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Posted at 1:08 PM ET, 10/14/2010

More housing units don't guarantee lower rents

By Rob Pitingolo

The District's 2.5 percent apartment vacancy rate is certainly an indicator of the city's economic strength. Vacancies remain low, even as rents steadily creep higher and new housing units are added at a furious pace.

The low vacancy rate and high rents are nevertheless concerning to many of the District's residents and would-be residents. Washington is already one of the most expensive cities in America. Even for many professionals, finding affordable housing can be a serious challenge.

All of the new housing units should theoretically offer relief for renters in the tight housing market; but so far there's no evidence that it's happening in practice.

In economics, shifts in supply and demand curves influence market prices. All else being equal, a boost in the supply curve for housing units would lead to lower prices. In this case, however, all else isn’t equal. As Washington's neighborhoods increase in density and add new amenities, they become gradually more desirable places to live. Demand curves are shifting, too, and in many cases, overwhelming the change in supply.

As neighborhoods like NoMa and Near Southeast continue to develop and grow, their appeal increases, as well. The problem of high rents in the District is not easy to solve, and recent events prove that building our way out might not have as much effect as many had hoped.

Rob Pitingolo blogs at Extraordinary Observations. The Local Blog Network is a group of bloggers from around the D.C. region who have agreed to make regular contributions to All Opinions Are Local.

By Rob Pitingolo  | October 14, 2010; 1:08 PM ET
Categories:  D.C., HotTopic, Local blog network, economy  
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Comments

What DC needs to do is reduce the burdens on developers to provide unnecessary amenities that nobody really wants. Case in point: parking minimums. These types of requirements reduce the number of sellable/rentable square footage and drive up construction costs, resulting in perverse market distortions that drive up housing prices.

Second, I would really like to see ANCs lose some of their clout. No offense to well-intentioned residents, but their meddling often results in big cost overruns. While this is particularly true for commercial businesses who need to spend lots of money in legal fees drafting up voluntary agreements to assuage neighbors, it is also true for developers who have to acquiese to resident demands for things like cultural spaces and minority-owned retail frontage. Not that these aren't good things, but there are better mechanisms to incentivize this type of activity (including taxation) that do not drive up the costs of development and drive down the number of units created.

Just my two cents. As a native Washingtonian who was a transplant to NYC for 10 years, sometimes it's better for everyone when fewer cooks are in the kitchen.

Posted by: supersmax | October 14, 2010 3:25 PM | Report abuse

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