For about a decade now, an indicator of economic activity in DC has been the number of erection cranes you can count as you as you drive down into the Potomac River flood plain from upper Northwest. You can pretty much see all of the downtown and a good bit of the Southwest and Southeast too from the piedmont above downtown. I counted the largest number a couple years ago — 28.
The City was building aggressively, with Gallery Place (about 5 blocks north of the National Mall) completing its transition from dangerous neighborhood to major tourist hangout. Seventh St. NW running up from Pennsylvania Ave. to Gallery Place was nicely rehabbed and retains many historical architectural features. Many of the adjoining streets, and all the way across town to Georgetown, had built large office buildings behind preserved facades. Also being completed was the new three block long convention center (built with no public parking if you can believe that). Both hands and feet would not have sufficed to count the number of new condo buildings and building makeovers. This was a stark contrast to the ’80s and 90s when things were falling into decay and you could pick up a habitable row house in many downtown neighborhoods for less than $90K.
With the big turn-around came quite a flurry of condo developments into the downtown and new neighborhood names like West End and Penn Quarter. City promoters trumpeted the return of urbanites to downtown, and with them new night life. Washington really has seen a needed reversal of fortunes — for the better. But with the run-up in property values that pumped up the national housing balloon, DC become more like Manhattan, where many of the people who worked providing essential services like fire and police protection could no longer afford to own a home (PDF).
The need to preserve affordable housing in DC was acknowledged by new DC Mayor Adrian Fenty in his 2006 campaign promise to leaders of the Washington DC Interfaith Network to fund, build and preserve 14,000 affordable housing units over a four-year period. Included in that goal is the creation of 2,500 units for the chronically homeless. Recently, Fenty outlined for the Interfaith Network how he intended to keep this commitment. Goals of the plan are to provide permanent housing for the city’s chronically homeless, to preserve affordable housing by making it harder for landlords to convert buildings into high-priced condos and to help fund 500 townhouses annually for low- and moderate-income workers. Fenty pledged that his administration would allocate $117 million yearly to protect and create affordable housing. He intends to require that 30 percent of new units built on city-owned land be affordable for low-income residents, and called for a partnership between the city and the interfaith network to build 5,000 homes as part of a project to create housing for residents who make $25,000 to $60,000 a year. Planning and construction for the first 500 such homes will begin in 2008.
It is no small feat to articulate a vision for affordable housing in a hot real estate market, and so Fenty’s vision has been aided immensely by the slow leak pricked in the DC market. The DC market is nothing like the free-fall in some parts of the country. Rather it’s more like NYC where housing in some boroughs have dropped a notch or two, but others have gained in value. DC overall has seen a 0.5 percent drop in housing value since August 2006, but most of that has been in the price of condos. Condos in DC were built by the thousand until last year when it became clear that the “correction” didn’t appear to have any bottom. Between January and September of this year, area developers canceled 2,900 condo units and converted an additional 8,400 condos to rental units.
In 2006, developers turned more than 8,600 condos into rentals. A year ago, there were about 25,000 condos on the market, and the DC rental vacancy rate was 1.4 percent (national average of 4.9 percent). Now the rental vacancy rate is up to 2.7 percent as projects in the pipeline are either switching to rental or being canceled. This has caused some easing of what is typically considered to be a tight rental market rivaling NYC and LA.
All this means that the Mayor has some breathing room to make good on his commitment to preserve some moderately priced housing in DC. It might even come to pass that condo buyers who went speculating at the top of the market will try to fob off their new-found liabilities as “high-end affordable housing.”