Some quick notes:
1. DC rents continue to rise:
While the vacancy rate for the Metro area is indeed low, it is most pronounced among Class A buildings in the District where just 1.6 percent of apartments are vacant. Class A rents in the city in the third quarter averaged $2,582/month, up from $2,448/month in September 2010. For Class B buildings, the situation for renters in the city looked a little better; the vacancy rate sat at 2.2 percent (up from 1.8 percent last year), but rents also increased to $1,886/month from $1,793/month in September 2010.
From the report:
“…while all submarkets are chronically low [in the area], there is notable vacancy variance among District submarkets. The Upper Northwest submarket posted the lowest stabilized vacancy at 0.5%, while Columbia Heights/Shaw posted a stabilized vacancy of 2.4%.”
2. I’d say there’s some strong demand in this market. Clearly, room for more development, yes? Yet Housing Complex notes that some developers are concerned about their new projects all hitting the market at the same time.
“There is just a ton of supply coming,” he said. “In certain markets, there will be spot oversupply.” Which is developer-speak for holy shit guys slow down so my building will still sell.
- as Rob points out, housing is a bundle of goods whose utilities vary for different audiences
- housing construction can induce demand, particularly by adding amenities to a neighborhood
- housing construction can also remove amenities from a neighborhood, like a low-rise scale, thus changing other intangibles included in that bundle of goods
- construction costs don’t increase linearly; rather, costs jump at certain inflection points, like between low- and mid-rise
- housing and real estate in general are imperfect markets, since land is not a replicable commodity
- the substantial lag time for housing construction, even in less regulated markets, almost guarantees that supply will miss demand peaks
Pro-active planning remains the best and most time-honored way of pre-empting NIMBYs. Get the neighborhood to buy-in to neighborhood change early on, and then they won’t be surprised and upset when it happens.
I’ve often cited Chris Bradford’s short post on filtering as a good summary of one of the dynamics at play, but there’s no one thing you can point to for a full explanation.
As for Payton’s last point about the best offense against NIMBYs being a good defense (or maybe it’s the other way around), I hope to write more about that soon as a part of a more complete response to Ryan Avent’s The Gated City.