As housing market soars, poorest renters are priced out

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BREMERTON, Wash. - Crystal Turner stood in the kitchen of her cramped apartment and stared at the cracks in the fake wood flooring beneath her feet.

Surrounding her was the home she'd made for herself and her two sons in the past year, since they moved out of her Toyota Camry and into Admiral Manor, a low-rent apartment complex in west Bremerton. There was the single bedroom with two kids' beds on the floor.

The living room she'd decorated with signs that said "Hope" and "Love." A dingy bathroom with a leaking toilet that had never been fixed.

In this undated photo, Matthew Daigneault pushes his son Aden as he plays outside on the swings of his rental home in West Bremerton, Wash. (Larry Steagall/Kitsap Sun via AP) © 2017 Cox Media Group.

Admiral Manor wasn't the place Turner, a recovering addict, wanted to raise her boys. It was the place she could afford.

"It was better than nothing," she said.

Turner can't afford Admiral Manor much longer, the Kitsap Sun reported.

A Seattle company bought the 118-unit complex in January and began displacing tenants in waves as it prepared to renovate rooms and increase rent. During a visit in March, residents in Turner's block of apartments were awaiting 20-day termination notices. For Turner, eviction likely meant a return to her Toyota and the street.

"I'm going to lose all this" she said. "It isn't much, but it's mine."

The same upheaval taking place in apartments at Admiral Manor this spring is quietly playing out across Kitsap County as the economy gains strength and a long-slumbering real estate market roars back to life.

Rents have surged. Vacancies are scarce. Once-cheap houses and apartment buildings like Admiral Manor are being renovated and rented at higher rates. Some federally subsidized developments have been converted to market-rate rentals, eating away at the county's stockpile of affordable units. With a large pool of tenants to choose from, landlords are less likely to lease to low-income families, even when they have money for rent.

Frustration is simmering among those residents finding themselves priced out of homes.

"If you don't work at the shipyard, or you don't work for the Navy, you're screwed," said Laura McLovin, a pizza delivery driver who lost her Admiral Manor apartment at the end of February.

McLovin was considering a move to Belfair. Bremerton, she said, had become too expensive.

Affordable housing advocates say the sudden constriction of Kitsap's real estate market widened an existing gap in affordability, a gap that will continue to grow unless new housing solutions are created. Reports from service agencies suggest rising costs already have added to the county's homeless population.

"A recovering economy is a great thing, except when it impacts people who are most vulnerable," Bremerton Housing Authority Executive Director Kurt Wiest said.

Communities across the region are confronting similar pressures. Seattle recently declared a state of emergency on homelessness.

Community leaders here warn Kitsap is facing a housing emergency of its own.

"Sometimes I wonder if we don't have an undeclared crisis," said Joe Roszak, CEO of Kitsap Mental Health Services, which reported a growing number of vulnerable clients priced out of rentals. "I think it's happening already."

DEMAND 'LET LOOSE'

Kitsap's housing squeeze was years in the making, according to real estate professionals.

Home construction slowed to a virtual halt during the recession as sales fell off, contractors went out of business and platted developments slipped into foreclosure. Home construction ground back into gear across the county over the past few years, but demand rebounded faster, said Mike Eliason, CEO of the Kitsap County Association of Realtors. More people hunted for new homes and rentals as the economy improved and consumer confidence grew.

Emerging trends heaped additional housing demand on the peninsula. New jobs came online, including hundreds of shipyard positions. The Navy stationed a second aircraft carrier, USS Nimitz, in Bremerton through 2019, ensuring nearly 3,000 military households will stay in the area. King County residents trickled across Puget Sound, seeking refuge from Seattle's skyrocketing costs.

A host of economic factors seemed to converge in 2015.

"The pent up demand finally let loose," Eliason said. "The problem with housing is the inventory hasn't been there."

The average number of homes for sale in the county plunged 30 percent last year. The vacancy rate at large apartment complexes, which had been as high as 10 percent in 2013, dove to about 3 percent. Property managers said the vacancy rate for single-family homes was as low, if not lower.

"I've never seen the market as tight as it is now," Wiest said.

High demand and low supply helped drive up prices. Buyers paid a median of $258,500 for Kitsap homes in 2015, an 8 percent increase from the year before. Average apartment rent jumped 15 percent — about $143 — climbing to more than $1,000 for the first time.

The strong rental market was a refreshing change for landlords. To tenants already scraping to pay rent, it signaled trouble.

PRESSURE ON LANDLORDS

"Welcome back to the '70s," Ben Nelson said, pushing open the door to a one-bedroom apartment in Madrona Estates, a low-rent complex on the outskirts of Bremerton.

The apartment inside was small, clean and simple. A bathroom, tiny kitchen and living room were wedged into the ground floor. A spiral staircase led to a sleeping loft above, a funky layout devised 40 years ago, when the complex opened as a motel.

