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Posted at 01:35 PM ET, 05/09/2013

Keeping D.C. rent lower through ‘filtering’


The rising supply of high-end apartments has slowed the rise in prices (at least outside the hottest areas). Will that make housing more affordable for people who can’t afford the fanciest apartments?

Real estate consultant Maeve Gallagher writes in Capital Business that vacancies have risen in the metro area, to 4.4 percent from 2.2 percent a year ago, though DC’s vacancy rate continues to fall. That means rents in will decline in Northern Virginia, but rise in DC.

Most people can’t afford the highest-end or “Class A” apartments in new apartment buildings, but one theory holds that if we build more Class A housing, other rents will also fall through a process called “filtering.”

If the top tier isn’t full, rents won’t go up there as fast. People who can afford those luxury units will want to buy in a new building, so the owners of an older building will have less incentive to renovate and less market upside from doing that. That will keep lower-tier rents more reasonable and “filter” down to successively lower-price levels of the housing market.

However, that doesn’t happen if the Class B and C apartment building owners instead respond in counter-intuitive yet sensible way. They could renovate their buildings to Class A, with new granite countertops and other high-end finishes, so they can get Class A rent.

[Continue reading David Alpert’s post at Greater Greater Washington.]

David Alpert is founder and editor of Greater Greater Washington. 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  |  01:35 PM ET, 05/09/2013

Tags:  Local

 
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