The latest addition to this chapter involves a description
of the rapidly rising costs of living in DC and the rest
of its inner metro area. The analysis was conducted for the Wider Opportunities for Women
(WOW) in 2005 and "gives new urgency to the question of self-sufficiency for the DC metro
area's working families". It also provides potent arguments that education is a key ingredient in
achieving that self-sufficiency.
The remainder of this chapter, written in 2001, describes the many aspects contributing to DC's
"economic landscape", most of which are as applicable today as when written, though the detailed
statistics have changed somewhat.
Serious analysts seeking solutions to DC's many problems will do well to take into
account the physical, economic, and cultural layout of the city. In many ways it is
like other cities, but in some aspects it is unique--and not just because it lacks two
senators and a fully-ordained representative. It is worth considering all the
In addition to being a residential city,
o it is an unusually wealthy area;
o although the source of that wealth comes from an unusual job
balance which emphasizes government work at the expense of private sector
entrepreneurship and cannot help but impact on the city's political outlook;
o this is also reflects in the unusual composition of DC's gross
domestic 'state' product, as demonstrated by 1999 BEA data;
o it has limited sources for its revenues and
o the are substantial differences between the 'net productivity' of residential and commercial stakeholders with DC favoring the less
financially rewarding option;
o the character of its residents and real estate is changing;
its housing stock is at best a mixed bag, and DC is
proving to be remarkably slow in getting rid of rent
o it retains strong racial, political, and economic
o and the gaps between rich and poor are continuing to
grow, with a high concentration of jobs and property value in a small portion of the city.
o it also has a very high number of homeless people
relative to the rest of the metro area--a perfect opportunity for regional "poverty-sharing";
o it has very large contrasts in the "productivity" of
both its people and its land, in terms of revenues and expenditures produced;
o and there are strong contrasts in the productivity of
households as well;
o Updated statistics using the latest issue of DC's
Indices indicates that data for the years '97 and '98 did not greatly change things,
though some of the 'conventional wisdom' about DC trends still do not hold water;
o but it clearly has not yet exploited its new metrorail
o the new long-range plan for the
"monumental core" of the capital city does not deal with the needs for the non-
federal parts of the inner city, but other plans are emerging.
o and, a new bill being drafted in the DC Council would establish a National Capital Revitalization Corporation
devoted to improving the economy of the District by, amongst other things, slum and blight
o NARPAC has collected many of the factors addressed here and elsewhere in its separate
briefing summary entitled Economic Challenges for
THE UNAFFORDABLE WASHINGTON METRO
In mid-September, 2005, The "Wider Opportunities for Women (WOW)" organization released a
report prepared for them by a senior sociologist at The University of Washington (State)
indicating the high, and rapidly increasing, costs of living in the Washington, DC, metro area. It
clearly shows the financial challenges for single parents, mostly moms, and the counter-intuitive
fact that it is cheaper for them to live in DC than any of the neighboring suburbs, except for
Prince George's, plus the inadequacy of the federal poverty measure. According to the report's
summary, "these trends give new urgency to the question of self-sufficiency for the DC metro
area's working families". It might also have pointed out that the need for a self-sufficiency
education is at least as great a challenge.
The report develops a "measure of income adequacy for working families" in today's
environment, called the "Self-Sufficiency Standard". It is a market-basket approach to accurately
document the cost of living for families that takes into account family size, ages of children,
geography, and the number of breadwinners. It "calculates the bare-minimum costs for housing,
child care, food, transportation, health care, miscellaneous (including clothing, shoes, household
items, telephone, etc.), and federal, state, and local taxes". Federal tax relief measures, i.e., the
Child Care Tax Credit, Child Tax Credit, and Earned Income Tax Credit, are all included where
applicable. According to the Executive Summary, the Self-Sufficiency Standard (SSS) is "a
measure set at a level that is not luxurious or even comfortable yet not so low that a family is
unable to meet its day-to-day needs."
