The Rise of Washington D.C. as a Model for Housing Supply Growth
Washington, D.C., has been experiencing a remarkable transformation in its housing market over the past couple of decades. With its growth rates rivaling those of Austin, Texas, D.C. proper has become a prime example of scaling various aspects of housing supply. This shift deserves closer examination, and in this article, we will delve into the data to understand how D.C.’s housing market has evolved.
A Brief History of D.C.’s Housing Market
Before the turn of the century, Washington, D.C., was essentially building nothing. However, since then, it has been booming with multi-family infill development. In fact, D.C. proper is more or less completely built out, which means that most of its recent growth can be attributed to this type of construction. Since 2008, the city has been building at a rate comparable to Austin’s, and in some cases, even surpassing it.
Population Growth and Rent Inflation
While the total population growth of the D.C. metro area hasn’t reached Austin’s rates, D.C. metro area rent inflation has been roughly similar to Austin’s over the past decade. Both cities have experienced annual rent inflation rates about 1.5% lower than the US average. This may seem counterintuitive given that D.C. rents were approximately 40% higher than the national average in 2015, but they are now only around 20% higher.
Decennial Census Adjustments and Housing Permits
To better understand this growth, let’s examine Figure 1, which shows population growth in D.C.’s metropolitan area over time. In fact, population growth has slowed significantly in suburban D.C., while D.C. proper has experienced frequent annual growth rates of up to 2%. This is an extraordinary phenomenon, especially considering the age and built-out nature of many American urban cores.
Housing Permits: A Closer Look
Figure 3 provides a breakdown of housing permits per capita for multi-family and single-family construction in D.C. proper compared to suburban areas. Before the turn of the century, metro area growth was primarily driven by single-family suburbs. However, since 2008, D.C. proper has outperformed its suburban counterparts.
The Impact of the Mortgage Crackdown
Unfortunately, despite this remarkable shift toward infill development in D.C. proper, total metro-area permits are still running at about half the rate they were before 2008. This is a direct result of two factors: the mortgage crackdown that devastated entry-level single-family construction and a low rate of apartment construction in suburban areas.
Permit Numbers and Housing Shortage
Figure 4 illustrates the raw number of permits issued over time. Pre-2008, D.C. proper was relatively insignificant in terms of local construction market participation. Suburban areas would permit around 25,000 single-family units annually and slightly under 10,000 multi-family units. However, since 2008, D.C. proper has seen a significant increase in permits for multi-family development, adding approximately 5,000 annual units.
Can Any Other City Match D.C.’s Success?
Is there an American city that can rival the success of Washington D.C. in terms of housing supply growth? While many cities have made efforts to address their housing shortages, few have achieved such impressive results. If every city could accomplish this type of development, it would be a significant step toward addressing the affordability crisis and validating the approach employed by YIMBYs (Yes In My Backyard).