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Long answer: The primary driver of housing costs in this area is not lot size or the newness of the construction or anything that has to do with the physical attributes of the unit (those certainly are factors, but they are subsidiary). It is the location, and, specifically, the socio-economic demographics of the neighborhood and (closely related but not always directly so) the school options associated with that neighborhood.

Most of the affordable housing stock in DC and the close-in suburbs is not affordable because it is old or due to other physical characteristics - it is affordable because of who lives there now, which makes it undesirable to those with the money to access larger parts of the housing market, rather than having to settle for whatever they can. Racism plays a significant part in these perceptions, to be sure, but crime & education stats are front and center as well.

So what you have is a situation in which the housing market is strongly segmented and certain parts of it are simply considered off-limits by those with inflationary purchasing power until something (broadly speaking, the assurance that there will be a non-trivial amount of people of similar SES) opens up that neighborhood market. At that point, new demand is induced for that area.

This dynamic does not favor the kind of filtering postulated by economists. Or rather, it might, but not within the close-in DC area. The properties that are losing value and becoming affordable due to filtering are not older units in the urban core, but units further out, from which people are moving to fill up new high-end construction. The market for garden apartments and duplexes in Prince William, Chantilly, etc. is hanging on for dear life right now, held up by the proximity to things like the Dulles Tech Corridor and Fort Belvoir. Pending the size of defense cuts, those places will quickly filter down and become housing for the next generation of Salvadorans and Hondurans coming over. Something similar has already been ongoing.

by Dizzy on Jan 28, 2013 11:19 am • linkreport

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