No Sign of Stopping?

by Art Rodgers

During the first quarter of this year 129 permits were issued in DC totaling an astounding 1,285 units of new housing construction. About 115 of these units (9 percent) were single-family. Annualized, it could mean DC might start construction on 5,140 units of housing in 2014! The last four quarters totaled almost 4,000 units. Interestingly, DC currently represents about 13 percent of the regional share of housing units; but DC’s share of new units in 2014 (based on Census data through February only) represents about 20 percent of the region’s new construction for the year so far. The chart below shows how DC’s regional capture rate of new construction has changed since the financial meltdown in 2007. Just for kicks, it includes a simple, long-term trend line1 that suggests an increasing share of regional growth in the short run before flattening out.

Source:  US Census; 2014* Year to date February.

Source: US Census; 2014* Year to date February.

Is the change in demand for urban vs suburban living that great (look here and here)? Is the trend line conservative or optimistic? Will DC’s increasing prices narrow the range of households who can afford it and therefore slow demand or shift demand to lower cost neighborhoods? Will Millennial demand convert to demand for family housing? If so when and where?

Oh wait, there is more. Based on an incomplete review of building permit data from DCRA, another 94 units were issued permits in the first quarter as a result of conversion to flats or changes in existing multi-unit buildings. At the same time only nine units were lost due to razes or consolidation within existing buildings.

[1] For data geeks it uses a logarithmic curve based on percent share of production since 1996 when DC had zero new construction units.