One in 7 Washington households in the top 5 percent of incomes

February 11, 2013

High-income households account for one in every seven in the Washington region, according to new census figures that underscore how the nation’s corporate, financial and government capitals thrived during the recession.

Nationally, Washington ranked third among all metro areas with high concentrations of households in the top 5 percent, a group that begins at $191,500.

Many of the richest households are clustered in the Northeast, from Washington to Boston. The New York City suburbs around Bridgeport, Conn., including several towns that are hubs for investment firms and hedge funds, have the biggest concentration of 5 percenters. The Silicon Valley area of San Jose is second.

With 14 percent of households in the top 5 percent, Washington’s ranking is due largely to the predominance of two-income, college-educated households. Almost half of all adults have college degrees, the most in the nation.

The region’s broad affluence, fueled in part by the outsized role played by the federal government, was barely dented while the rest of the country went through a crippling recession. That has helped fuel a transformation in Washington and its suburbs. More luxury retailers have opened in the choicest neighborhoods, and in most places, housing prices dipped rather than collapsed and are now climbing again.

But the higher cost of living that accompanies such widespread prosperity has squeezed the middle class and pushed even longtime residents into more distant suburbs where housing costs less. It also makes it more expensive to do business here, since employers must pay bigger salaries and offer more generous benefits to lure talent, said Jim Dinegar, head of the Greater Washington Board of Trade.

“I’d rather be at the top than the bottom, so it’s mostly good,” he said of the census report, which pinpointed concentrations of the top-earning 5 percent between 2007 and 2011. “But there’s beginning to be a backlash from around the country of people saying, ‘Gee, the greater Washington area is successful and the rest of us are suffering.’ That’s just not healthy.”

The census statistics illustrate the degree to which the well-to-do gravitate to big cities and their suburbs along the two coasts.

“In places with high property values, the only people who can afford to live there are the ones who are doing well,” said William H. Frey, a demographer with the Brookings Institution. “A lot of the areas that are on top are suburban enclaves in big metro areas.”

Suburban Washington exemplifies that. In some jurisdictions, one in five households, or close to it, are in the top 5 percent. Loudoun, Fairfax, Howard, Arlington and Montgomery counties were among the 10 counties nationwide with the biggest percentage in the top tier. Prince William County and the cities of Falls Church, Fairfax and Alexandria also had high concentrations, as did the District. Most are also among the jurisdictions that have the nation’s highest median household incomes.

Many people whose earnings vault them into the top 5 percent say they do not feel they are in society’s most elite layer.

“I’m in that group, and I feel like I’m not in the top 20 percent,” said Eric Kim, a sales specialist in the watch boutique of Liljenquist & Beckstead, a Tysons Galleria jewelery store where some wristwatches sell for as much as a new sports car. “That makes you barely middle class in Fairfax County.”

Retailing consultants said more luxury stores have shown interest in opening outlets in the Washington area, particularly as the region flourished during the recession.

“It was more taken for granted before,” said Milton Pedraza, head of the Luxury Institute, which researches high-income consumers. “After 2009, they saw Washington was one of the few places that were robust and resilient.”

Aba Bonney Kwawu, a retail consultant in the Washington area, said the region’s affluence is measured not so much in the stores residents frequent but in the schools to which they send their children.

“It’s all about investing in the future of our children and sending them to the finest they can afford,” she said. “Or having a great travel experience abroad or culinary opportunity. All those things are more important to the Washington area consumer than adding stuff.”

Steven R. Goodman, an educational consultant in the District, often meets parents who are scrimping to educate their children. “If you compare people in Santa Monica to people in Takoma Park, a larger percentage the residents of Takoma Park are saving every dime they have and taking lunch to work so they can save $10 a day for the college fund,” he said. “The priorities are education, education and education. As opposed to nice car, nice car, nice car on the Santa Monica Freeway.”

The census report documenting Washington’s expanding presence in the top 5 percent of households comes at a time when the region is bracing for cutbacks in federal spending, particularly if sequestration takes effect. But observers say the region is likely to remain ensconced among the rankings of affluent jurisdictions.

Sequestration would “put a crimp in the buying power of contractors,” said Dinegar of the Board of Trade. “Certainly there will be more unemployment. More people will be furloughed one week during the year. But sequestration won’t knock us out of the rankings.”

Frey of Brookings said the report is a good reminder how well the region fared during the recession. “A lot of people here are doing a lot better than the rest of the country,” he said. “It may make a lot of residents perk up and give them a sense of how much better we’re doing.”

Carol Morello writes about demographics and the census, as well as a lot of other stuff that comes down the pike. She has worked at the Washington Post since 2000.
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