Housing Complex

Apartment Shortage in D.C.? Depends How Much You Make.

High-end apartments at new developments like CityCenterDC are out of most Washingtonians' budget.

High-end apartments at new developments like CityCenterDC are out of most Washingtonians' budget.

Two years removed from her Housing Complex gig, my predecessor Lydia DePillis decided to prove she's still got her D.C. real estate reporting chops. At the Washington Post's Storyline today, she has a great distillation of the central paradox confronting renters in the city: With cranes topping off new apartment buildings seemingly each week, why's it so hard to find an affordable place to live? The answer comes in the form of another question: affordable to whom?

For the District's high-earning young professionals without families to worry about, there's no shortage of available apartments. The supply of "class A" apartments—new buildings loaded up with amenities—grew more than 70 percent between the end of 2010 and this summer, DePillis reports. Sure, the city's population is growing, to the tune of 1,000 new residents a month, but high-end apartments are more than keeping pace.

The trouble is that not everyone can afford these apartments: The average class A rent in the Northwest quadrant is $2,648, according to Delta Associates. (The figure is for apartments of all sizes; studios and one-bedrooms are lower.) That actually represents a slight decrease from a year ago, given the expanding supply, but it doesn't really matter to the majority of D.C. residents, who wouldn't be able to afford these units even if prices dropped by 10 percent or more.

Then there are the "class B" apartments. These are older buildings with fewer amenities, and by definition their supply can't grow much. As a result, their vacancy rate is low—3 percent, compared to 4.5 percent for class A units—and their rents are rising. In other words, the portion of the District's housing supply that's supposed to be more affordable is growing less affordable, while the portion that's expanding is well out of the reach of the bulk of the populace.

Developers DePillis spoke with pointed to the thing they always point to: financing. It's easier to get banks to make loans for high-end housing than for affordable or family units. This, of course, highlights the importance of the city's role in steering development toward these apartment types that are more difficult to come by on the free market. The District's inclusionary zoning law requires new residential developments to set aside around a tenth of their units for low-income residents, but the program has been slow to get off the ground. That places ever more significance on the city's use of its publicly owned land, like a big vacant property near the Petworth Metro station that's drawn pleas from neighbors alternately for affordable and market-rate housing. The wisdom of concentrating too much affordable housing in any one place is still up for debate, but as DePillis' story makes clear, if the city doesn't muster its resources to promote affordable housing, the market won't do so on its own.

Photo by Darrow Montgomery

  • Ryan

    Being single and making less than $40,000/year makes finding a place to live in a walkable neighborhood tough.

  • 7889

    "The wisdom of concentrating too much affordable housing in any one place is still up for debate"

    It's not up for debate. It's bad public policy and that is a settled issue.

    If it's a choice between concentrating all the affordable housing in one area and not building it it's probably better to not build it in DC and look to inner ring suburbs that way it can be spread out. Ideally the govt would distribute ah all across the city but that would require political will that does not exist, even if they had the money.

  • JS

    Yeah, there really is no debate about the overconcentration of low income housing. It's why the projects got torn down, it's why Section 8 was introduced, and it's why DC's trying to get the New Communities developments going.

  • preston

    There are a couple of very simple ways to fix this problem (although their impact will be more acutely felt over the long term): 1) eliminate the height limit; 2) massively expand density allowances through the zoning code.

    You can talk all day about the need to expand government's role in financing affordable housing, but that's never going to be more than a drop in the bucket in terms of what we need to build. By increasing the %s required through inclusionary zoning, you drive up the cost of market-rate development, and you make it even more expensive to build. In NYC, rents continue to go up even while a small % of very lucky people get slots at new buildings.

    By lowering the cost of building (through a zoning rewrite that makes it easier for developers to get through the pipeline), increasing the sq footage that can be built on a lot, allowing micro units and tiny homes, and removing some of the ridiculous NIMBY-fueled zoning restrictions, we can unlock a huge amount of new development.

  • chris

    "Then there are the "class B" apartments. These are older buildings with fewer amenities, and by definition their supply can't grow much."

    Don't today's class A apartment become tomorrow's class B apartments? Seems the problem with the class B market is that we didn't build many class A apartments in the 80s and early-90s, when the city was falling apart.

    Seems in 20 years we are setup for a boom in class B apartments.