The chart below summarizes the changes in SSS between 1999 and 2005, between one adult
alone and two adults with two kids, and between the six "inner jurisdictions" of the DC metro
area. Several facts seem to stand out:
o DC remains the cheapest place for a single adult to live ($21,200), and the second-cheapest
place ($60,300) after Prince George's County for a couple with two kids;
o Fairfax is the most expensive place for a family to live ($71,800), with Montgomery Country a
close second ($69,600), consistent with their latest ranking as the two wealthiest counties in the
United States; and
o Perhaps more troubling, these "bare-bones" break-even incomes have risen between 25% and
50% in the past six years, and the notion of providing "affordable housing" for lower income
workers seems more and more fanciful.
The next chart shows the build-up of a typical household from single mom to a 2x2 family, and
offers the following insights:
o The costs of the first kid virtually doubles the wage needs of a single adult from $21,000 to
$41,000. The addition of a school-aged kid adds $6200, and a second adult (hopefully, but not
necessarily, a wage-earner!) another $6500;
o While housing is a major outlay for the single resident (47%), it is only 21% for a family of
o Taxes become a significant share of household costs as the household and its income demands
grow. (Not shown, the DC of these taxes is probably less than half of those paid by the 2x2
o The costs of transportation, health care, and day-to-day purchases together do not match the
spending on housing, taxes, or "net child care" (after suitable credits are taken);
The next chart simply reinforces how little it costs (financially, at least) to add a second adult to
the household, either in the cheaper place to live, or in the most expensive:
o The marginal cost of an adult household partner varies from $4900 to $5400, and the major part
of that seems to be from what he eats!
o But the major significance of this chart is implied but not stated. Surely it is more practical for
two adults with two kids to earn $68,000 in DC than for one, most probably a mom, to earn
$62,000, or for two to make $70,000 in Fairfax County rather than one to make $65,000. As
noted ahead, two parents with some college education seems more achievable than a single mom
with a law degree.
The fourth chart provides some possibly startling information on the magnitude of the available
child support and work-support benefits in offsetting the required earned wages (the heavy black
line is not a separate cost or benefit, it is just a highlight between required wages and available
governmental support). It should be read as follows: Case A starts with the income needed for a
single adult with two kids, noting the reduction due to federal child credits included in the SSS
calculation; Case B deducts federal child support benefit; Case C includes the large reduction for
child care; Case D adds food stamps, "WIC" (supplemental nutritional income for women, infants,
and children) and "CHIP" (a DC healthy families initiative); and Case E adds the Section 8
o Added together, federal and local child and work support benefits can cover 77% of a single
mom's overall family-sustaining wages, some $53,600, leaving an earnings requirement of only
$12,500, well below the DC minimum wage of $19,300, and providing virtually no federal or
local revenues in return.
Finally, and perhaps a little further afield, this report presents an estimate of the new jobs likely to
become available between 2000 and 2010, a period now half gone by, the salaries those jobs will
offer, as well as the educational achievements needed to earn those wages. The upper chart has
some interesting twists, the lower one is not a pretty picture.
The impact of education on earnings in the nation's capital city is indicated in the somewhat
complicated upper chart. Eight levels of education are listed down the left-hand side from a full
doctorate at the top to a high-school drop-out at the bottom. The dark blue bars indicate the
average annual earnings (in thousands of dollars) across the US for males. The pink bars show the
equivalent earnings for US females. The tips of the bars indicate the marginal wage advantage or
disadvantage of the same educational skill for those working in DC: light blue for a male wage
advantage; yellow for a disadvantage; and green for the female wage advantage. The following
observations pertain to the upper chart:
o As applies nationwide, a doctorate is not worth as much in DC as a professional degree for
males or females;
o Females do better than the US average in DC at all education levels, but surprisingly enough,
males earn less than the US average in all the middle education levels, making salaries almost
o Men with professional degrees make about $110,000 on average in DC: a good 50% more than
o Masters Degrees bring men about $63,000 and women about $10,000 less;
o High school drop-outs make roughly one-third as much, very close to the DC minimum
o to bring up two kids alone in DC, a woman needs at least a bachelor's degree, a man better than
an associate's degree.
