High-rise apartments near Nationals Park under construction, viewed from the South Capitol Street bridge. Image by the author.

Dozens of tower cranes dot DC's skyline, and so many of them are building new high-rise apartments that the District now ranks ninth among US cities with the most housing units under construction. It sure looks like a lot of new housing supply is being built, and certainly plenty of new luxury apartments within the District. However, the downtown high-rises under construction only tell half the story of Greater Washington's housing growth story.

While all those cranes are easy to see from afar, what isn't immediately apparent from the airport (but might be from a plane) is that many fewer acres of the countryside around us are being bulldozed for subdivisions–which for the past century has been where most lower-cost, low-rise housing was built. As a result, the region as a whole isn't building enough housing for our rising population.

Reducing sprawl is good, but we haven't built enough housing in city cores to meet demand

Fewer than half as many single-family houses are being built at the suburban fringes of Greater Washington every year, compared to the region's long-range average. Taken together, the single-family houses that aren't being built around Greater Washington each year would cover four square miles–an area the size of Rock Creek Park. The slower pace of suburban development over the past ten years has meant tens of thousands of acres of farms and forests around our region haven't been bulldozed for subdivisions and strip malls.

Reduced sprawl has been a tremendous boon to our region's people and habitats: more and better wildlife habitat, cleaner air and drinking water, more unspoiled mountain and bay scenery, less traffic and shorter commutes, reduced capital expenses for local governments, less segregation and disinvestment, and more opportunities for local agriculture.

However, we still haven't made it easy to build infill, so only a fraction of the housing construction activity that used to take place at the fringes has shifted to infill housing within the region's core. Less sprawl has meant fewer housing units overall–so despite all the new high-rises downtown, our region's housing stock isn't growing quite as fast as our population.

Image by US Census count of building permits, via FRED/St. Louis Fed.

This graph charts housing construction in Greater Washington over the past two decades for all units (the blue bars), and for single-family houses specifically (the red bars). Single-family housing permits fell by two-thirds as the housing boom crested and ended, from 2003 to 2008. They've rebounded since then, but not even to levels seen during the 1991 recession. Recent years have still seen fewer than half as many permits for single-family houses as the early 2000s did.

Yes, about 30 percent more multifamily permits are issued now than then, but the overall number of permitted housing units is still one-third below the long-term average. The average number of housing permits issued each year has declined from 30,000 from 2000-2009 (a period that includes most of the downturn) to 20,000 since 2010. Yet our region's population growth hasn't slowed as much: from 1.63 percent a year over the 2000s to 1.41 percent a year since 2010. Much of that population growth has occurred within the region's core jurisdictions, where building new housing is difficult.

More people competing for fewer homes means higher housing prices. Although we're seeing a large wave of new apartments arrive in the urban core, these apartments still aren't enough to house the growing population–and so prices within the central jurisdictions have increased sharply during this decade. Not only is supply overall not keeping pace with demand, but a large fraction of the new supply is in the housing market's priciest segment: expensive high-rise construction, on expensive downtown land.

The Washington region isn't alone with this problem, and we're actually better than average

This is a national phenomenon, as a recent Wall Street Journal article, citing analysis from BuildZoom, explains:

As builders have shifted focus toward trendier urban markets and away from cheaper suburbs, they have produced less housing overall than they otherwise might have... At the same time, high land costs in central cities have pushed developers to focus on higher-end housing geared toward high earners instead of younger people just starting out. The shift helps explain one of the most vexing aspects of the housing recovery: New homes are getting more expensive and yet there are fewer of them being built than in past cycles.

Image by the author.

In fact, our region has done a better-than-average job of building higher-density multifamily housing since 2008. Compared to the nation as a whole, overall housing production in metro Washington has recovered faster, and in particular multifamily growth has been faster. Part of this is also because urban population growth (and housing demand) is higher here than in other metro areas.

Yet this is relative to a national housing market that's even worse off. Zillow's chief economist Svenja Gudell writes, "the simple fact is that we are severely under-producing housing in this country, relative both to basic demographics and currently high demand from buyers.”

The forecast: less construction means higher rents

There's one segment of the housing market where housing construction seems to have caught up with demand: luxury apartments in central DC. So many shiny new high-rise apartments have been built in areas like NoMa and Capitol Riverfront in recent years that rents have stopped rising, and even fallen a bit–which, in the short term, threatens the cash flow that repays banks' loans. As a result, banks have reined in lending for similar new buildings.

Image by JLL, via JBG Smith filing with SEC.

Since the current flock of cranes is highly concentrated in those few neighborhoods, forecasters expect that the number of new apartments opening in 2019 and beyond could sharply decline–perhaps even to recession-era levels. If those predictions come true and new construction elsewhere doesn't pick up the slack, our region could see a housing capacity crunch in a few years.

Going back to the bad old days of endless suburban sprawl is not a sustainable path forward. Even making our fringe suburbs higher density will likely result in lots more driving, because their distant locations mean that when people do drive, it'll be for longer distances.

That's why it's important to support ways to add all kinds of new infill housing within the regional core–and especially at lower prices. That means not just pricey new downtown towers–but also accessory dwellings (like coach houses and English basements), duplexes, small apartment buildings, cottage courts, mid-rise apartments, new rowhouses, even pop-ups–both in my backyard, and maybe even yours.