Employment Growth and High Housing Costs in Washington, DC
HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.
The District of Columbia (Washington, DC) is the capital of the United States and part of the Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Statistical Area. The District of Columbia is the 20th most populous city in the nation, with an estimated population of 703,300 as of July 2018. Strong job growth has contributed to high net inmigration since 2010. Washington, DC, is a popular tourist destination, seeing more than 30 million visitors per year. A recent Comprehensive Housing Market Analysis on Washington, DC, highlighted the economic and housing market activity in the area.
Overall Employment Growth Led by Restaurant Industry Despite Losses in Government Sector
Over the past year, total nonfarm payrolls in Washington, DC, increased by 6,300 jobs, or 0.8 percent, to 793,200. Employment growth over the past year was led by the leisure and hospitality sector, which added 2,100 jobs. This growth can be attributed mostly to employment gains in the restaurant industry, which accounted for two-thirds of the sector’s employment growth.
Other fast-growing sectors include the information and other services sectors. The Washington, DC area has a large number of nonprofit organizations, about half of which are classified in the other services sector. Nationally, nonprofit organizations constitute an average of 3 percent of all private-sector establishments, but in Washington, DC, nonprofit organizations make up 11 percent of private-sector establishments, more than double the national average.
The professional and business services sector is the largest private employment sector in Washington, DC, partly because of the area’s large number of government contractors and research institutions. Employment in the sector increased by 1,300 jobs, or 0.8 percent, over the past year.
The government sector is the largest employment sector in Washington, DC, making up 30.1 percent of area payrolls. Within the government sector, the federal government encompasses 83 percent of government-sector payrolls and 25 percent of all area payrolls. The sector declined by 1 percent, or 2,300 jobs, over the past year.
Nearly Half of All Home Sales Are Condominiums
The sales housing market in Washington, DC, is tight, with a vacancy rate of 1.4 percent. Condominiums made up nearly 50 percent of existing home sales and 57 percent of new home sales in the area over the past year; 4,200 existing units were sold and approximately 1,250 units are under construction. Currently, the largest planned development is the Lexicon in the city’s NoMa neighborhood, which will have 182 units.
Rent and Sales Prices Among the Nation’s Highest
The average sales price for a condominium during the period was $526,800, and the average home sales price was $687,400. Home sales prices in Washington, DC, are among the highest in the nation. The high sales prices deter many would-be homebuyers in the area, particularly younger renters and homebuyers. As with home sales prices, rents in Washington, DC, are among the highest in the nation. The rental market in Washington, DC, is balanced, with an overall vacancy rate currently estimated at 7.5 percent. Even with ample apartment construction, strong economic growth in the region has contributed to high demand for apartments, leading to a balanced market.
Over the next 3 years, demand is estimated for 3,650 new sales housing units. The 1,325 single-family homes currently under construction will meet some of this demand. Demand is estimated for 9,675 new market-rate rentals; however, more than 11,050 apartments are under construction, which will meet the forecasted demand.