It's not the retro vibe but cheap rents that draw tenants to Madrona Estates. Studios start at about $575 a month. With Admiral Manor converting to market rate, Madrona Estates might soon become the least expensive private apartment building in the county. The waiting list for units is 90 applicants long and growing.

"We're kind of the last bastion of affordable rentals in Kitsap," said Scott Nelson, who owns Madrona Estates with Ben, his son.

The Nelsons want to keep rents low, but they say pressure is mounting to charge more. Their tax and utility bills have risen to the point they'll have to eventually bump up rent to cover expenses.

"Essentially forcing us to go market rate," Ben Nelson said.

Some jurisdictions, including Bremerton, offer tax breaks for new multifamily developments that rent a percentage of units to low- and middle-income families. Ben Nelson wonders why there aren't similar incentives for existing building owners to keep affordable units affordable.

"Where are the incentives for landlords that have been here 10, 20, 30 years, who are providing low rents to the people of Kitsap County?" he asked.

Many of the Nelsons' counterparts have increased rents, with the housing market improving. Others are selling.

Already this year, two large Bremerton apartment complexes have been scooped up by firms outside the county. A Los Angeles company paid $13 million for the 70-year-old Bremerton Garden apartments in Manette in March and announced plans to invest $3.5 million in upgrades.

In January, a corporation affiliated with Seattle-based Stratford Co. bought Admiral Manor for $5.83 million. In February the company began issuing 20-day notices alerting residents their tenancy would be terminated.

"We are planning to make significant and necessary improvements to the property," Stratford CEO George Webb said in an email. "We believe this will be a benefit to the community and are excited to help revitalize this part of the city."

Tenants being displaced from Admiral Manor agreed the apartments desperately needed renovation. In interviews, they complained about unsanitary conditions, ignored maintenance requests and bedbug infestations. But most believed they wouldn't be able to afford rent at Admiral Manor after the work was finished.

"We're not the right monetary demographic, or any other demographic," said resident Laurleen Smith, who commutes to a call-center job in Tacoma.

Pete Gamez, 70, shares a one-bedroom Admiral Manor apartment with his sister Rosie. Gamez said he didn't know where he and Rosie would move after the new apartment owners give them notice. Neither did his neighbors.

"They don't care where we go," Gamez said. "That's the ugly part."

PRESERVING SUBSIDIES

Residents leaving Admiral Manor will be joined in their housing search by a group of renters uprooted from Poulsbo.

Like Admiral Manor, Woodcreek Apartments on Hostmark Street recently changed hands and new owners began moving out tenants to make way for renovation and rent increases. Unlike Admiral Manor, Woodcreek was a government-subsidized development.

The 40-unit complex was built in 1984 with a low-interest loan offered through a U.S. Department of Agriculture rural development program. Under the program, Woodcreek made apartments affordable to low- and moderate-income households. A portion of the units were supported by a federal rental assistance subsidy, making rents even cheaper.

Mary Traxler, multifamily housing director for the USDA in Washington, said the loan for Woodcreek was set to mature in 2034, but owners successfully applied to pay off the debt early in 2014, releasing the complex from the terms of the program. Woodcreek Apartments sold in September for $3 million. Some tenants received 20-day termination notices shortly after.

Jeff Miller, CEO of Pacific Living Properties, which oversees Woodcreek, said the property was purchased with a market-rate loan, and the new owners need to increase rents for the investment to pencil out.

"There was no way we could still support those low rents," Miller said, noting that many tenants in low-rent units were allowed to remain in place for months.

Traxler said qualifying residents were offered vouchers to help them pay for housing elsewhere.

Allison Shaw, a single mother of two, received notice to move out of Woodcreek in February and relocated across Hood Canal to Brinnon. Shaw felt lucky to have stable housing but worried other Woodcreek tenants would be left homeless.

"I don't want Poulsbo to become the kind of place where a single mom can't live, and I think that's what's happening," she said.

Federal programs subsidize about 40 multifamily properties across Kitsap. According to housing agency officials, owners of properties with subsidies set to expire in the near future have indicated they'll continue to participate in affordable housing programs. Local advocates are keeping a close eye on the properties, hoping to head off another situation like Woodcreek.

Earlier this year, Bremerton Housing Authority swooped in to buy Charter House, a 30-unit affordable apartment complex for seniors in Manette that was on the verge of letting its Housing and Urban Development subsidy lapse. Funding for the $1.37 million purchase came from land sales at the former Westpark public housing neighborhood in west Bremerton, now being redeveloped as Bay Vista. The housing authority planned to keep rents affordable and make minor renovations.

Tenant Donna LaVerne was among the seniors at Charter House feeling relieved.

"When you're on a very limited income, with no potential for increasing that income, you're very grateful for anywhere you can live," LaVerne said.

