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How Amazon HQ2 would squeeze the D.C. region’s already tight housing market

The area is widely seen as a frontrunner in the competition over the planned headquarters

Amazon’s Seattle headquarters
The Washington Post/Getty Images

Here’s a timely lesson about supply and demand, courtesy of the District-based Urban Institute: If regional housing production remains sluggish, and tens of thousands of new residents arrive in the area within a short period due to the entrance of a major employer such as Amazon, the cost of living will climb at an even faster clip than it is climbing now.

That’s the main takeaway from a new analysis the Urban Institute released on Tuesday that examines how the quality of life in the D.C. region could change in response to the advent of Amazon’s second headquarters (HQ2) or a similar economic catalyst. The Seattle-based company is expected to announce its selection of the jurisdiction that it wants to host HQ2 before the end of 2018. The District, Northern Virginia, and Montgomery County, Maryland are all on Amazon’s shortlist of 20 municipalities that had bid for the opportunity last year.

“Without substantially more housing production at a wide range of rent levels and price points, the challenges of rising affordability pressures and lengthening commutes will intensify, and more households will experience hardship,” the Urban Institute explains.

Although the region has become more prosperous in recent years and grown to 6.2 million residents as of 2017, the creation of new homes has not kept up with the overall population boom. Since 2010, the number of housing units in the inner region rose less than 3 percent, while the population rose 7 percent, per the Urban Institute. (The inner region includes the District as well as Montgomery, Prince George’s, Arlington, Fairfax, and Loudoun counties.)

Urban Institute

Citing data from the Metropolitan Washington Council of Governments, the researchers say that by 2025, the region requires an additional 235,000 housing units just to keep pace with already anticipated job growth, and only about 170,000 are currently expected. Introducing 50,000 new jobs—the number Amazon promises to the jurisdiction chosen for HQ2—could necessitate about 267,000 additional units to meet the need, the Urban Institute estimates.

Meanwhile, the region continues to gentrify. From 2000 to 2016, the number of households who earned more than $150,000 a year jumped by 34 percent—significantly more than the number of households who earned lower incomes jumped. This “surge” in affluent families, the researchers say, “puts upward pressure on house prices and rents” and makes owning a home “increasingly out of reach for many of the region’s middle-income workers.” Already, “almost half of renters and a quarter of homeowners” here spend more than 30 percent of their income on housing costs, meaning they are “burdened” by those costs, as experts say.

Urban Institute
Urban Institute

Another impact of a massive employer like Amazon moving to the region under the status quo, according to the Urban Institute, would be to push lower-income families farther out from the District, as they would seek more-affordable housing options. In turn, this would increase commute times for residents who relocate to places like Prince George’s County, where in recent years, a fifth of employees traveled more than an hour to get to their jobs.

Urban Institute

“Although the region’s housing affordability challenges warrant serious concern, they can be addressed by a coordinated and committed effort by our entire region before they reach the extremes confronting the nation’s highest-cost markets,” the Urban Institute also contends.

The D.C. region is widely seen as a frontrunner in the competition for Amazon HQ2. In part, that’s because it appears to meet many of the criteria the company announced in launching the search process and it would provide an East Coast counterpart to Amazon’s West Coast headquarters. Amazon CEO Jeff Bezos has also recently visited D.C. and owns a home here.

This post has been updated to reflect a correction by the Urban Institute regarding the estimated number of additional housing units needed if 50,000 new jobs hit the region.