Two recent surveys show that Washington-area residents face one of the country's biggest gaps between wages and housing prices, which analysts warn could blunt the city’s attractiveness to talented workers.
An analysis by ZipRealty Inc., an online residential real estate brokerage, found that the Washington region is the most expensive housing market among 30 major metropolitan areas.
ZipRealty reported that the Washington area's median housing price from December through Feb. 10 was $1.03 million, 16.78 times the median income. Washington was followed by New York's Brooklyn borough and the San Francisco Bay area on the list, which was released March 18.
That median housing price is twice as high as what other local real estate sources report. ZipRealty says it calculated its numbers by looking at median sales price and median incomes to come up with the ratios. The company included homes of 2,000 square feet or larger and excluded multifamily and land sales. It considers a house of about 2,000 square feet — one with three to four bedrooms — to be average size, said Stacey Corso, ZipRealty's public relations manager.
Underscoring the housing price problem, especially for working families, is a report compiled by the National Low Income Housing Coalition (NLIHC). The advocacy group for affordable housing said a two-bedroom apartment in the District typically costs $1,412 monthly to rent, second only to the $1,671 needed in Hawaii.
Working full time and spending no more than 30 percent of take-home pay, a standard “cost burdened,” a renter would need to earn $27.15 per hour, while D.C.'s hourly minimum wage is $8.25. The study concluded that a minimum-income renter in the city must work at least 3.3 jobs, or toil 132 hours per week, to pay the rent.
“Low-income people face an extremely difficult housing market in D.C.,” said Elina Bravve, research analyst for NLIHC, which has proposed converting the mortgage interest deduction into a 15 percent tax credit. “There are very few apartment units available and affordable to them, and many existing units are at risk of losing their affordability as contracts expire or landlords choose to convert the units to market rate. Furthermore, the waiting list for public housing or Section 8 in D.C. is very, very long,”
Lower-income earners are not the only victims of the tight housing market. Housing prices are challenging house hunters and renters at all income levels.
Although the NLIHC survey showed that D.C. has the richest renter group, with the highest average hourly income at $25.20, statistics from a survey by George Mason University's Center for Regional Analysis suggests that more than one-third of D.C. families with income between 30 and 50 percent of the region’s median — about $84,523 in 2010 — spend at least half their income on housing. In addition, a growing number of families with incomes up to 80 percent of the area median are severely burdened.
The roaring housing prices are a product of a quick recovery from the financial crisis, which did not hit D.C. as hard as it did other parts of the country, said Peter Tatian, senior research associate at the Urban Institute, a D.C.-based think tank.
The District has added 32,500 jobs in the past three years and is expected to add 1.7 million residents by 2040, according to the Metropolitan Washington Council of Governments.
Tatian warned, however, that a continued rise in housing prices would hurt the District’s appeal to job seekers in the long term.
“If you are in the real estate business, maybe the high costs are a good thing, but if the high price of housing in D.C. and the Washington region persists it will likely have a negative effect on economic growth,” Tatian said. “People who are looking for places to live and work will compare this region to places like San Francisco, Boston and Chicago and may decide Washington is too expensive. Young single people who moved here for work in the 2000s may go elsewhere when it comes time to buy a home.”
D.C. Mayor Vincent Gray, in an address last month, pledged to invest $100 million in building or sustaining 10,000 units of affordable housing. Observers are worried, however, that the expected 5 percent cut in the federal budget, which provides 97 percent of the D.C. Housing Authority’s nearly $300 million budget, would undermine that initiative.
“The challenge for the city and the region is ensuring an adequate supply of housing of different types and price levels that will accommodate future growth,” Tatian said.
© 2013 American City Business Journals, Inc.