At first glance, the District’s central-city housing boom might seem to be completely benign: as long as new housing is being built, does it matter where it is? But by funneling almost all new residences into central-city high-rises, the District is all but requiring that new housing be built with only the most expensive construction techniques, on the most expensive land. Potential residents need more choices.
Where housing is built influences how housing gets built. That, in turn, determines how much new housing will cost and thus, who can afford to live there. Given how the city is building high-rises, it’s no wonder that the resulting housing is expensive: these buildings are expensive by their very nature, and far more expensive than what most of the District’s new residents can afford.
High-rise buildings are built to last, with solid materials like concrete and steel plus expensive fittings like elevators and sprinklers. All of that heavy-duty construction costs a lot of money — up to twice as much as low-rise buildings, per square foot. Those fittings also cost more to maintain over the long run. And since these buildings aren’t built on land that was cheap to begin with, it should be no surprise that high-rise apartments are expensive.
High-rises are too expensive to rent for anything but top dollar
How expensive are central city high-rises? The cost of just materials, labor, design, and appropriately-zoned land for a high-rise building in central DC amounts to over $400 per rentable square foot — and that’s before its developer has made a single cent on her investment, much less paid interest to her investors, paid attorneys to get the site zoned correctly, paid for community improvements like transportation or affordable housing, or brought in the gimmicky amenities.
These high costs go a long way towards explaining why so little of the District’s new housing is affordable to low and moderate income households. It’s not necessarily because developers are greedy, but because developers can’t afford to sell their products at a 50% loss.
For instance, take a theoretical two-bedroom, 1,100-square foot unit in a newly built high-rise building. The play-an-apartment-developer online game handily provided by New York City’s nonprofit Citizens Housing and Planning Council, reprogrammed with DC’s considerably lower costs for land, construction, and property taxes, yields a rent of $3,993 for that two-bedroom apartment.
Under HUD’s standards for affordability and household size, this theoretical unit could house a three-person household earning $159,720 a year, or 163% of the Area Median Income for three-person households in this region (which is $98,253). Alternately, to make the unit affordable to a “low-income” household that can afford rent of $1,966 a month, the developer would have to lose (or the government would have to pay) over half of the monthly rental cost.
Requiring high-rises also affects the diversity of the new housing that’s built. Building fewer but larger apartments in a central-city high-rise divides the building’s high costs among fewer units, pushing per-unit prices up even further relative to cheaper low-rise buildings. A typical three-bedroom unit sold in DC this year had 1,336 square feet; the CHPC’s calculator indicates such a unit would be affordable only to a four-person household earning more than twice the Area Median Income.
Wages in the region aren’t keeping up with rent costs
All of this would be fine if the new jobs that this region is creating were all high-paid, but they’re not. A June report by Jeannette Chapman from George Mason University’s Center for Regional Analysis forecasts that only 37% of the new households that will settle in the District from 2011 to 2023 will earn middle or high incomes (120% or more of Area Median Income). That leaves 63% of all new households, and 73% of new renter households, earning low or moderate incomes.
Most of DC’s new households, then, will be priced out of most of DC’s new housing. 30,000 new households of more moderate means, who can’t afford fancy new high-rise apartments, will instead have to compete with existing households for existing housing, pushing prices up across the board.
The District could step in and provide tremendous subsidies to pay the high rent on high-cost high-rises, which is sort of what inclusionary zoning does on a very small scale. Or it could acknowledge that while luxury high-rises have their place, they cannot meet everyone’s housing needs, and that new housing is also needed that’s intrinsically more economical — built using less-costly low-rise and mid-rise techniques and on less-expensive land.
That would be possible if more housing were being built outside of the central city, which is exactly what the Comprehensive Plan calls for.