Fewer Low-Income Residents Are Owners

Study Cites Past Decade's Rising Property Values; Ward 5's Changes Striking

The number of low-income families obtaining mortgages to buy houses in the District has plummeted the past decade as property values have soared and the city has attracted more affluent residents, according to a new study.

Ten years ago, 17 percent of District home buyers were low-income, which the study, by the Urban Institute, defines as a family of four with an income of $45,000 or less in current dollars. In 2005, the most recent year for which data were available, that rate had slipped to just over 4 percent, the study found.

The decline has been especially pronounced in Ward 5, which the report defines as a mid-priced area that includes gentrifying Northeast neighborhoods including Brookland and Eckington. In 1997, about 33 percent of buyers seeking loans for properties in the ward were low-income, a level that fell to slightly more than 3 percent in 2005. At the same time, high-income families, or those earning more than $108,000, accounted for a third of all buyers in Ward 5 in 2005, up from 5 percent in 1997.

The general decline in low-income home buyers is the result of the "rapid increases in prices that we saw starting in 2000, increases that were much faster than anyone's increase in income," said Peter A. Tatian, a senior research associate with the Urban Institute. "There was a lot of interest in people buying homes in the District, and the higher-income folks started crowding out the lower-income buyers."

The study, which the Urban Institute issues quarterly with funding from the Fannie Mae Foundation, found further evidence of a slowdown in the housing market.

A total of 752 condominium units sold in the District during the third quarter of 2006; 1,638 changed hands during the same period in 2005. Condominium prices dipped from a median of $394,000 to $354,000.

The decline in the sales of single-family homes was more gradual. Total sales fell from 1,211 in the third quarter of 2005 to 1,070 a year later. The median price for a single-family home fell from $490,000 to $465,000.

Lawrence Yun, a research economist for the National Association of Realtors, said the Washington area remains a strong housing market because it continues to generate new jobs. "Any decline in home prices will be very short-lived, because there are potential buyers lining up in the pipeline," Yun said.

But the rise of property values over the past decade has made the housing market increasingly difficult for low-income families to penetrate, a trend Harriet Tregoning, director of the District's Office of Planning, characterized as "alarming."

"While the good news is that there has been a significant increase in middle- and high-income buyers, the report also indicated that the challenge of providing affordable housing is a continuing one," she said.

The study also contains data suggesting that the share of African American home buyers is beginning to fall, from 31 percent between 1997 and 2000 to 28 percent since 2001. The share of white home buyers also has fallen, from 60 to 56 percent since 2001.

At the same time, Hispanics are becoming a larger share of home buyers -- from 3 percent a decade ago to 7 percent in 2005. The number of Asian home buyers also has increased.

In Ward 5, the racial breakdown also has changed. Blacks accounted for nearly 85 percent of the mortgages to buy homes there between 1997 and 2000. In 2005, that rate dropped to 53 percent. The number of loans granted to whites rose from 9 to 33 percent.

Although neighborhoods have diversified along racial and economic lines, Tatian said they could grow more homogeneous if District officials and planners do not take steps to control what is built.

"What is it going to look like in 10 years?" he asked, referring to Ward 5. "We need to take actions to preserve housing opportunities for lower-income people."