The Future of the Region’s Housing Market, in Charts
This graph pretty well sums up the fundamental challenge in the D.C.-area housing market:
That comes from Lisa Sturtevant, deputy director of the Center for Regional Analysis at George Mason University, at a presentation she made this afternoon at the D.C. Housing Finance Agency. "No matter what you're looking at," she said, "the cost of housing has outpaced the growth in income."
That's problematic, especially when combined with this graph:
So the population increased by 74 percent between 1970 and 2010, while the number of jobs increased by 150 percent. "Did everyone start working two jobs?" Sturtevant asked, and then answered her question: "No—those people don't live here."
The D.C. region—defined here to include 22 jurisdictions comprising the District, 20 counties and county equivalents in Maryland and Virginia, and Jefferson County, W.Va.—has recovered more quickly and strongly than the rest of the nation since the recession. But while there may be plenty of jobs, the cost of housing is simply too high for a lot of workers, so they choose to commute into the region. As D.C. well knows, commuters don't bring all the benefits, in tax revenue or otherwise, that residents do. So something needs to be done to increase the supply of inexpensive housing.
It's worth noting that the three main areas of the region—D.C., Northern Virginia, and suburban Maryland—have felt the effects of recession and recovery on their housing markets very differently. Take a look:
The greatest contrast here is between Maryland, which is only just emerging from its housing slump, and Virginia, which has hardly felt the slump at all in the past three years. Sturtevant laid out two main reasons for the difference. First, Northern Virginia has seen much stronger job growth. And second, Maryland has a judicial foreclosure process that slows down its ability to process foreclosed homes, while Virginia moves through foreclosures much more quickly.
Now, the housing crunch doesn't apply just to homeownership. With the falling demand for owner-occupied homes after the bust, the demand for rents has increased, and so have rents themselves. In the District, 49 percent of renters are spending 30 percent or more of their income on rent—above the level generally considered affordable.
Sturtevant expects the rise in rents to slow as the supply of rental units increases. But there's still a whole lot of demand up ahead:
The high estimate, which foresees demand for an additional 122,613 housing units in the District alone, assumes that all new workers live in the jurisdiction in which they work; the low estimate, which is more manageable, assumes that people commute at the current rates.
But Sturtevant says the low estimate is out of the question, given how much commuter traffic it'd impose on the region. "That is not a sustainable number," she said. "Jobs will go elsewhere."
So what's needed? The short answer is: lots of multifamily units and affordable rental units.
Sturtevant says there are major risks if the region doesn't address its housing crunch in an affordable way.
"What happens if the new workers who need these units can't afford them?" she asked. "They go farther out. And what do they do when they get tired of commuting? They move somewhere else."