  • Northwesterneer

    Chris- good call on the lack of apartments built in DC in the 1980s and the impact on rents today. Technically, though, apartments are allowed to improve amenities- there are many beautiful and renovated apartments in 1950s buildings on CT Ave.

  • chris

    Preston: In a convoluted way, do you think more density could actually raise housing prices in DC?

    I know this sounds like economic illiteracy at its highest order. But, DC is currently cheaper than cities like SF and NYC. Part of the reason, is that is considered a less interesting place. The food isn't as good, the street life not as vibrant, the shopping more limited, etc.

    Raising the height limit could potentially make DC are more dense and interesting place. Especially to more high end trust funders and the local wealthy who tend to live in the suburbs. There really is no reason to spend $5 million for a condo in DT DC it is basically a 9-5 office park. But, if it became an active mixed-use environment, I could see having a place in DC rank up there with having a place on Central Park or a high rise condo in SF. You would go from walking out your door into an office ghetto into one of the finest urban experiences on the planet. Conn Ave could transform into a lux Mag Mile district, Franklin Square into a Union Square-style lively urban park.

    Basically, raising the height limit could induce demand from the wealthy. Sort of a localized gentrification story on steroids. Of course, this would leave cheaper housing in the exurbs and limit sprawl.

    Realistically, I don't think this would happen to this extreme level. But, I do think raising the height limit would largely lead to DC become more attractive to high income individuals.

  • Northwesterneer

    I'm going to throw another monkeywrench into the equation that Weiner has consistently ignored. The overwhelming major movement financing construction of condos in Miami and a significant part of new construction in NYC is from foreign investors looking to lock up their money in the US, in real estate, to get out of the fluctuations of their currencies.

    Just to be clear, foreign investors are the majority of new condo buyers in Miami, most units are purchased and not moved into (by their owners).

    Washington, DC is neither NY nor Miami, but I believe completely absentee owners will play a minority factor in all units built- in some ways, we need to build for the population in DC and 5-10% of "ghost owners."

  • chris

    Do the ghost owners in NYC and Miami rent out their units? If so than it really shouldn't impact prices.

    If they don't, then it seems like it could be a temporary bubble. Sure there will always some people wealthy enough to have a property just a couple times a year, but this can't be an extremely deep market, especially in a place like DC, which isn't a premier global city like NYC and London.

    Maybe not a bad strategy in the long run, wealthy foreigners fund the high construction costs needed to build urban housing. They unsustainably drive up new home prices, which incentivizes more new construction. The market correct, prices start falling. They are underwater and sell of the properties to local residents at discounted rates. The wealthy speculator basically ends up subsidizing new construction for local residents. After all, bubbles built the rail roads and the dot.com/telecom bubble laid the ground for all the current web business.

  • Preston2

    Preston,

    For the past 6 years, DC has been experiencing a real estate boom unlike any the city has experienced in history. That says a lot because DC's population grew by 50% in the 6 year period of WW II, and population aside, this building boom has eclipsed what happened then...by spades.

    I tell you this because the DC Office of Planning said themselves last year, that at current levels of growth (which are unprecedented in any US urban area), DC still had a minimum of 50 years of development it could accommodate before the city abutted up against existing zoning, or height limitation.

    Suffice it to say, DC will not grow faster than it did during WW 2 indefinitely, and in fact DC's population growth has already fallen 17% from its height in 2010 (1,200/month vs 1000 per month).

    DC has plenty of affordable housing. The problem with the millennial set is they want to live in the popular, expensive neighborhoods, without having the money to afford it rather than doing what every other person in history did prior to 2000 in DC...they lived where they could afford to live, and moved up from there as increased income allowed.

  • Northwesterneer

    Chris, I think I've been aware of "ghost owners" of NYC condos for 10 years now. And you're right- NYC is arguably the only "world-class" city in the US with DC falling somewhere around Chicago, Seattle, etc.

    But Miami is not NYC, one may argue that it's the NYC of Latin America, and I'll believe that, but still, it's a second tier city in the US. And the majority of new condo owners are from out of the country.

    Now... what percentage will rent out these properties? Ok, you got me, I don't have any statistics on that.

  • DK

    I'm curious to know how much of these Class A, and even Class B rents are being supplemented by these millenials' parents? I mean, most of these young high-earners are coming from well-to-do families in the first place. The vast majority didn't get there from "pulling themselves up by their own bootstraps," so to speak.

