent) seem to have flattened - to $1,163 for one-bedroom and $1,387 for two-bedroom apartments in the county. So perhaps there might be some relief coming in the rental markets.