Washington, D.C. boasts the second-highest median household income among major U.S. metropolitan areas. Even so, it’s facing a significant shortage of affordable housing—particularly for its lowest-income residents.

Four in five extremely low-income D.C. renter households are severely cost-burdened, spending over half their income on housing, according to The Gap report from the National Low Income Housing Coalition. There are only 32 affordable and available homes per 100 extremely low-income renter households.

Addressing this need requires tackling several challenges, including:

• Rising costs 
• Elevated rent arrears
• Strained resources for developing affordable housing

“These are complex issues involving not just housing providers, but policymakers and all the players in the affordable housing capital stack. But we’re seeing promising efforts to address the shortage, including policy hurdles, creative land use, renewed focus on affordable housing preservation and more,” said J.P. Morgan senior community development banker Brett Macleod.

Rising economic vacancy 

The District of Columbia reported a growing backlog of unpaid rent, with an economic vacancy rate of 15% in 2024. In 2019, the economic vacancy rate was just 5%.

Affordable housing providers note that many residents are still financially recovering from the COVID-19 pandemic and have limited access to rental assistance. This forces housing providers to absorb losses, making it harder to maintain properties and threatening their financial stability.   

“So many dollars that could have been used to produce housing are now being used to cover deficits from nonpayment of rent,” said J.P. Morgan senior community development banker Jordan Bishop. 

The district’s leaders, meanwhile, said pandemic policies enacted to help people facing housing emergencies carried an unintended side effect: significantly lengthening how long renters could remain in a unit without paying.

D.C. Mayor Muriel Bowser has proposed legislation intended to address rent arrears and other policies affecting affordable housing preservation and production—the RENTAL Act. An amended version passed an initial council vote and awaits a second vote. 

Opportunity: Jim Knight, president and CEO of Jubilee Housing, which specializes in providing deeply affordable housing, called initiatives like the RENTAL Act “a step in the right direction.” 

“They show that city leadership is willing to take on structural issues, especially around rent transparency, maintenance and enforcement,” he said.  

But housing providers stressed the need to address challenges without overcorrecting. Focusing on buildings’ financial stability without stabilizing low-income households could make D.C. “a more exclusive, less diverse city—in short, not the vibrant, inclusive city where housing for all is the priority that many of us envision it to be,” said Elin Zurbrigg, co-executive director of Mi Casa, Inc., an affordable housing provider in the greater D.C., Maryland and Virginia area.  

Other measures housing providers called for include: 

• Funding streams to address existing rent arrears: “Without that, too many mission-driven developers will be forced to pull back or divert critical capital from long-term development,” Knight said. 
• Expanded rent assistance: Knight also expressed that a stronger Local Rent Supplement Program, which subsidizes rent for households earning 30% or less of the area median income, could help stabilize housing providers serving D.C.’s lowest-income residents. 

Increased operating and development costs

Housing providers now contend with inflation, which has raised costs essential to maintaining safe, quality communities, including security, utilities and insurance. 

Although 2024 recorded the first decrease in property insurance rates since 2017, rates remain elevated, further exacerbating the affordability crisis, according to the National Multifamily Housing Council. 

Opportunity: Multifamily owners and operators can mitigate insurance costs by shopping for better coverage and documenting their efforts to keep properties in good condition. 

Strained resources for development

New apartment construction activity slowed across the Washington region in 2024, with the district experiencing the sharpest decline, according to the Washington, D.C. Economic Partnership’s Development Report. Only 580 market-rate units started construction—the fewest since 2009. Limited housing production can drive prices higher across all income ranges. 

Elevated interest rates, construction costs and operating expenses present challenges for all multifamily development. Affordable properties can face additional hurdles. 

“What used to be achievable with a few public sources now requires a far more complex and layered capital stack,” said Janine Lind, president of nonprofit affordable housing developer Enterprise Community Development. 

Opportunity: Affordable housing providers can work with their lender to explore new capital stack strategies and identify active public and private capital sources in the D.C. market.

Lind also identified policy changes that could ease development processes and create new capital sources. 

“We’re encouraged by efforts to streamline zoning and permit processes, increase density allowances near transit and capitalize local housing trust funds to provide critical gap financing,” she said. 

Enterprise also supports legislation simplifying and broadening payment in lieu of taxes programs, expanded use of federal programs such as the Low-Income Housing Tax Credit and Housing and Urban Development Section 108 Loan Guarantee Program, and establishing a separate local housing trust fund focused on preservation. 

“Enabling flexible financing tools is essential if we want to build at the pace and scale the crisis demands,” Lind said. 

D.C.’s affordable housing bright spots

Despite D.C. going through a challenging time, affordable housing developers and operators are innovating to expand access to high-quality, affordable housing. Their strategies include:

• Building trust with residents: When property managers take the time to form relationships with residents, it contributes to mutual respect that can encourage steady rent payments. A property manager who can sit down with a resident and discuss payment challenges over a cup of tea is more likely to have a positive outcome than one who simply slides a letter under the resident’s door after a missed payment.
• Preserving affordability within communities: Stabilizing existing affordable housing and developing multifamily housing designed to remain permanently affordable helps low-income households stay in the neighborhoods they call home. “If we could shift to policies that reflect low-income household stability in addition to building operating stability, we will create a stronger city overall and counteract displacement in D.C. and other urban neighborhoods,” Zurbrigg said.
• Creating mixed-income housing: Blending affordable, workforce and market-rate housing can alleviate financial pressures. “We’re seeing growing demand for mixed-income communities that offer long-term affordability, stability, and economic opportunity across income levels,” said Lind. J.P. Morgan recently provided a $12 million construction loan to develop 52 workforce and affordable housing units in the Glover Park neighborhood. Townley Court, a former housing complex, will get a complete renovation and energy-efficient upgrades.
• Enhancing climate resilience: Investing upfront to prepare buildings to withstand extreme weather events and operate efficiently can lower repair, utility and insurance costs. “Through solar installations and water-saving retrofits, we’re reducing utility costs and reinvesting savings back into resident services,” Lind said.
• Exploring creative land use: As of December 2024, office-to-residential conversions were expected to add nearly 1,000 residential units by the end of 2026, according to the Washington, D.C. Economic Partnership’s Development Report. Lind reports growing interest in strategies such as transit-oriented development, modular construction, accessory dwelling units and public-private collaborations.

Housing providers’ strategies for continuing to expand access to high-quality, affordable homes is an example of D.C.’s resilience. “This is a challenging moment, but it isn’t going to last forever. It’s a point in time we need to get through collectively as an industry,” Macleod said.

JPMorganChase remains dedicated to supporting D.C.’s resilience, not only with affordable housing, but with investment in creating opportunity throughout the greater D.C. area.