Most D.C. Property Priced Out Of Reach
Wednesday, November 16, 2005
District home prices have risen so rapidly that more than 80 percent of the properties for sale last year were financially out of reach for the average city household, according to a report by Urban Institute researchers released yesterday.
Soaring prices since the late 1990s have reshaped the profile of the typical home buyer, who is increasingly likely to be white and well off in a market where the average home sold for $450,000 last year, the report said. The cost of ownership rose in every part of the city, the report said, with sharper increases in modest neighborhoods such as Anacostia than wealthier ones such as Cleveland Park.
The report, commissioned by the Fannie Mae Foundation, cited indicators that even people with good jobs are finding it harder to secure an affordable place to live. And it is not only the cost of a house that has gone up: D.C. rents have risen more sharply than those in the area overall. One reason is supply. In the first half of this year, 2,500 apartment units were converted to condominiums, triple the number for all of 2004.
Though home sales have slowed in recent weeks, the report said it is unlikely that home prices will drop enough to enable many more lower- or moderate-income families to buy. More likely, it said, would be a stagnation that would soften high-end real estate prices for a while.
The report used the example of a public school teacher to show the effect of rising house prices. A teacher with a typical $45,000 income buying a first home could have afforded one-third of the D.C. homes for sale in 2001. By 2004, with a $52,000 paycheck, that teacher could afford only 17 percent of the properties on the market. That means a household with a $44,926 income -- the city median last year, according to estimates by the demographics data company Claritas -- could afford even less.
"The residents who live here, if they wanted to move to the neighborhood today -- with the prices that are being paid -- they wouldn't be able to," said Wesley Hickman, who lives in the middle-class Brightwood area of Northwest Washington, where he grew up. Most buyers there now have incomes of at least $75,000, the report said. A third had household incomes that high in 2000, not adjusted for inflation.
Hickman, an advisory neighborhood commissioner, said that his neighbors are not happy about rising property taxes but that "people are finding a way to deal with it." What concerns them, he said, is that many homes are being bought by investors who want to turn a profit, not to put down roots. Another issue for neighbors, he said, is dense new development that will bring more traffic.
The city's rapid run-up in prices, which rose 15.9 percent per year in real terms from 1999 to 2004, is confirmation of the city's economic revitalization. The housing boom has helped homeowners build equity and fattened the city's tax collections. It's helped increase the homeownership rate: 46 percent of D.C. householders now own their homes, compared with 40 percent five years ago, according to one federal survey.
But the report also said the rise in prices is a warning sign that less-affluent people are being pushed out and is one more indication of a growing gap between the city's haves and have-nots.
Six in 10 city home buyers had incomes of $75,000 or more in 2003, the report said. In 2000, just under half did. At the other end of the income scale, about one in four buyers had incomes of $50,000 or less in 2000. By 2003, one in six did.
The share of loans made to racial and ethnic minority buyers also declined in the majority-black city. Minority purchasers made up 37 percent of D.C. home buyers in 2003, compared with 43 percent in 2000, the report said, citing home mortgage data.
In the region's suburbs, racial change is the reverse of what is happening in the city. Minority buyers rose from 37 percent of all purchasers in the region to 42 percent during those years. Some minority buyers are moving to the suburbs for better school systems, new homes and more land, the Urban Institute researchers said, but others are leaving because they cannot find an affordable place to live.
The shift to higher-income buyers is affecting neighborhoods throughout the city. Even in some low-priced neighborhoods such as Ivy City and Mayfair, one in five buyers now has an income of $75,000 or more, more than double the proportion of such buyers in 2000. The rising number of white buyers is most dramatic in gentrifying, racially mixed neighborhoods such as Mount Pleasant and Capitol Hill, but far less so in mainly black areas east of the Anacostia River.
The report also said the city needs to do more to provide affordable housing. The city has more than 17,000 new and rehabilitated affordable housing units under construction or in the pipeline. The report recommended a range of strategies that should vary by neighborhood, with the underlying principle that it costs less to preserve a currently affordable unit, or offer more subsidies, than to build a new one.
Rising housing costs will also pressure homeless shelters, nonprofit housing developers and other social service providers to concentrate in the lowest-income neighborhoods, the report said, imperiling the ability of those areas to attract the middle class. The report said those kind of services should be spread throughout the city.
The report suggested that city officials target specific fixes to specific types of neighborhoods -- encourage more moderate-priced housing in wealthier neighborhoods, focus on saving affordable housing in fast-changing neighborhoods where new luxury units are going up and push construction of a range of housing types in lower-income areas.
D.C. government officials said that they welcomed the report and that they already are pursuing many of its recommendations -- for example, trying to implement "inclusionary zoning," which would require that developers include affordable units in new housing developments.
"We view these studies as useful tools to give us more currency on some of the challenges," said Stanley Jackson, the city's deputy mayor for planning and economic development. "We are blessed by the economic renaissance in our city and our neighborhoods, and at the same time we are challenged very much to make sure this remains an inclusive city."