As the Trump administration’s newly established Department of Government Efficiency continues to cut jobs in Washington D.C., some have wondered if that would negatively influence the local employment and residential market. Well, not necessarily, at least, according to a Washington D.C. multifamily outlook report published by Marcus & Millichap.
It lists a few reasons why. For one, this isn't the first time a Presidential administration has cut back on the government. The Clinton administration did this; from 1992 to 2000 the federal workforce dropped from 2.3 million to 1.9 million, according to Marcus. And yet, total employment in Washington D.C. wound up increasing by 535,0000 over that period. So far, DOGE has fired more than 200,000 probationary federal workers country-wide, with 75,000 civilian employees accepting buyout offers. However, Marcus noted that Washington D.C. hosts one of the strongest job markets in the nation thanks to its 3.2 percent unemployment rate in 2024 being one of the lowest levels in the country.
The strong local workforce leads to another key fundamental — income. Only San Francisco's household earnings exceeded the nation capital's total of $131,000 last year.
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A third reason to have confidence in the local multifamily sector is affordability. According to a chart posted by Marcus, average rents in D.C. have only increased gradually since 2020 and were over $1,650, as of 2024. Mortgage payments, meanwhile, have skyrocketed in the $4,000s. That comes after they were closer to the $1,650 threshold in 2020.
Also, multifamily in D.C. has strong fundamentals. In the fourth quarter of 2024, the vacancy rate was just four percent, which is about three times less than the levels seen in 2023. Also, rent growth was more than three-fold the national average in 2024. This could help provide some comfort in 2025.
"This will allow owners some amount of breathing room to withstand softening demand. Meanwhile, multifamily properties could fill a key role during a period of economic uncertainty," Marcus said.
While the CRE firm thinks there could be some impact from the layoffs, it does note that the Trump administration's five days per week return to office mandate for federal employees could lead to "reanimating urban activity" and offset the job losses.
"While not immune to effects of layoffs, the apartment rental market is at the center of multiple crosscurrents and some loss of demand could be offset by the need for more rental housing as workers seek more flexible living arrangements, or make rapid and unplanned moves back to the region," Marcus added.
Of course, it's important to note that the new administration's other policies on tariffs, and how they would affect the entire economy, are not yet clear. So that might be something to watch out for too as the D.C. multifamily sector takes shape in 2025. But the fundamentals appear to be healthy, as of now.
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