The somewhat obscure chart below integrates the total number of jobs expected to be available in
DC as a function of the average annual earnings associated with them. Reading up from the lower
left-hand corner, the number of jobs projected for each level of education can be discerned:
o Of the 170,000-odd new jobs expected by 2010, less than 30,000 will be filled by high-school
o High school graduates may get a shot at some 40,000 jobs, and those holding bachelor's
degrees will find only 10,000 more available;
o The remaining 90,000 jobs, paying more than $50,000 per year will almost all require advanced
degrees, a Master's or a professional degree such as lawyer, doctor, or engineer. These are also
the pay scales required to bring up two kids alone.
(The September 23th, 2005 issue of Washington's Kiplinger Letter confirms these trends
"Skilled workers will be harder to find in 2006, and even more so in following years. The real
problem lies in education. Some college or advanced training will be needed for about 85% of
new (US) jobs, but only 60% of American students will get that far. Businesses will need 2 million
more scientists and engineers by 2012 and 2.4 million workers with key manufacturing and
production skills. Current trends indicate demand won't be met."}
It appears clear from the above that not only are self-sufficiency wages increasing
rapidly, so are self-sufficiency educational requirements.
DC IS A RESIDENTIAL CITY|
DC, sometimes called the "City of Trees", still considers itself a
"residential city", and has over 100 identifiable, named neighborhoods,
many with quite distinctive characteristics. Many of the subway stops bear the
names of these locales, and the DC Home
Page features short descriptions of
several of the best known. Some of these communities are over
100 years old, but others resulted from the rapid expansion of the federal
government during the war years in the 1940s. Although the street layout of the
city was largely established during the 1920's, it was not fully implemented until
WWII. Since then, of course, DC has become the inner--or central--city of a very
much larger, and still growing, metropolitan area. Nevertheless, because DC
residents have no state affiliations with Maryland or Virginia, they still tend to think
of themselves as a separate entity.
Relative to a sample of 19 large US metro areas (excluding the
"megametros", New York and Los Angeles), The Greater Washington
Metro Area ranks 13th in area, 9th in population. Despite its residential nature, It's
population density is typical of cities of the same overall size. DC's
socioeconomic situation is nonetheless more fragile than that of its surrounding
metro area. While the average inner city is about 6% of its metro area, DC is only
3%--half as large. As a result, it has only 25% of the population (v 39% avg);
21% of the total income (v 35%), and 20% of the labor force (v 38%). DC is also
unique in that the surrounding jurisdictions share virtually no common political,
economic, or administrative responsibilities for its day-to-day management--or its
Topography and Land Uses
Topographically, the District is virtually flat, and most of it is less than 100 feet
above sea level. There are essentially no natural or political barriers to metro area
"sprawl" beyond its fixed boundaries. The southern quarter of the
District is separated from the rest by the minor Anacostia River, which has had
surprisingly little development--or even clean-up--to date. Its original population
was farmers, partially replaced by blue-collar shipyard workers, and then by
government workers. There are a few "hills" (250-350 ft) with
commanding views of the rest of the District and surrounding area. Some have
been reserved for prominent churches and public institutions, others (primarily
south of the Anacostia) are virtually undeveloped other than for housing or schools.
The new National Capital Planning Commission new
plan for expanding DC's
"monumental core" now encompasses the banks of the Anacostia.
The District's 69 square mile area, with its three straight-line borders, plus the
Potomac River, has a number of large parks, substantial areas owned or set aside
for the federal government, and an unusually high number of non-profit
organizations (religious, cultural and otherwise). There are also over 180
embassies, many now occupying what once were the finest "mansions"
of the city's original upper class, and supported by thousands of foreign
In fact, only 43% of the city's acreage is taxable. Of the tax exempt area, 72% is
federally owned, 10% is DC-owned, and 18% is used by non-profits. Of the
taxable land, 75% is zoned residential, 13% commercial, and 3% industrial
(another 9% is categorized simply as "vacant").
