The vacancy rate for apartments in Washington is lower than anywhere in the country, and renters are paying the price, analysts said.
The D.C. vacancy rate is a mere 1.4 percent compared with the national average of 5.6 percent, said a recent report conducted by Delta Associates, an Alexandria-based real estate consulting firm.
At the same time, D.C. rental rates in the past year have risen at a rate of 7.5 percent, compared with Washington’s normal long-term growth rate of 4.9 percent.
There are two reasons for high rental prices in D.C., said Grant Montgomery, vice president at Delta. “First, the demand for apartments is high; D.C. has some of the strongest job growth in the country.”
The D.C. region is expecting over 65,000 jobs, a significant increase from the long-term average of 54,800 new jobs, said analysts at Delta. “All things stem from job growth,” said Mr. Montgomery “when more people move to the area they need a place to stay.”
“Washington is unique in this market because we have a built-in transient population that comes from students and government contracts,” said Mr. Montgomery “There is a constant churn of people coming to D.C., which affects rental properties, because in other markets people would buy,” he said
The second reason for the tight housing market in the Washington is the strong supply in the condominium market.
“In the past, developers found it more profitable to build condos rather than apartments,” said Mr. Montgomery. “They realized that they could sell their projects as condominiums and see an immediate return on their investment, rather than collect rent payments from it year after year,” he said.
Recently, analysts have seen a major shift from condominium developments to upscale apartment complexes. “Over the past 12 months, the number of planned apartments in the District has grown,” said Mr. Montgomery.
The Flats at Dupont Circle is one Northwest apartment development that seems to have reached the market at a crucial moment. The 306-unit apartment complex opened up in March of this year and has since leased 78 percent of its total capacity.
Located in the affluent Golden Triangle of Northwest, the Flats are being marketed to students and working professionals who are willing to pay more to be a part of the action. The rent for an average one bedroom, 700-square-foot apartment ranges from $2,500 to $3,000.
Jack Nicholson, a 29-year-old Georgetown graduate student, said he doesn’t mind paying a bit more for the convenience of living downtown. “I’m very happy about the location. The accessibility of the Flats makes it really easy to get around” said Mr. Nicholson, “and at this point, saving time is really important to me.”
A Portland, Ore. native, Mr. Nicholson said he is currently paying more monthly to live in a one-room studio than he paid for a mortgage on his three-level house back home.
“The average renter here is someone who is in D.C. for a specific reason,” said Larry Brown, the community manager at the Flats.
“Whether they are students, or government contractors, they rent because they haven’t decided that D.C. is the place for them to live,” he said. Mr. Brown hopes to have 100 percent occupancy in the complex by January.
The rising number of apartment developments in the next three years will lead to a 1.5 percent decrease in rental rates from 7.5 percent to 6 percent, said the analysts at Delta. “The development community is bringing new products to market that will hopefully bring an equilibrium,” he said.
“Washington developers have really been spoiled over the last few years,” said Mr. Montgomery. “Its unhealthy to have the market at this level,” he said. “We need to take a step back and see that the real estate market of the past three years is not indicative of what the real estate market in D.C. has been long term,” he said.
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