Can This Novel Loan Program Help Ease Seattle's Housing Crisis?
Low-interest renters' loans designed to pay for new apartment expenses like first and last month’s rent, security deposits, moving costs and furniture could be a lifeline for renters in space-squeezed Seattle.
Take a new program launched by the Seattle Credit Union. The plight of millennials living with their parents because they couldn't afford the expenses of apartment life inspired the credit union's executives to develop this product, SCU Executive Vice President and Chief Operating Officer Tonita Webb said.
Other programs, such as one in Cincinnati, look to make apartment entry costs more affordable. This month, Cincinnati City Council passed a law giving renters options on how to pay their security deposit, according to The Hill. It also gives renters an innovative option to pay a nonrefundable security deposit insurance monthly premium.
While the SCU renter’s loan product isn’t an increase in physical housing, it is a bridge to help those living on the edge of being able to afford housing. It also gives borrowers a constructive way to build their credit, which can lead to homeownership in the future.
“It’s not that people don’t have a job or that they can’t pay monthly rent,” she said. “But it’s hard to pay for all the extras that are included in that like first and last month’s rent and security deposits.”
This product gives those starting out an opportunity to build credit responsibly, Webb said.
“We rolled out this product with the intention to help the community and positively contribute a solution to this issue,” she said. “We know we can be on the forefront of helping to solve the affordable housing crisis in our community.”
The credit union also has a product for a 1% down for starter homes, which Webb said would be in the $200K range. Those homes are more likely to be on the city’s outskirts, she said.
The renter's loans, which the credit union began offering in October, range from $2K to $10K and are even available for those who have poor credit. Loans may not be the best option for everyone, so SCU does offer financial advice to clients to determine if this is their best course of action.
As the price of homes continues to grow, the number of renters now equals the number of homeowners. The current average rental price in the greater Seattle metro for a one-bedroom apartment is $1,780 per month, a 3.8% year-over-year increase. As it becomes a tech hub, it’s also becoming one of the most expensive places to live.
Stakeholders in the community, such as Jake McKinstry of Spectrum Development Solutions, told Bisnow that the city must think of affordable housing as a ladder and use tools that serve those at all levels. McKinstry said for every 5% to 7% rent increase, thousands of families lose their stable housing. His firm focuses on the missing middle, which includes teachers, first responders and civil servants.
“We want people to achieve their dream of having a place to call home,” Webb said. “Home is the place everyone wants to be. We want to help people get there."