The 550,000 remaining residents still think in terms of a
"downtown" business area, well differentiated from where they live,
despite the fact they represent less than 15% of the population of the metropolitan
area. The downtown area bounds the federal enclave on the north and south, and
each occupies roughly half of a four square mile area--no more than 8% of the total
area of the District. Despite the existence of good public transportation, there is
still a tendency to cram all new developments into this same small area: a new
sports arena has just opened, a new convention center is being planned a few
blocks from the existing one, and a new home is being sought for the Washington
Opera in the very center of the downtown area. To some it appears to be a
conscious decision not to "spread the wealth" across the entire DC
As a case in point, a considerable controversy currently surrounds where to locate the
city's new convention center. Advocates seem determined to squeeze this huge 10-pound (2-
million sqft.) structure into the tight 5-pound Shaw neighborhood at Mount Vernon Place.
Struggles to accommodate neighborhood worries have escalated costs substantially, while the
Authority appears to have turned a deaf ear to a readily available, much larger site (27 acres v 17)
adjacent to Union station. This nearby location which would contrbiute to the development of a
major part of DC--and essentially expand the "downtown" area into economically depressed
It has become increasingly clear that the city authorities did not properly consider this second
site, and is using a somewhat specious issue of "closer to downtown" to stonewall thoughts of
change. The few blocks difference (if any) seems almost immaterial compared to broadening
DC's developed area . NARPAC, Inc. has absolutely no information to suggest that local
political hany panky is involved, but surely hopes that someone in authority will insist that a
second look be taken at this important addition to DC's economic future. Meanwhile, in a proper
exercise of grassroots democracy, civic leaders in the Shaw Neighborhood have put together a "Greater
Shaw Consensus Group which hopes to develop a "common ground" for developing the several
unattractive razed lots that have stood virtually empty for 25 years.
The city is distinguished by its 1922 law that restricts the height of all private/commercial
buildings in order to avoid dwarfing the federal enclave. The result is
that the downtown office buildings are limited in height to perhaps half of what
they are in the immediate suburbs, making them less efficient, and less able to
generate income for the inner city. One wonders why this limitation could not be
modified so that allowable height could increase with distance from the center of
the federal enclave, until it matched the height of the satellite city buildings at DC's
boundaries. Surely no one foresaw those burgeoning satellite cities in 1922.
AN UNUSUALLY WEALTHY METRO AREA.|
The Greater Washington Metro Area is, however, by far the richest in per capita
income--25% above par inside the city, and 30% in the suburbs. In addition, more
of its adult residents are working both in the city (55% v 49%), and in the suburbs
Industry and Commerce
There is very little "industry" in DC, and even commercial zoning
is tightly restricted to certain areas. Most of the commercial zoning is for
"low density" mom-and-pop shops, except in the "downtown
area". What little area is zoned for industry is mainly centered at the
confluence of the two railroad lines entering the city from the north and the east,
and most of that is now standing idle. Little attempt has been made to capitalize
on the first-class new subway system as an
engine for economic growth.
With regard to retail sales, there tend to be more shops per capita both inside and
outside DC and those shops are still serving a higher income base per
establishment. However, due to the small size of the District (and its anti-business
climate), only 26% of the area's retail stores are in the central city (v 40% avg).
Retail sales in the suburbs are much higher per establishment, per resident, and per
dollar of income. These factors all tilt economic prosperity towards the suburbs--
and make it more difficult for the District to raise revenues for its own needs.
Many analysts have noted that the federal government is the real
"industry" of the nation's capital, and that it is just as good--and
doubtless longer lasting--source of income as automobiles in Detroit, or steel in
Pittsburgh. In the past it has certainly been a more stable source of employment--
and does not require access to railroad tracks. Federal employment provided well
over 350,000 jobs to the Washington Metropolitan Area from 1970 to 1990, over
200,000 of which have been within the District. However, the current
government "downsizing" is the greatest single reason for the recent
drop in DC population. And now the DC government is probably going to
"downsize" by as many as 10,000 of its 50,000 employees. If these
jobs are to be replaced by "light industry" of other kinds, then some
rezoning will be required, and some low density residential area converted.
