One chart that shows why the rent is too damn high in Washington, DC

Because a lot of journalists live in Washington, DC this chart showing the disappearance of affordable rental units in the city has gotten a lot of attention:

High-end rentals have grown while cheaper ones vanish. (Urban Institute)

But here's the interesting thing. With the average inflation-adjusted price of rental housing growing, the average rental income of landlords is also growing. Since landlording is becoming much more profitable, we would expect to see a lot of construction of new rental housing. So are we seeing a lot of new rental units? No. During this period the city added about 1,781 units per year. That's not nothing. But it's not a huge boom either.

So what's happening? Are homeowners, investors, contractors, and real estate developers committing a huge blunder and forgetting to build more apartments? Nope! They are hamstrung by zoning restrictions and neighborhood opposition to new density. Even if the hypothetical construction surge were just a bunch of enormous new luxury condos, that would have restrained the tendency — clearly visible in the chart — for rich tenants to bid up the price of formerly affordable dwellings that already exist

The same thing is happening in DC as is happening in New York and San Francisco and other in-demand central cities right now — rents are rising faster than they should, the population is growing slower than it should, construction jobs are growing slower than they should, and overall the economies of America's richest places aren't prospering quite like they should.

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