Across the country, more and more developers are hitting what they consider to be an unpleasant reality—the luxury housing market is flooded. With so many new luxury units coming onto the market at the same time, there’s too much supply to support the sky-high rents that these amenity-rich developments demand.
There’s at least some evidence that the same could be true in DC. As luxury units flow into neighborhoods like Shaw, Capitol Hill, and new megadevelopments like the Wharf, top rents have gone down in other neighborhoods. Anecdotally, people around the city talk about longer and longer periods to fill these new buildings, with some sitting close to half-empty.
And rents for the most desirable buildings in Columbia Heights, Logan Circle, Dupont Circle, and Mount Vernon Triangle have all declined.
Does this mean we’re moving into a new period of affordability? Is it time to celebrate the salvation of the city?
Not even close. These drops in prices only apply to the top of the market. Average rents are still increasing, although they are finally increasing more slowly than the country as a whole.
But the crisis remains. Lifelong DC residents are still being pushed out of their homes every day.
There is opportunity, however, if for-profit developers in DC get turned off of building more luxury units. In other places across the country, developers are now looking at a new (old) way to make money: workforce and affordable housing.
Building for people of more modest means has been so neglected in recent years that there’s an enormous demand for any developer who can bring something reasonably priced to market. What’s more, developers are starting to see less expensive housing as a wiser investment—unlike those in luxury digs, average families don’t look to downsize as soon as the economy turns south.
To get for-profit developers to build truly affordable housing, however, will require a lot of subsidy. Part of that is, of course, the “profit” piece of for-profit. That extra expense, along with the rarity of a true sense of mission to their work, is the reason non-profits need to keep leading in affordable housing development—when money is the only motivator, it has a way of bulldozing even those who are supposed to be served by a project.
But there’s a fundamental reality to the need for subsidy, too. To get rent prices below market rate means making them cheaper than the sum of their parts—land prices, construction costs, management fees, maintenance. All of these things are expensive (some at historic highs), and if we’re serious about keeping a diverse city, we need to invest more in making it happen.
One important first step would be quickly passing Councilmember Anita Bonds’ (At-Large) bill that would set a $120 million floor each year for DC’s Housing Production Trust Fund. That would increase the fund by $20 million over its current level, while also saving it from the yearly changes in the political winds that it is currently vulnerable to.
It might not be for the right reasons, but DC’s for-profit developers could soon be coming around to affordable housing. To make that move stick, we’ll need to invest more in housing—and fast.