The buzz around the region about the prospect of a colossal corporate relocation has many local residents worried about the "prosperity bomb” that could result if the corporation brings 50,000 jobs over 10 years. In particular, many are concerned about even-higher housing costs: “We’re already seeing high rents and high home prices, and we don’t have enough housing for the number of people we expect in the next five to 10 years, even without Amazon,” local architect Yolanda Cole told the Washington Post.
Housing prices in greater Washington have trended sharply upwards in the past decade, especially within the Beltway and close to job centers. That's even with a regional economy where job growth badly lagged other major cities over the past few years.
Yet new jobs alone don’t necessarily cause housing prices to increase. The proof? Not far from here is a metro area which added over 40,000 jobs every single year for an entire decade — and yet not only did housing prices barely budge, they even declined relative to overall inflation and local incomes.
That magical metro area? Greater Washington, DC. The time period? Within even Millennials' brief memories: the 1990s. In our own region (as with individual neighborhoods within our region), housing prices can indeed remain stable — when we allow new homes to match new jobs.
The dream of the '90s
In the fabled decade between 1990 and 1999, greater Washington added an average of 40,500 jobs every single year — more than the regional economy added per year in the 2010s, despite a much smaller population. Yet house prices remained fairly stable for most of the 1990s, only climbing slightly at decade’s end. Over the entire decade, regional house prices crept up at only 1.21% a year, far below the annual inflation rate of 2.82%.
The healthy job market translated into widespread prosperity. Median household incomes in Montgomery County, one of the region’s most populous jurisdictions, rose at 3.55% a year, appreciably faster than inflation and comfortably faster than housing prices. (Data were not available for the entire region.)
At the time, though, the housing market seemed out of whack. A March 2000 report by the Wall Street Journal’s Patrick Barta warned of “unusually tight supply” and “frothy buying conditions,” citing "11 bids in a single day on a Capitol Hill townhouse that sold for $260,000.”
The nightmare of the '10s
These days, of course, only a few Capitol Hill townhouses sell for even twice as much, and many sell for well over $1 million. Housing prices have been climbing upwards this decade at a steady annualized rate of 3.12%, far below the 2000s’ excesses but much faster than in the 1990s. Meanwhile, overall inflation is down substantially (just 1.65% per year) and wages are growing slower than prices: Montgomery County’s median household income has risen just 1.48% per year. (Worse yet, much of that inflation has been due to rising rents.)
It sure looks like a lot of new houses are being built today, with cranes dotting the horizon and DC's population rebounding. But while all those cranes are easy to see from afar, what isn't immediately apparent is that thousands fewer acres of the countryside around us are being bulldozed for subdivisions.
Hundreds of thousands of homes are missing
Those missing subdivisions mean that regional housing growth hasn’t kept up with either the region’s job growth, or its population growth. In the 1990s, greater Washington built one new house per 1.38 new jobs — while in the 2010s, that ratio has fallen to one new house per 1.82 new jobs. As a result, more workers are bidding against one another for fewer homes, sending prices skyward.
Zillow data scientist Jared Frey, comparing the current national "construction boom" with the period from 1985 to 2000, finds that the Washington region has seen the sharpest slowdown in housing growth of any region in the country, relative to its population growth. If the region had built as many new homes per new resident as it did in the 1990s, there would be 173,843 additional homes.
Those "missing homes" would be the equivalent of building an entire new Arlington and an entire new Alexandria, just in the past 10 years. Put another way, 88% more (almost twice as many) homes would be under construction today if housing construction were keeping up with population growth, as it was in the 1990s.
This isn't just an artifact of the housing bubble. Frey notes that greater Washington, like "many major metros actually issued permits at lower than historic rates during the housing bubble." The bubble wasn't as pronounced here as elsewhere: annual housing permits were only 17% higher in the years from 2000-2007 than in the 1990s.
It also isn’t unique to our region. Seattle, in the other Washington, also once “roughly built enough homes for people who needed it, helping prevent the intense competition that can push up home prices and rents,” writes Mike Rosenberg in the Seattle Times. “But this decade, the number of new jobs has soared twice as fast as new housing,” leading to an affordability crisis.
Boomers got new homes, Millennials have to make do with hand-me-downs
Today’s “housing boom,” and even the housing bubble, look paltry in comparison to the levels of construction common in even earlier eras. Indeed, today’s level of housing construction is comparable to levels seen previously only during national recessions, particularly when a larger population and smaller households are taken into account.
