How the Proposed Federal Budget Would Affect the DC Area Housing Market

by Nena Perry-Brown

How the Proposed Federal Budget Would Affect the DC Area Housing Market: Figure 1
Aerial photo of Logan Circle. Library of Congress.

As the seat of the federal government, the DC region has typically benefited from the stability provided by a disproportionate share of government employees as area residents. However, the Trump administration’s federal budget proposal could greatly undermine that stability — particularly where the housing market is concerned.

As The Washington Post reported last week, although presidential administrations have always reconfigured the size and emphasis of the federal government according to their agendas, the current administration’s plans could eliminate 15,000 to 26,000 jobs in the first year of implementation. The Washington Business Journal noted that the proposed cuts could also lead to over half a million square feet of newly-vacated office space.

“It’s inconceivable to imagine such a large employment reduction not causing some really negative impacts on the housing market,” MRIS economist Elliot Eisenberg explains. The first likely consequence would be a tempering of the development pipeline. “Builders don’t stop building; they reduce construction activity by 20 to 40 percent and after a couple of years, the problem goes away, so I think you’re looking at the largest reduction the first year and then slowly recovering over time after that.”

Eisenberg notes that the impact could resemble that of the budget sequester several years ago, which greatly constrained appreciation of home prices.

“Prices [could] fall by 3 or 4 percent, which is pretty large by objective standards as now they’re going up by 2 [percent].”

The potential impact on the local housing market could be far greater in the affordable sector — particularly in light of a $6 billion reduction in funds for the Department of Housing and Urban Development (HUD). The cuts to HUD could eliminate Community Development Block Grants (CBDG) and the HOME Investment Partnership Program (HOME), both long-standing tools to encourage targeted neighborhood investment.

“[DC’s] city administrator has estimated that the District could lose $17 million in funding that could be used for affordable housing and community development,” David Bowers, Mid-Atlantic director of Enterprise Community Partners, told UrbanTurf. “Montgomery [and Fairfax Counties both] estimate that they could lose over $6 million in money that is typically used for housing and community development.”

“These cuts will reduce the ability of local governments to work with the private market,” Bowers explains. “This is not just about something that’s only paid for by the government, this is money that is used in deals with private developers, non-profits and mission-minded for-profits, who are getting private financing from banks and other financial institutions, so that money leverages private dollars. So the extent to which the administration pulls back with its support is the extent to which we’re not able to leverage as much of the private sector capital and expertise.”

Another potential consequence is that more people will be looking to secure affordable housing as their income falls.

“We already have a disconnect where some of the housing that could be afforded by lower-income households is occupied by folks who are a bit higher up the income scale,” says Bowers. This dynamic would be exacerbated if more households enter the market with less income and begin competing with households for affordable units.

Eisenberg also believes that middle-income earners who experience job loss or a drop in income will be impacted. However, many of these affected households also live in further-out suburbs. “Because of the millennials and their interest in living downtown, we may see less of an impact in neighborhoods like Adams Morgan, Dupont Circle, Logan Circle [versus] somewhere out in Loudoun County,” he says. “There’ll be some price points that are more adversely affected and some geographic areas that will be more negatively affected than others.”

Ultimately, while this budget is highly unlikely to pass in its current iteration, the severity of federal government cuts — and localities’ ability to respond to those — could shape the regional housing market over the next few years.

This article originally published at https://dc.urbanturf.com/articles/blog/how_the_proposed_federal_budget_would_effect_the_dc-area_housing_market/12363

DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!

Northern Virginia

Profiles of 14 neighborhoods across Northern Virginia

Looking to Give People A Reason to Stay Past 6pm
Happily Straddling the Line Between City and Suburb
Columbia Pike
Arlington’s Neglected Stepchild is Getting a Makeover
Crystal City
Turning Lemons into Lemonade
Lyon Village
Developing An Air of Exclusivity?
Hitting Its Growth Spurt
An Urban Village Hitting Its Stride
Del Ray
Virginia’s Small Town Near the Big City
Eisenhower Avenue
The Vibrancy Might Take a Few Years
The Quiet Neighborhood By the Beltway
Old Town
Mayberry By The Potomac
132 Commerical-Free Acres
Downtown Falls Church
Staying the Same in the Midst of Change
Tysons Corner
Radical Change Could Be On The Way

