Seattle and the San Francisco Bay Area have a lot in common — coastal locations, high-tech economies, and relatively high wages. But as California's Legislative Analysis Office wrote in a recent report, it's much easier to get permission to build new houses in the Seattle area. Consequently, the Seattle area's housing stock has grown twice as quickly as the Bay Area's. The CLAO writes that in recent years, Seattle's total number of housing units "grew at an average annual rate of 1.4 percent per year while San Francisco and San Jose’s housing stock grew by only 0.7 percent per year." The main reason for this is that Washington state centralizing more planning functions at the state level, which gives hyperlocalized Not in My Backyard sentiments less when determining what people are going to be allowed to build.

So what happened? While prices in the Bay Area have been skyrocketing, some Seattle landlords have actually seen the rents they can charge start to fall. Mark Stiles of the Puget Sound Business Journal writes that landlords are finding the trend "alarming" — though if you're a tenant in Seattle you probably feel differently:

The big warning sign for landlords is what the report says is "price resistance" in the most expensive submarkets: the downtowns of Bellevue and Seattle, including Belltown and South Lake Union, and Sammamish/Issaquah. After increasing during the first three quarters, rents dropped this quarter in all but South Lake Union, with the average decline hitting $59 a month. Further, when all of these submarkets are considered, the average vacancy rate increase was nearly a full percentage point. Meanwhile, across all markets, more landlords are offering tenants sweeter incentives, such as free rent. The average value of incentives is $15 a month this quarter, which is nearly double what it was last quarter, when 16 percent of landlords were offering incentives. Now 20 percent are.

Skeptics often note that new construction tends to target the high end of the market, rather than creating affordable dwellings for the working class. And that's true here. Stiles reports that the weakness in the market is at the high end, "where 5.4 percent of the units are vacant," while cheaper rentals feature a lower vacancy rate.

But these markets are all logically linked. As proprietors of luxury buildings begin to lower rents in response to high vacancy rates, some people currently in mid-market housing will take advantage of the opportunity to upgrade. That puts downward price pressure on the middle of the market and draws more people further up the chain. None of this exactly makes Seattle a cheap place to live — land is still more expensive there than it is in Atlanta, and multi-family apartment buildings are often more expensive to build than sprawling single-family homes. But a high level of construction ensures that the homeland of Microsoft and Amazon remains substantially cheaper than the Bay Area homeland of Apple and Google.