The Washington DC metro area is widely recognized as being one of the highest cost regions in the country. Recent reports show that it is more expensive to live than either New York or San Francisco. According to data from the American Community Survey, the median rent in the Washington DC region (which includes more than 20 local jurisdictions in Maryland, Virginia and West Virginia, along with the District of Columbia) increased by more than 42 percent between 2005 and 2014 while median earnings grew by only 12 percent. A detailed analysis of the region’s housing supply has found that there is a critical shortage of housing that is affordable to low- and moderate-income families and individuals. Economic and demographic trends suggest that the demand for lower-cost housing will only grow over the next decade. The region needs more overall housing, and in order to build inclusive, diverse and sustainable places, we must proactively plan for the coming housing needs and to think creatively about solutions that help expand affordable housing opportunities.
There has been a lot of new residential construction recently in the Washington DC region and in the District specifically. However, the vast majority of new construction has been high-end, luxury apartments, which meets the needs of only a small part of the overall housing demand. Between 2005 and 2012, the number of rental units available for over $1,500 a month doubled in the District, while the number of units priced under $800 dropped dramatically.
Over the next 20 years, we will need more than a half a million net new housing units in the Washington DC metro area, simply to accommodate new workers. A range of housing types and prices are needed to house workers and families all along the income spectrum. Several economic and demographic trends will drive the need for lower-cost rental and multi-family housing in the Washington DC region over the next 20 years:
The local economy. The Washington DC metropolitan area is expected to add hundreds of thousands of new jobs over the next 20 years, but there is a structural shift underway in the economy where growth in the region’s high-wage government and professional services jobs will slow while lower-wage service sector jobs will be a growing part of the economy. Health and education services, construction and leisure and hospitality jobs have recovered while higher-paying Federal government jobs have been on the decline and growth in the professional services sector has slowed. When workers have lower wages, they can afford to spend less on housing.
The age of the population. The Millennial population is currently between the ages of 18 and 33 and is beginning to reach the age where they are starting careers and families. They are also starting out in difficult economic conditions and with mounting student debt. Many are still living at home or are doubled- or tripled-up. When they are ready for their own place, they will be limited in what they can afford. At the same time, the leading edge of the Baby Boomer population is just reaching their mid-60s, many entering retirement age with fewer resources saved and less equity built up in their homes. Many Boomers who are looking to downsize when they shift to a fixed retirement income will also be on the market for lower-cost, smaller housing.
More one person households. As Millennials delay marriage and childbearing—and as older adults live longer—there will be a rise in the number of one-person households, which means a lower income to spend on housing. As a result, these one-person households will be looking for smaller and less expensive homes.
Growing preference—and necessity—for renting. Because young workers will constitute a growing share of the region’s population over the coming decade—and because young people are more likely to rent than older people—there will be strong demand for rental housing. At the same time, many households who faced foreclosure or who have difficulty accessing the current tight mortgage market have become renters by necessity. A study I did while at the GMU Center for Regional Analysis showed that 44 percent of the new housing that will be needed in the Washington DC region over the next 20 years will be rental, compared to just 36 percent of the existing housing stock.
Forecasting the future can often be difficult. However, there are clear demographic and economic signs pointing to growing needs for lower-cost housing. Housing that is affordable to lower-income households is very difficult to build without significant subsidies or incentives. Local commitment of dedicated funding for affordable housing can help facilitate the development of lower-cost housing. Modifications to land use and zoning regulations can encourage higher density housing, which can be built at lower per-unit costs. And much of the more affordable housing that will be needed in the future is existing, rather than new, housing, which means preservation is also key. The risks of not having enough affordable housing are a loss of economic and demographic diversity, a potentially slower-growing economy, and a decline in our communities’ overall quality of life.