The ten largest business employers in the District are generally white collar
(Washington Post, Potomac Power, Bell Atlantic, Safeway, Hyatt Hotels, etc.) and
employed some 18,600 workers in 1996. By comparison, the ten largest non-
profit employers were universities and hospitals, employing 35,700 workers.
Not surprisingly, the growth in regional employment has favored the suburbs over
the inner city by a substantial amount. Between 1982 and 1994, jobs grew from
1,646,000 to 2,376,000 in the region, but DC's share grew only 60,800 (10%)
while the suburbs grew 669,600 (64%). DC's share of the regional jobs market
thus dropped from 36% to 28% by 1994--and is still dropping. Government jobs
grew both inside and outside the District, remaining 41% of DC's work force, but
declining to only 21% of the suburbs'. In the suburbs, private sector jobs
expanded almost 78%--with the service industries growing by almost 104%, while
all else grew 62%. Services was DC's only growth industry, rising 36%, while the
non-services sector dropped almost 13%. Of greater concern, however, is DC's
apparently endemic unemployment rates. In 1997, when national unemployment
levels dropped to their lowest levels in 24 years (4.6%), DC rates still hovered
around 8%. By comparison suburban unemployment dropped to 2.9%, with skilled
worker shortages threatening to slow economic expansion.
While employment in DC rose by 87,000 jobs (15%) between 1982 and 1989, the
rest of the metro area gained just over 500,000 jobs (47%). In the short recession
from 1989 to 1991, central city jobs dropped only 1%, while the suburbs fell 3%.
Since 1991, however, DC lost 64,500 jobs (10%) while the suburbs grew another
23.5%--350,000 more jobs. Most of the loss in city jobs were from government
downsizing (53,000), plus reductions in trade and finance (15,000), with only the
services sector growing (11,000).
Not all DC residents work in the city. Of the 260,000 employed DC residents,
some 80,000 wortk in the suburbs, while some 420,000 suburban residents make
their living in DC.
Immigrants also have some impact on the general employment patterns across the
US. According to a new (Jan, 2000) study from the Center for Immigration Studies, there
are fewer native-born entrepreneurs (10%) than the national average of (11.8%),
while there is a higher fraction of immigrant self-employed (13.8%) than the
national average of 11.3%. This may be due to an unusually high number of
immigrants from Europe, Korea, and the Middle East.
The overall composition of the job market in the District is quite distinctive, and
bears on any plans for future development. As is shown on the table below, the
average annual pay for all Americans in 1994 was $26,900. In DC, it was
$40,900. Of the almost 660,000 paying jobs in DC (down from 690,000 in
1990), 41% were in the public (government) sector with an average wage of
$46,900, while the other 59% were in the private sector, with average wages of
$36,600. No wonder government has come to be known as the employer of first
resort. More troublesome, however, is the fact that while there were 660,000
paying jobs in DC in 1994, only 314,000 workers reside in the District and
contribute to the District's revenue base.
DC SOURCES OF EMPLOYMENT AND PERSONAL INCOME|
(Ref: DC Indices 1994-96)
| Public Sector||$29,205|
| Private Sector||$26,494|
| Government Jobs||270,500||$46,872||41.1%||47.0%|
| Private Sector Jobs||388,200||$36,642||58.9%||52.8%|
|DC Private Sector:
| Services, incl:||251,740||$37,898||64.8%||67.1%|
| Retail Trade||46,802||$15,765||12.1%||5.2%|
| Finance, Ins, RE, etc.||28,557||$45,895||7.4%||9.2%|
| Wholesale Trade||5,868||$45,770||1.5%||1.9%|
In the private sector in 1994, a whopping 67% of the total $14.2 billion
payroll generated within the District was in the services areas (business, medical,
education, legal, etc.) with an average wage of $37,900. The legal profession,
with its average wage of $63,400, accounts for 19% of this category. Another
9% was in finance, insurance and real estate with an average wage of $45,900.