The US built many more new homes per new household during previous economic booms: almost four times as many in 1971 than today, as a Great Society-era HUD quickly ramped up subsidies to both homeowners and developers. Building new housing was a national priority then, with the federal government pledging to build tens of millions of homes.
As Brink Lindsey and Steven Teles write in their recent book The Captured Economy, “For most of American history, when growth and opportunity in a particular place led to greater demand to move there, the supply of housing responded. Cities became denser, creating space for newcomers to share in the opportunity provided by the places graced by fortune.”
Greater Washington's many economic booms led local developers to build so many new homes, so quickly, that their mass-housing innovations changed America: speculative rowhouse blocks in the 1790s, streetcar suburbs of the 1890s, garden apartments and strip malls in the 1930s and 1940s, suburban New Towns in the 1960s, all the way to the new urbanism of the 1990s. But even the most-ballyhooed plans of our own decade for new neighborhoods, in areas like Tysons and along the Anacostia River, have so far yielded homes for only several thousand residents.
Ugly sprawl is the price we're still paying
The rapid housing supply growth seen in this region prior to and into the 1990s came with a huge downside, since almost all of it was suburban and exurban sprawl. That came at a tremendous cost to the region’s environment, long-term economic outlook, and to longtime area residents who saw economic opportunities gallop further into the distant suburbs.
Tens of thousands of acres of farmland were paved over: urbanized land in the Chesapeake watershed increased by 61% over the 1990s, increasing polluted runoff into the Potomac River. All of those far-flung tract homes, strip malls, and business campuses locked the region into an unhealthy dependence on cars as the sole means of transport — making everyone drive a whole lot more, wasting everyone's time in traffic jams, threatening vulnerable road users' lives, and filling the air with toxins and catastrophic amounts of greenhouse pollutants.
Unfettered sprawl also had dire implications for residents of the regional core, who saw economic opportunities slip away. The proportion of metro-area jobs within the District dropped by 27% as most new jobs were created in transit-inaccessible distant suburbs. Residents voted with their feet and fled the District; over the 1980s and 1990s, DC's population shrank by about nine residents every single day, and most of those leaving were African American.
The high costs of maintaining infrastructure and providing services to a relatively far-flung population stretched local governments' budgets — then, the nearly-bankrupt District, and now Metro and even prosperous suburbs like Fairfax.
As former Palo Alto planning commissioner Kate Vershov Downing says: "We paved over the orchards to make way for the Baby Boomers, and now the Boomers are fighting with Millennials who want to turn one-story strip malls into four-story apartments."
A choice: longer commutes and worse traffic, or better transit and livelier neighborhoods
The labor market can manage this to some extent by getting more existing residents into the workforce. The main result of slower residential growth, though, is that the region's still-growing economy draws people to commute from ever further beyond the Beltway.
We all know someone who commutes from outside the immediate area — whether Baltimore, the mountains, or the eastern shore — if even for a few days a month. In 2010, 4.25% of metro area earnings went to people living beyond the area, three times the proportion in the New York region, and that proportion is growing. Yet many employers are skeptical about hiring employees whose commutes they see as unreliable, and such long commutes take a tremendous personal, economic, and environmental toll.
Practical constraints like commutes as well as political constraints have slowed sprawl's further advance into rural areas — but it's strictly political constraints that prevent our region from embracing a more compact, more ecologically sustainable, and more just urban paradigm of growth. This is a situation that's entirely one of our own creation.
Contributor Ben Ross writes that the failure of housing construction to adequately rebound in this decade is "less that it's gotten harder to build housing in any given place, than that demand has shifted to places where it got hard to build." In this decade, more people are choosing to live closer to work, transit, and the people and places that make this region special. As a result, the new homes in the region's core are finding a ready audience, despite much higher prices — while new homes at the fringes of the region sell slowly, despite much lower prices.
The catch is that we need many, many more centrally located homes in order to keep housing prices from escalating even faster. Letting people build homes closer in will allow more people to enjoy the fruits of a growing regional economy, while also cutting the costs that sprawl imposes upon all of us. Undoing century-old exclusionary zoning laws that ban new rowhouses and apartments from being added to most of the region's most popular neighborhoods might be a good starting point.