    Essentially, we have the upper-middle-class sending/advising/persuading their kids to go to DC for work (which is pretty well insulated from the still-going recession in the rest of the country, mind you). This factor, which I think is more prevalent than it seems, may have a lot to do with what rents cost these days.

  • EH

    Preston2 is right - the heart of the matter is that people can't afford to live in the best, trendiest neighborhoods. This is absolutely nothing new. No one person is entitled to an artificially priced unit in the middle of Dupont, Logan, Georgetown, U Street, or any other "Hot" market in NW (since the only quadrant discussed in the article is NW). Is it good policy to try to bring some affordable housing in these areas - of course! But nowhere near the scale that would be necessary to appease Lydia - and to deliver $1,000 rents to everyone who wants it.

    When I came to DC I wanted to live in Dupont. Guess what - I could not afford it. So, I moved to another transit-oriented neighborhood - Takoma Park. Over the years I saved enough and eventually moved to Columbia Heights, and now Petworth. I'm still not in Dupont. But you know what - that's life. Maybe someday I will - if it's still a great place to live. But I had to compromise - and I am still able to take transit and live relatively car-free.

    This whole argument that the way to solve this problem is to build thousands of units downtown, eliminating the height limit, flooding the market to drive down costs is a complete and total fantasy. In order to drive down rents you would need such a volume as would require a developer to willingly build in a declining market. Who does that? Where exactly has that happened? And the obvious issue at play here is this - if you were to cram that many units into these amazing neighborhoods, would they still be amazing?

    In life you have to make choices. If you can't afford to live somewhere, you live somewhere else. You compromise. You save. You wait. It's up to you how you internalize this. You can accept that in life you can't always have what you want right away, or you resent the "unfairness" of it all and pressure government to come to the rescue. While it is reasonable for government to make some accommodation, I certainly don't think this particular problem is one that warrants a major shift in resources.

  • wait a minute

    NYC ghost owners are alomst all in the UES, and only a few parts of it at that. They don't drive NYC real estate. Trust fund babies and footloose free lance writers may drive a few parts of Manhattan like Chelsea and the LES, and North Williamsburg.

    But whats really driving NYC real estate is jobs. Wall Street (which has rebounded from the financial crisis) fashion, advertising, media, marketing, and even a big internet sector. Manhattan has a LOT of jobs.

    And SF has jobs. If not all in the city, than in nearby Silicon Valley (itself very supply constrained)

    Few places in the USA are a hip and fascinating to millenials as Portland. Is portland as pricey as NYC or SF? NO. Why? Because it does not have the jobs.

    Residential density will not make DC real estate costlier. Raising the height limit could, ONLY if it was for office space, and DC could use it to attract a corp HQ that would not otherwise come here. Which I doubt.

  • wait a minute

    "In order to drive down rents you would need such a volume as would require a developer to willingly build in a declining market. Who does that? Where exactly has that happened? And the obvious issue at play here is this - if you were to cram that many units into these amazing neighborhoods, would they still be amazing"

    Chicago is a metro comparable in size to DC with much cheaper housing. I don't know Vancouver well and IIUC its a good bit costlier than Chicago, but its made progress keeping rents down by building high. Even NYC is not that much costlier than DC considering the metro area is so much bigger with so many more jobs.

    As for cramming units into amazing neighborhoods, there are plenty of well located but not amazing neighborhoods where changing the height limit would work. The SW ecodistrict around L'Enfant, SW in general, Navy Yard spring to mind. It doesn't mean building 30 story buildings on quiet blocks in Capitol Hill.

  • wait a minute

    "the heart of the matter is that people can't afford to live in the best, trendiest neighborhoods."

    No its not, unless you are talking about single yuppies. Rents are historically high across the region. Working class hispanic families double and triple up in 60 YO suburban apt complexes to avoid homelessness - because there aren't enough such older complexes - because slightly better off folks have been priced out of the oldest hirises and better located low rises. Because middle class folks have been priced out of the better class B buildings - because would be yuppies, priced out of class B in the trendy areas, and class A in the non-trendy areas, are pushing into better class B building in non-trendy areas.

    All of which results in too many people living where they don't want to, and the people at the bottom living in near 3rd world conditions, and of course too many people who want to live walkable transit focused lifestyles being auto dependent instead. Now, if we needed massive subsidies to change that, maybe we would have to live with it. But if we can address it with subsidies for the poorest - and for everyone else, simply getting govt out of the way, by reducing the multiple limits on supply - not just the height act, but other excessively strict density zoning rules, parking minimums, abuse of historic preservation, delays in developing govt owned property (DC owned, WMATA owned, etc) then I do not see why we should not do that.