HARDER TO HELP

If Kitsap is experiencing a housing crisis, Housing Solutions Center is its ground zero.

The Kitsap Community Resource's program is billed as the county's "one-stop" source of help for families struggling to find homes. The center can place people in temporary shelters, refer them to landlords with affordable rentals, provide money to help with deposits and other upfront housing costs, and link them to other services.

The Housing Solutions Center recorded its busiest year in 2015. Staff met with 3,258 households facing housing crises, up 17 percent from the previous year. Monica Bernhard, who oversees the program, said more than 940 households reported living in homes not fit for habitation. Instead, they were sleeping in cars, abandoned buildings or tents. Nearly 550 households were seeking services because they'd been evicted — also a spike from the previous year.

At the same time more Kitsap residents are seeking help, Housing Solution Center is finding it harder to place clients in housing. Bernhard said the lack of vacancies is a big part of the problem. With demand for housing high, some landlords also are tightening income requirements and shying from renting to low-income tenants. It's taking three to four months for tenants assisted by the center to find homes, even when they have cash in hand.

"The number of landlords who will work with us has shrunk," Bernhard said.

The story is similar for renters receiving coveted Section 8 rental assistance vouchers. Nearly 2,000 very low-income Kitsap residents have their rent subsidized by vouchers, which are funded by Housing and Urban Development. Residents who receive vouchers pay between 30 and 40 percent of their income on rent. The government covers the remaining cost.

For many recipients, "it's the difference between going over the edge and being able to survive," said Wiest with Bremerton Housing Authority, which administers its own Section 8 voucher program, and the voucher program for Housing Kitsap.

When Housing Kitsap opened a lottery for 150 vouchers in February, 2,500 people applied. Bremerton Housing Authority opened a lottery for 300 voucher slots in March and expected to receive another 4,000 applications.

Those lucky enough to be awarded assistance will have 120 days to find landlords who will accept their vouchers and homes that meet the program's requirements. If they can't find qualifying housing in time, and don't receive an extension, their vouchers will be revoked.

A year ago about 85 percent of voucher holders in Kitsap found housing within 120 days. This year the "find rate" is down to about 50 percent. Wiest attributed the change to a depleted supply of rentals.

"As the vacancy rate tightens, voucher holders are the first to suffer," Wiest said. " . I'm really hopeful this is as bad as it's going to be."

NO EASY FIXES

Solutions to the affordable housing shortage won't come easy, cheap or fast.

Local housing authorities are chipping away at the issue. Bremerton Housing Authority, for example, is working with the city and Kitsap Mental Health Services to create homes for mental health clients at the site of the former Frances Haddon Morgan Center. Housing Kitsap has self-help housing projects under way that help income-qualified households obtain low-interest mortgages. On Bainbridge, the City Council approved a plan for a 14-acre parcel called Suzuki Property that will include an affordable-housing element.

Housing Kitsap Executive Director Stuart Grogan said it will take incremental bites to close the affordable housing gap.

"The more aggressive we can be in our bites, the more successful we'll be as a community," Grogan said.

Housing advocates say their work is slowed by a lack of funding. Federal and state revenue streams for affordable housing have generally held steady or declined, falling behind demand. With finite public dollars available, they believe creating more affordable units will require partnerships among governments, private developers and nonprofit groups.

"Housing authorities can't go it alone anymore," Grogan said.

Kirsten Jewell, who heads the county's Housing and Homelessness, said planners are considering policies to encourage the creation of lower-rent housing. Promoting accessory dwelling units and tiny houses, for example, could result in more backyard homes for renters, she said. Jewell noted all local jurisdictions are updating their comprehensive land-use plans this year, making it an ideal time to consider affordable housing goals.

Kitsap cities already have some density or tax incentives for building less expensive housing into new developments. In Bremerton, developers of four recently approved apartment buildings are taking advantage of a tax break awarded to multifamily projects that rent 20 percent of their units to low- and moderate-income tenants.

Landlords like the Nelsons would like to see more incentives to keep existing affordable units affordable. Builders say streamlining land-use and construction permitting would speed the creation of new homes, easing pressure on the housing market.

"It's a very long and difficult process to get land permitted in Kitsap County," said Teresa Osinski with the Kitsap Building Association.

On a broader level, housing challenges won't be addressed with new buildings alone, Wiest with Bremerton Housing Authority said. Residents need access to education, decent paying jobs, transportation and support for myriad issues like mental illness and substance abuse that contribute to underemployment and homelessness.

"I think society likes to make it simple," Wiest said. "But there are a lot of factors."

The good news, Jewell said, is that headlines created by Seattle's housing crisis have raised an alarm in surrounding communities.

"We have to pay attention to this," she said. "Because it's not going to go away on its own."

© 2017 Cox Media Group.