Then comes transportation, communications, and utilities at 6.3%, paying
$51,200 annually. Retail trade accounts for only 5.2% of the total DC payroll, in
part because the average wage is only $15,800, followed by 4.4%
"manufacturing" (predominantly printing and publishing) paying
$47,400. Finally, wholesale trade and construction each account for 2.0 with
average wages of $45,800 and $31,600 respectively.
The District cannot hope to solve its "revenue base" problem by
lowering unemployment, or filling it's unoccupied housing units. Three-quarters of
the 26,000 unemployed come from the low income areas of the city where job
skills, and even literacy, are lacking. There are also about 15,000 vacant housing
units considered habitable, again mostly in the lower rent districts. If all the
unemployed found work in restaurants (@$13,400), and all the vacant housing
units were occupied by non-family households of workers in the business services
(@$23,200), the total additions to the annual (taxable) payroll might reach $800M,
providing a kind of "full-employment, no vacancies" baseline. The
additional income and property tax revenues from taxpayers at the low end of the
income spectrum are likely to be very small indeed, and to be more than offset by
their demands on District services.
There is clearly no alternative to somehow tapping the $6,700M payroll of the
370,000 daily commuters, and many others whose suburban jobs depend on their
proximity to the nation's capital. At the very least, "gentrification" of
some of the lower income neighborhoods in DC must be strongly encouraged
(rather than disparaged) by local political leaders.
MORE BUREAUCRATS AND FEWER
It is important, NARPAC believes, to note the general distribution of jobs in DC compared to its
suburbs, and also to look at the growth of entrepreneurship among the area's plentiful minorities.
Both have an impact not only on the relative economic outlook of the city compared to the rest of
the metro area, but on the local political climate as well. The private sector has a generally
different outlook on the role of government, and entrepreneurs are generally stronger supporters
of self-reliance rather than government dependence regardless of their income levels. 1998 data
shows that DC has an inordinately large number of government workers (federal and local), and
an inordinately small number of competitive business workers (in trade and manufacturing):
Recently released but quite old--data also shows the relative rate of growth of minority
entrepreneurship , strongly favoring the suburbs over the city, and of incoming Hispanics relative
to the black population. The latter has generally found the road to the middle class generally runs
through public sector employment, while the former, perhaps by necessity as well as choice,
prefers independent small businesses:
| DC's 1999 GROSS
The Department of Commerce's Bureau of Economic Analysis tracks "gross state product" for
the US and each state including DC. The Bureau of Labor Statistics can provide labor statistics
and personal income for states, counties, metro areas, and cities. The two charts below show the
20-year trends of gradually declining economic stature for DC relative to its neighboring states,
and to the metro area
Of more direct interest in the fall of 2001, in the wake of the 9/11
terrorist attacks on the US, may be the composition of DC's employment
base relative to the entire metro area, and of DC's gross state/domestic
product and employment mix compared to that of the US as a whole. For
instance, as indicated on the two charts directly below, DC is far less
susceptible to changes in the construction, manufacturing, and wholesale/retail
trade sectors than either the metro area or the country as a whole. On
the other hand, as is pointed out in earlier statistics
DC is uniquely heavy in the services industries and in government workers:
Further details are provided in the three charts below, which break out
subheadings within each of five key areas: transportation, communications,
finance; services; and government.
In the first three areas, DC is above average only in the area of communications.
Since these are all in percentages of total domestic product, however,
the relatively low percentages in these first areas reflect the much larger
shares below. In the services area, DC stands out in the hotels/lodging
sector, business and personal services, legal services, and the ill-defined
"other" area. Note that DC's "legal" category is very extensive, generating
more wealth than health and education combined. Strongly tied to the business
of government, these law firms provide an interesting buffer against an
economic recession (as do the government employees they interact with).
As a bonus, of course, the revenues from a smaller number of wealthy taxpayers
is greater than from a larger number of lower paid workers.