  • chris

    I think part of the reason Chicago is so much cheaper is because:

    1) Wages are lower, so by nature people can afford to spend less on housing. This also means construction costs are lower, due to lower wages for everyone involved.
    2) The city hasn't done as well economically as NYC, DC, SF or Bos. This puts downward pressure on demand.
    3) Chicago has a large supply of older, less expensive buildings. DC was a small town during the age of city building, so we don't have the legacy of older urban close in development.

    New construction isn't really that big a deal in which Chicago is cheap. Chicago actually permitted less new housing (on a per capita)than NYC or DC.

    Yes, building more housing is needed, but in the short term "new construction" will never drive down rents in a sustainable manor. New construction is by nature expensive housing. If projected rents drop too much nobody will finance them.

    Now of course not building is not a solution either. New construction limits price increases in the existing housing stock. And with sufficient time, modern class A housing will turn into older class B housing.

    So yeah, build baby build. We absolutely need to. But, lets not pretend that new construction in DC is going to make DC suddenly cheap. It may prevent SF or NYC prices, but it probably won't make DC as cheap as a stagnate city like Philly or Chicago.

  • 20011

    "I'm curious to know how much of these Class A, and even Class B rents are being supplemented by these millenials' parents? I mean, most of these young high-earners are coming from well-to-do families in the first place. The vast majority didn't get there from "pulling themselves up by their own bootstraps," so to speak."

    Right on the money. Like the 23 y/o pictured hanging out in the community room at the Harper. Wouldn't want her living in ghetto SW, now would we?

  • chris

    Re: "Preston2 is right - the heart of the matter is that people can't afford to live in the best, trendiest neighborhoods. "

    This is the wrong attitude to have. DC's main competitive advantage is that it offers walkable, big city amenities. But, DC's urban core is relatively small compared to SF, Chi and certainly NYC.

    Takoma and Brookland are nice enough, but they don't give off the big city feel. If we tell people, looking for "big city" living...tough DC's core is built out, they will probably not move to a streetcar suburb like Brookland, but rather go to other peer cities (CHI, PHILLY, BOS, SF and maybe SEA). DC needs to compete for talent. The best strategy to do that is by doubling down on its core strength...it's one of the very few actual urban cities in the US.

    People come to cities to live in vibrant urban areas like Dupont, Philly's Center City, Boston's South End, SF's Hayes Valley. DC is still pretty underbuilt in its core. No reason to be pushing people out to city fringes. Let's keep through neighborhoods for people that actually want to live in a streetcar suburb, not people who are just there because they can't afford the actual city core.

  • Northwersterneer

    "NYC ghost owners are alomst all in the UES, and only a few parts of it at that."

    I know of a building of these ghost owners on Lafayette in... I guess that's still Soho.

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  • vikki

    Mr. Wiener; The way I perceive the situation, (and I may be wrong), is thus: D.C., especially the Northwest quadrant, has been built up in the past few years, by builders with rather showy and expensive ideas. It resemble "Oz" in some ways, especially with all the multi-colored lighting. Am I living in a bad dream about Disney World?
    The less "showy", and older craftsmanship visible in Adams-Morgan in a stroll along our economically strapped, 18th Street, N.W., is more the "flavor" the neighborhood has had for many, many years. Neon lights and bull horns do not attract romantic couples, looking for a tasty, affordable evening out, before walking home, together. The big late night music is still something you find downtown, under the aegis of Bill Warrell, and his crew.
    Years ago, when Adams-Morgan was quite rough around the edges, the local Police walked beats, and were permitted to ask for ID under certain circumstances. I do not know what the current law is about that, but may I suggest we consider trying something along those lines, again. With the dozens of "borracho" bodies, strewn on the sidewalks of Mount Pleasant, Columbia Heights, and Adams Morgan, I have the terrifying sensation that I am NOT in Washington, D.C., but rather have found myself inexplicably transported to "Ciudad Mexico". (NOT a positive feeling, I must say). The economy would improve, if businesses were paying legal wages to legal citizens, instead of playing "let's pretend" 24 hours a day. When you pay an illegal immigrant to do the work a U.S. citizen could do, the money leaves the U.S. economy, and makes the hole dug by our losses, even deeper. Vikki/printmaker54@gmail.com

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