As the District’s population steadily increases, you would expect that the combination of an influx of newcomers, and an increase in the construction of higher-end rental properties would lead higher overall rents city-wide, and you would be right…kind of. According to real-estate portal Zillow, their 2014 year-end report shows that while rents are indeed up over the past year, the exact amount is peanuts in comparison to other major metropolitan areas. For example, Washingtonians shelled out $13.4 billion in rent during 2014, up 7.7% from 2013’s overall figure, which at an average rate of $1,428 per month means that rent has increased around $24 for the entire year, per person.
If that number seems good, then it’s about to sound a whole lot better, as during the same time period rents increased by $86 per month in Denver, and a jaw-dropping $163 per month in San Francisco. But, as with any good news, there’s always looming cloud around the corner.
Although an increase in rents may remain relatively flat for the time being, don’t expect that to last for long. As the demand for housing has increased, so has the use of loopholes within DC’s rent-control law by landlords.
A large majority of Washington rental units are subject to rent-control, a law that caps the amount in which a landlord can raise the rent each year at the rate of inflation, plus two percent. This is meant to keep rents down in order cater to those who rent, which consists of a majority of DC’s population. However, landlords have begun bypassing the statute by filing a hardship petition, which states that if the landlord is earning less than a twelve percent annual return on their investment, they are then allowed to increase rent as much is necessary in order to hit that twelve percent mark.
The use of hardship petitions and the other varying loopholes within the rent-control law means that as more tenants are forced to leave properties due to a lack of affordability, they’re also finding a steady decrease in other affordable options.
So as we enter 2015, with the population continuing to increase, one of the most interesting market trends to keep an eye on will not only be by how sharply rental rates start turning upward, but conversely, how many affordable rental properties will remain standing?