By Brian Trompeter
From offices left vacant by telecommuting workers to increasingly unaffordable housing and a downturn in one of the Washington region’s most reliable job sectors, local leaders face a bevy of challenges, panelists said Oct. 18 at the inaugural Capital Area Economic Forum.
The region is renowned for – and dependent on – wonky, high-paying jobs in the professional-and-business-services sector. But these positions, which normally have weathered the economy’s ups and downs, decreased slightly overall this summer – and that’s not a good sign, said Terry Clower, director of George Mason University’s Center for Regional Analysis.
“What I’m concerned about is we are entering a potential phase where we could be at a tipping point on a path to perpetual mediocrity,” Clower said at the forum, held at Mason’s Arlington campus.
The Washington region’s gain of 40,000 jobs over the past year was just so-so compared with some of its competitors, said Clower, who pointed to some ominous signs on the economic horizon.
Federal spending has continued its inexorable upward trend in the metro area – “It doesn’t matter what party’s in control, they’ll spend more money,” Clower said – but the usual concomitant increase in business-and-professional-services jobs hasn’t materialized.
That sector, which lost jobs during federal budget sequestration in 2013-14 and in 2020-21 during the pandemic, has been on a downward trend, losing about 1,600 jobs between August 2022 and this August, he said. The region also is falling behind in a previously booming segment of that jobs category, cyber-security, he said.
One business-and-professional-services job has the economic impact of seven positions in the leisure-and-hospitality sector, Clower said.
Northern Virginia’s recent unemployment figure of 2.7 percent is pretty good historically, but a full percentage point above suburban Maryland’s rate of 1.7 percent.
Housing prices continue to escalate while inventory lags – an outcome that could convince workers to take their talents to less costly regions such as Florida and Texas, which have seen the greatest in-migration in recent years, Clower said.
“Businesses go where the talent is,” he said. “People switch areas because of better housing costs.”
Housing affordability across the country is at the “lowest level we’ve ever seen,” said Danushka Nanayakkara-Skillington of the National Association of Home Builders. Only 41 percent of homes are affordable to families earning $96,000 per year, she said.
The recent spike in interest rates means homeowners who obtained mortgages at 3 percent are staying put instead of buying another home at more than twice that rate, panelists said.
“People are stuck in their mortgages,” said Jon Peterson of the development firm Peterson Cos.
Local jurisdictions need workforce housing and Arlington County has made the greatest strides on that front, but localities have been “doing it on the backs of developers” by forcing them to provide an ever-higher percentage of lower-priced units, he said.
“The cost is so high that you can’t build it,” Peterson said.
One possible panacea is easily within localities’ grasp, he said: Donate “lazy land,” i.e., under-utilized property owned by the jurisdictions, for affordable housing.
Fairfax County supervisors in February by approving a public-private partnership between the Fairfax County Redevelopment Housing Authority and Lincoln Avenue Capital II to build The Residences at Government Center II, which will provide a total of 279 affordable rental units in two buildings on an unused parking lot at the county’s government center. Construction on that project is slated to begin in spring 2024.
High office-vacancy rates also continue to plague the region, thanks to an abundance of teleworking during the pandemic and employees’ insistence that some such options remain, panelists said. Some federal agencies continue to use only a fraction of their available office space, they said.
“We need to get the government back to work,” Peterson said. “We are less productive as a society today than we were four years ago.”
The sluggish return to the office by federal workers is being mimicked by some contractors as well, and the result has been a “seismic shift in the economy,” said Clark Mercer of the Metropolitan Washington Council of Governments.
“The federal government is sitting on a lot of land that’s not being taxed,” he said. “I think its going to be difficult to turn the ship” around.
The federal office situation also contributes to more than 200,000 people who are not riding Metrorail each day compared with pre-pandemic years, said Jason Stanford, president of the Northern Virginia Transportation Alliance.
“Metro is absolutely critical to the economic competitiveness of our region,” said Stanford.
The region needs to attract more young people, diversify its economy and bring in new sectors, said Gabe Albornoz of the Montgomery County (Md.) Council.
Montgomery County has been focusing heavily on bio-medical sciences and its “green economy” also is taking off, but still, “we have been falling behind,” he said.
That county also committed an unforced error recently by approving rent control, which “creates more problems than it solves,” Albornoz said. “We must build a coalition to swing the pendulum back.”
Several panelists alluded to the need to make political changes based on the desires of the population’s silent majority, not vocal minority, to address pressing problems.
“We need to support candidates with clear economic visions,” Albornoz said. “We need to enact policies to accelerate and grow the economy.”
