Coming out of the COVID-19 pandemic, the D.C. region was doing better economically, according to the most recent State of the Capital Region report. But one of the authors says that with recent decisions being made by President Donald Trump’s administration, its future now remains unclear.
The report evaluates how the different parts of the D.C. area’s housing, population and employment situations recovered from the pandemic.
Leah Brooks, one of the report’s co-authors, told WTOP that most of the region, urban and suburban, was doing well compared to their state during the pandemic.
“The Capital Region, as of 2023, was exiting the COVID era, gracefully and on a good track for economic growth,” said Brooks, who’s also a professor at the Trachtenberg School of Public Policy and Public Administration at George Washington University.
“Whether that good track for economic growth is likely to persist now that we have these huge federal job losses, I think, is a big open question,” she said.
Real estate
Prior to 2020, most people who worked in urban settings traveled to work and saw value in living near their jobs. However, once the pandemic began and working from home became a standard, Brooks said it made living in exurban and suburban areas a “much more viable choice.”
“Even before the pandemic, people in dense urban areas were more likely to work from home than people in far exurban areas,” Brooks said. “And that held true during the pandemic. And my guess is … that it still holds true now.”
As the pandemic subsided, people wanted to return to urban areas, which increased demand and raised rents.
“That could be a sign of a healthy metropolitan region where people want to live,” Brooks said. “Or it could be a sign of a metropolitan region that hasn’t built enough housing, and so rents are rising.”
The report found that interest in office-to-residential conversions was on the rise. Brooks said that these conversions help address housing shortages and revitalize urban areas, but present significant financial challenges.
Employment
The report states that with widespread lockdowns and social distancing measures forcing many to work from home, by 2021, remote work peaked at 32% — five times the 2019 Capital Region rate.
By the end of 2023, remote work is still roughly four times higher than pre-pandemic levels.
However, during the COVID lockdowns, employment in the hospitality sector, including restaurants and areas that relied on foot traffic and in-person services, sharply declined. According to the report, only 91% of those jobs in exurban jurisdictions have returned to their pre-pandemic levels.
Brooks pointed to smaller demand and a labor shortage — and businesses embracing technology, which could make those job losses permanent.
“I think once you’ve made that investment, you’re not going to go back,” Brooks said. “Once you have an iPad to take your order instead of a person, even if you’re able to hire the person again, you already have the iPad. You’re not going to go back and hire the person.”
The region could see new growth from projects like the new Washington Commanders stadium in D.C. or the redevelopment of the Six Flags America property in Prince George’s County, Maryland. However, Brooks said that outside of a downtown boom attracting new residents and businesses to the urban core, the number of hospitality jobs will probably not return to pre-pandemic levels.
Population
One of the surprising findings in the report was that household size dropped drastically during the pandemic, while the area population grew. Brooks said that before the pandemic, the average household size in urban areas like D.C., Arlington and Alexandria was about 2.3 people, and by the end of the pandemic, it was only two people.
“It’s weird, because people always complain about how housing prices are so high,” she said. “And one way you can save on housing is to live with other people, but that is not what we see people doing.”
With many people choosing not to live in groups, more housing will be required to meet the demand. The report says the number of households has continued to grow since the pandemic, with the largest growth area being in exurban areas — which saw an increase of 100,000 between 2015 and 2015.
Federal job cuts
With the arrival of the Trump administration and its decision to cut employment at several federal agencies, all the post-pandemic growth could create more changes in the region. Shrinking the federal workforce will cause a trickle-down effect that will hurt all areas of employment in the short term, the report states.
Brooks told WTOP those job losses will impact contractors, housekeeping services and other “ancillary jobs that go along with the federal jobs.”
If unemployment continues to grow due to those job cuts, many people will choose to leave the region, impacting the housing market. It is unclear how significant a change this will be.
Recently, Brooks, along with the report’s other co-authors, attended an event with Fairfax County Board Chairman Jeffery McKay, who expressed that his jurisdiction could be hit hard by the loss of federal workers who may leave after being fired or if their agency moves out of the region.
“Fairfax is probably the wealthiest, most successful jurisdiction in the entire metro area,” she said. “And if he’s worried, then we should all be worried.”
Urban areas like D.C. provide “a land of opportunity” for private businesses, Brooks said, which may be key to minimize the impact of the federal job losses.
“There are a lot of talented scientists, talented economists, talented data analysts who are out of work now,” she said. “That’s an opportunity for private businesses to come and hire these people and invest here.”
The study was commissioned by researchers at the American Enterprise Institute, Georgetown University and the George Washington University.
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