Researcher: DC’s Young Professionals Will Drive Micro-Unit Growth

• February 26, 2014
• 6 Comments

by Lark Turner

The DC area could use 10-20,000 more micro-units over the next decade to support an influx of young professionals with low- to moderate-incomes, a researcher told a crowd at a conference on the small apartments on Wednesday.

Between 2010 and 2020, the region’s population of adults aged 25-34 is expected to increase by 200,000, said David Versel, a researcher for George Mason University. At the same time, the growth of high-wage jobs is decreasing, so most of those adults won’t be making very much money. And most of them will likely be single.

Enter the micro-unit.

“Purely on what people earn, what can they afford, what does the market bear, the sweet spot in the [apartment] market over the next 15-20 years is going to be in that 275-to-430 square foot range,” Versel said to a group of architects, developers and others at an AIA|DC conference focused on the topic of micro-units and their feasibility in the area.

Layout of a micro-unit on the boards for New York City.

As the region’s job market weakens, a national trend exacerbated here by the shrinking federal government, incomes are going down. While most of the new apartment buildings going up in the DC area are classified as Class A, the young, single and unattached people planning to move to the area will do so for jobs that earn low to moderate incomes. These young newcomers generally won’t be able to afford rents eclipsing $1,750 a month, Versel’s data show. Affordability, population growth and a lack of rental inventory could conspire to create real demand for micro-unit developments in the DC area, he argued.

Growth rates for the 25-34 year-old set in the DC region were far higher than those of San Francisco, New York City and Seattle between 2000 and 2012, data show. During that period, DC’s growth rate for this age group was 37.6 percent; the closest rate was Seattle’s, which had a 15.2 percent growth rate. But unlike in Seattle, housing isn’t being built in the DC area to meet the demands of that population: mainly small housing suitable for singles without a lot of stuff.

To make that point, Versel presented data showing that roommate living situations rose 50 percent in DC proper between 2000 and 2012, while the number of people living alone dropped. In Seattle, roommate living situations have risen about 7 percent, while the number of those living alone has gone up 15 percent, a reflection of that city’s growing number of single-room occupancy projects.

This article originally published at http://dc.urbanturf.com/articles/blog/researcher_dcs_young_professionals_will_drive_micro-unit_growth/8172

6 Comments

1. Eponymous said at 9:26 pm on Wednesday February 26, 2014:
   DC needs to increase affordable apartment supply for sure, but it should also lower income tax rates on people making less than about $60,000 per year. These people have some money to spend and put into the local economy, but can't do that if their take-home pay is hundreds of dollars a month lower due to some of the highest "state" income taxes in the country, and it's even harder for them to then drop $1500 a month on rent. Right now the discrepancy in tax rates for young professionals and working-class people between DC and VA is huge, and it's one reason I lived in VA as a renter even though I would have preferred the much more vibrant culture of DC.

1. Paavo Nurmi said at 9:48 pm on Wednesday February 26, 2014:
   It's a mistake to extrapolate the growth patterns of 2000-2010 to 2010-2020. The extravagant sums spent on the GWOT are a thing of the past, and so consequently the rapid job growth that accompanied that spending. "Young professionals" will still come to DC, but not at the rate they did in the first years of this century.

1. brook rose said at 2:29 pm on Thursday February 27, 2014:
   Here you go

1. Payton Chung said at 4:32 pm on Saturday March 1, 2014:
   Paavo takes far too mechanistic a view of the region's economy. Population growth in this region was not appreciably different between the '90s (16.3% growth, when government spending declined as a percentage of the economy) and the '00s (16.4% growth, with growing government). The difference is not in the amount of growth, but *where* that growth happens: DC's suburbs saw their population growth rate drop by 10.6% from the '90s to the '00s, whereas DC's population growth rate skyrocketed by 6700%. It's the same number of people, but different destinations. Similarly, since 2005, central cities around the country have seen substantial population growth while suburban population growth has slowed; this is occurring even in slow-growth areas. (Post-2005, suburban Philadelphia's growth halved while the city went from -0.1% to +1.0% annual growth.) There's also no reason whatsoever to think that the Boomer-to-Millennial transition won't happen here, just as it's happening everywhere else in the world. Even if zero new jobs were being created, which is patently not true, there are a vast number of civil service jobs that are going to be vacated -- and 60-year-old paper pushers are made, not born. And speaking of aging boomers, 3X as many 65+s live alone as 25-34s; small apartments in elevator buildings will also be in high demand in an aging society. The other point that a lot of people miss about micro-units is that young people have a lot less physical stuff these days. Easily most of what I own by weight are books, CDs, etc. that I accumulated because that was how media was distributed in the 1990s. I've pared back on it since, but someone growing up just a few years later wouldn't have most of it in the first place.

1. Gerry Widdicombe said at 4:49 pm on Sunday March 2, 2014:
   Eponymous, As Executive Director of the DC Tax Revison Commission, I can say that the Commission's recommendations for (1) a new middle income tax bracket of 6.5% for taxable income between $40,000 and $60,000, (2) an increased standard deduction to $6,100 from $4,100 (to conform with the federal level), and (3) an increased personal exemption to $3,900 from $1,675 to $3,900 (to conform with the federal level) will narrow the tax difference to $460 in 2015 from $1,830 today. Thus, you will be paying approximately $40 per month more to live in DC, and should be able to make up for this by lower transportation costs. Please feel free to email me for more information. One can find my email at the Tax Revison Commission's website.

1. Rick said at 9:30 pm on Friday March 7, 2014:
   This is very interesting research. What I am most interested in learning is whether or not investors can get in on ownership of these types of units once developed...