In 2015, DC permitted more new housing units— 4,956, to be exact— than in any year since the Census started keeping track in 1980. This pace of housing growth compares favorably to other cities, and there’s reason to believe it’s helping to slow rent increases.

Photo by Ryan McKnight on Flickr.

The record-setting year is most likely due to both long-term factors (a shift towards city-living among young professionals) and short-term, cyclical ones (federal government job growth having recovered from the sequester).

The composition of 2015’s housing permits in DC skewed heavily towards large multifamily buildings, as it has in recent years. Neighborhoods like Navy Yard and Southwest Waterfront, where there are fewer neighbors to oppose large development projects, are contributing strongly to the city’s overall housing production.

Graph by the author, with data from the Census Bureau.

Accounting for population, DC got more permits than most other major coastal cities

How does DC’s year stack up against other cities? Well, it’s somewhat difficult to compare these numbers across cities for a few reasons:

  • Initial population matters. For example, 10,000 new units in one year would be a ton for DC, but very few for a bigger city like New York.
  • Population growth matters too. Baltimore has about the same number of people as DC, but there’s little reason to build new houses if few people are moving to town.
  • Cities have arbitrary political boundaries. We could use a standardized geographic unit (like MSAs), but that captures a lot of single-family, sprawling development. At the end of the day, we’re interested in the extent to which cities are allowing their cores to densify.

But we can still make some back-of-the-envelope calculations. One useful starting place is to scale permits by a city’s population. In 2015, DC permitted 7.5 housing units per 1,000 residents.

That matches or exceeds the rates of most comparable coastal cities: Boston (also 7.5), Portland (7.1), New York (6.6, an outlier driven by regulatory uncertainly for the usually low-growth city), San Diego (4.5), San Francisco (4.3), and Los Angeles (4.1). It easily surpassed cities with lower-than-average job growth, like Philadelphia (2.4) and Chicago (2.1). And DC was out-produced by growth-happy Seattle (17.0), Denver (12.0), and Austin (11.0).

There’s evidence that all this new supply is slowing rent growth

In recent years, real estate analysts have noted that DC’s higher pace of building has led to rents that are slowing in growth, or even declining. This effect is especially seen at the higher end of the market, since most new construction is luxury.

Here’s Multifamily Executive covering a new Yardi Matrix report:

The cities that had the smallest rent gains in 2015 were Richmond, Va.; Washington, D.C.; and Baltimore. Echoing other reports, Yardi says Washington’s rent gains have been held back because of the large amount of new supply in its market, while Baltimore still lacks job growth. These cities can expect to see similar results in 2016, Yardi says.

A Bloomberg reporter who interviewed DC developers last summer collected relevant anecdotes:

Tepid job gains and a spate of construction that created almost 20,000 units in the past two years made Washington one of the worst markets for US landlords, forcing owners to grant tenants concessions such as months of free rent to keep new luxury apartments from going empty.

And early last year, The Washington Post wrote that an increasing supply had driven down rents, partly by pushing landlords of luxury buildings to lower prices so they could compete.

Any effort to make our region more affordable will require a good deal more market rate housing than what we currently have. Hopefully, DC will build on the successes of 2015 and continue to allow high levels of dense housing construction.

John Ricco, a public policy analyst by trade, is interested in the economics of urbanism and transportation. He recently moved away from DC and now lives in Philadelphia.