See more Northern Virginia »


Profiles of 14 neighborhoods in suburban Maryland

Small-Town Living in the State Capital
Bedroom Community Gets Buzzing Cache
Cabin John
In With The New While Maintaining the Old
Chevy Chase
Affluence, Green Lawns and Pricey Homes
Downtown Silver Spring
Experiencing a Resurgence After a Bumpy History
A Suburb on Steroids
Rockville Town Square
Despite the Dynamism, Still Somewhat Generic
Takoma Park
More Than a Little Bit Quirky
A Foodie Magnet on the Verge of Change
Capitol Heights
Kudzu, Front Porches and Crime
Glass Half Full or Half Empty?
Mount Rainier
Artists, Affordable Homes and A Silo Full of Corn
National Harbor
A Development Rises Next to the Potomac
Riverdale Park
A Town Looking For Its Identity

See more Maryland »

Northwest DC

30+ neighborhood profiles for the city's biggest quadrant

16th Street Heights
DC's Sleeper Neighborhood
Where (Almost) Everyone Knows Your Name
AU Park
One of DC’s Last Frontiers Before the Suburbs
DC’s Northern Neighborhood on the Cusp
DC’s 535 House Neighborhood
Cathedral Heights
Do You Know Where That Is?
Chevy Chase DC
Not to Be Confused With the Other Chevy Chase
Cleveland Park
Coming Back After A Rough Year
Columbia Heights
DC’s Most Diverse Neighborhood, But For How Long?
An Island of Serenity East of the Park
Dupont Circle
The Best of DC (For a Price)
Foggy Bottom & West End
Where the Institutional Meets the International
Forest Hills
Ambassadors and Adventurous Architecture
Foxhall Village
350 Homes Just West of Georgetown
Friendship Heights
A Shopping Mecca With a Few Places to Live
History, Hoyas and H&M
Glover Park
One of DC’s Preppier and More Family-Friendly Neighborhoods
A Posh View From Embassy Row
LeDroit Park
A Quiet Enclave in the Middle of the City
Logan Circle
Trendy Now, But Not By Accident
Mount Pleasant
Sought-After Homes Surround Main Street in Transition
Mount Vernon Triangle
From Seedy to Sought-After
The Long, Skinny Neighborhood at the City’s Northwest Edge
Park View
It’s Not Petworth
Penn Quarter/Chinatown
DC’s Go-Go-Go Neighborhood
Getting a Vibrancy of Its Own
The Duke’s Former Stomping Ground
Shepherd Park
DC’s Garden of Diversity
Spring Valley
A Suburb With a DC Zip Code
Not To Be Confused With Takoma Park
Not Quite Like Its Neighbors
U Street Corridor
The Difference a Decade Makes
Woodley Park
Deceptively Residential
Adams Morgan
No Longer DC’s Hippest Neighborhood, But Still Loved by Residents

See more Northwest DC »

Southwest DC

The little quadrant that could

Southwest Waterfront
A Neighborhood Where A Change Is Gonna Come

See more Southwest DC »

Northeast DC

Profiles of 10 neighborhoods in NE

New Development Could Shake Up Pastoral Peace
A Little Bit of Country Just Inside the District’s Borders
Not to Be Confused With Bloomingdale
Fort Totten
Five Years Could Make a Big Difference
H Street
A Place To Party, and To Settle Down
The Northeast Neighborhood That Few Know About
Michigan Park
A Newsletter-On-Your-Doorstep Community
Evolving from a Brand to a Neighborhood
Ripe for Investment Right About Now
The Difference 5 Years Makes
Big Houses, A Dusty Commercial Strip and Potential

See more Northeast DC »

Southeast DC

6 neighborhoods from Capitol Hill to East of the River

Capitol Riverfront
Still Growing
Hill East
Capitol Hill’s Lesser Known Neighbor
Congress Heights
Gradually Rising
Notable for Its Neighborliness
Historic Anacostia
Future Promise Breeds Cautious Optimism
Eastern Market
A More European Way of Living

See more Southeast DC »