263,700 new jobs came to the Washington region between 2011-2016. But as we’ve added those jobs, we haven’t built enough homes to actually house all of the new workers that come with them.
The online blog EmployMarket used Census data to compare the number of jobs and housing permits added between 2011-2016 in each US metropolitan area with a population of at least a million.
In their comparison, the EmployMarket authors took two sets of data - the number of housing permits in an area, and the number of new jobs - and combined them into a simple housing-per-employment ratio.
In metro areas like ours, where unoccupied homes are more sparse, adding new homes roughly on pace with each new job— or, in other words, keeping the ratio near 1.0— is important to make sure that housing prices don’t rise too quickly.
It’s worth noting that there are some places where a ratio that’s less than 1.o makes sense. In a place like Detroit, for example, where there’s a lot of existing housing that’s unoccupied, adding new jobs and no new housing wouldn’t necessarily be a problem (up to a point) because those new residents would still have a place to live.
We’re building more housing than some places, but still not enough
Like most other metro areas, we’ve been adding jobs at a faster rate than we’ve been adding homes.
The major metro areas in the comparison had an average ratio of 0.34 housing permits per new job. While the Washington area managed to outperform this with a ratio of 0.53 for the span between 2011 and 2016, our region’s performance looked less rosy in 2016 alone, when our ratio fell to 0.37.
We’ve done better than a lot of regions in terms of the number of houses per job we’ve added, but in a region like ours, where we don’t have a surplus of unoccupied homes sitting around, a ratio of 0.53 - or about one house for every two new jobs - just isn’t that great, and exacerbates our shortage of housing.
About half of our area’s permits are for multi-family units
48.2% of the new housing units in the Washington area added during this time were multi-family, generally meaning high-rise apartment or condo buildings. This ranks about in the middle of the pack, but Washington has a lot fewer new multi-housing units than other dense American metropolitan areas such as New York, San Francisco, Boston, or even Los Angeles.
It is not exactly clear what that means for housing affordability in our region, but the Washington area has a notable dearth of new, smaller multi-family units – which can provide more affordable options.
Areas adding the most housing aren’t necessarily the ones with the jobs
Some of the country’s fastest growing job markets added quite a bit of housing, but others did not.
Austin had the fastest growing job market of any metro area during the years studied. In this case, its ratio of 0.56 was well above the national average. A number of the fastest growing job markets also built houses at a rate above the national average, but most of these were still well below a 1:1 ratio.
On the other hand, areas such as Hampton Roads and Pittsburgh have added housing, but their job markets were among the slowest. This means that the housing-to-employment ratio in these areas was very high - Hampton Roads was the only area to build more than one new house for each new job.
The places that added the fewest homes included a number of California areas, as well as some Rust Belt areas such as St. Louis and Detroit. The authors of the article speculate that restrictions on new housing in areas like San Jose were higher, resulting in less permitting. On the other hand, Detroit already had a glut of housing units, so there was little demand for new construction.
Missed opportunities for our region?
While the EmployMarket article’s data is an imprecise way of looking at new housing added, it indicates that we have not added enough to meet demand in an already tight housing market.
The Washington region’s slow movement to add its housing shortage is hardly unique either. As the analysis showed, only very slow job markets, such as Hampton Roads, have been able to keep up with housing. Our area is doing better than other areas, but that doesn’t mean we’re building enough.
With our already high cost of living, it is hard to imagine that without upping our housing supply, we’ll risk lost opportunities for more economic and population growth.