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The Economics of Gentrification in Washington, D.C.

This past decade has seen Washington, DC host one of the most rapid transformations in the United States. Once a city in decline, known for crime and plagued by disinvestment and poor governance, a quick look at the District's skyline will tell you that much of that is no longer the case. With forty-seven cranes operating throughout the city, new apartment and office buildings are rising up all the time. In older neighborhoods, typified by row houses built at the turn of the last century, developers are coming in to renovate, gutting buildings and keeping as much of the historic façades as possible. But what has spurred this resurgence after decades of decline?

Brand new apartment buildings opening on Florida Ave NW in Washington, DC.

Much of the answer can be found in the areas residents. In addition to long time residents and government employees, young professionals from all over the country are flocking to the Capital. And why not? Washington, DC has one of the strongest job markets in the nation. And, as plenty of economists will tell you, people follow jobs.

But people also follow their own preferences for a place they would like to live. The demand for walkable, vibrant neighborhoods with a mix of uses and access to transit is growing constantly. This demand is primarily being generated amongst the young, educated cohort of Americans we mark with the moniker of millenials, but older generations, like the baby-boomers, are also exhibiting this preference. The renaissance of American cities comes with consequences, however, one of which is gentrification.

A house being renovated in a gentrifying neighborhood in Washington, DC.

At its heart, gentrification is a supply and demand problem. For too long, development in too many places focused on creating drivable suburban neighborhoods. Now demand is shifting toward walkable urban places, and they are in short supply. Compounding this is the fact that it is older neighborhoods that have the framework in place to support the type of urbanism people desire. And in Washington, DC, this problem is being compounded even further, with the DC Height Act placing an artificial limit on housing supply.

So, with short supply and high demand, land values are being driven up, which is forcing out long time renters who can no longer afford to live in their neighborhoods. In the District we are seeing this process playing out in a swath of neighborhoods simultaneously. It began with redevelopment focused around transit corridors, but now the wave is sweeping from west to east.

While understanding the problem is one thing, solutions are another, but is there anything that can be done for lower-income residents who can no longer afford to live in the place they have called home for so long? Urban planners have implemented an inclusionary zoning policy, but can it really solve the problem, or by forcing developers to charge less for some apartments are we merely prompting unforeseeable reactions from the market? 

Is this a problem that can only be solved by the same market forces that have created it?

Credits: Images by Chase Keenan. Data linked to sources.