CHANGING DC GOVERNMENT REVENUES AND
Deciding how best to "increase the tax base" in DC, is surely not a
straightforward task. It may be worth noting the sources of the District's total tax
revenues of $39.1 billion over the past ten years. These are shown on the table
below. To begin with, 33% of those revenues came directly from the federal
government through $7.1B in grants (welfare, etc.) and $5.8B in federal payments
for DC "services rendered" (or foregone) to the federal government.
Another $3.2B derived from licenses, permits, fines, and other charges not
considered to be taxes. The rest came from taxes. No other city--or state, for that
matter--gets 33% of its revenues from the federal government--although very few
cities pay even 67% of their own bills.
TOTAL DC REVENUES AND EXPENDITURES, 1987-1996
(Ref: Greater Washington Society of CPAs: 1996 DC Audit)
| All Property Taxes||7.65||19.5%|
| Sales and Use Taxes||5.28||13.5%|
| Individual Income Taxes ||6.16||15.7%|
| Business Income Taxes||1.45||3.7%|
| "Other" Taxes||2.51||6.4%|
| "Other" Sources||3.25||8.3%|
|Debt Service & Financing||3.33||8.5%|
| Future Employee Benefits||-1.76||-4.5%|
Among the various taxes which raised $23 billion over these past ten years
(1987-1996), the largest chunk (30%) of $6.9B derived from real estate taxes,
followed by $6.2B (27%) from individual income taxes, and $5.3B (23%) from
sales and user taxes. Business income taxes raised only $1.5B (6%) while the rest
came from personal property taxes, rental taxes, gross receipts, and the ever
present "other" category. It is surely not immediately clear how best to raise
revenues within the district.
On the other side of the ledger, it is also instructive to look at how DC spends its
revenues. DC spent $39.4 billion over the past ten years, including $1.4 billion on
"government" and another $3.3 billion on debt servicing and financing,
which are clearly partially attributable to failures in prudent governance. Another
$2.6 billion has been spent on economic development, although there is precious
little to show for it. In fact, total DC revenues have been declining slightly since
$14.0 billion has been spent by DC on welfare and other human services, though
probably half of that was provided by Federal grants ($7.1B), not local taxes. $7.1
billion has been spent on public education since 1987, and DC seems to have
squandered most of it. A goodly number of its drop-outs and illiterate graduates
have found a life in crime, and as a result the District has spent $10.0B on
"safety and justice". It is a sad commentary on urban life in general,
and on our nation's capital in particular, that there are 3650 uniformed police
officers in DC, and only 5600 in the seven surrounding counties: 40% of the law
enforcement personnel for 13% of the population!
Finally, DC has spent just $2.8 billion on public works--less than on debt servicing--
and virtually none of that has gone into capital improvements, it was needed for
snow and pothole removal.
At best, one-half of total DC spending went to "building on success"(education,
economic development, etc.), while the other half went to make up for past failures (welfare,
police, courts, jails, and debt payments). More troubling, perhaps, is the fact that over
the past ten years, the share of DC's budget devoted to "past failures"
has risen from 39% in 1987 to 52% in 1996.
In addition, the per capita tax burden has also risen, exacerbated by the drop in
population in the District. Hence the total DC expenditures in 1987 amounted to
$3300 per man, woman, and child in DC, but this amount had risen to just under
$5500 in 1997.
At the same time, the federal payment and federal grants have also risen
substantially, with the result that DC--up to 1997, at least--now receives a little
over $6 per American man, woman, and child, whereas this figure was only about
$4 ten years ago. On the other hand, it is also a fact that 260 million Americans
could provide all the revenues now consumed by DC for $17.20 per
capita, or for $37.25 per American tax return--of which there are now some 120
|Prime Real Estate on 9th St. NW.
LEFT: This prize home has had no owner for thirty years. RIGHT:This five story home at 9th
and R St. NW may become a charter school. Photos by Len
RELATIVE PRODUCTIVITY OF DC'S
COMMERCIAL AND RESIDENTIAL SECTORS
The most basic productivity comparison is whether businesses or residents contribute more to
DC's fiscal solvency. One of the most popular myths in DC, repeated by the Control Board, the
DC Council, the Mayor's office, and the Planning Office, is that DC needs more residents to
produce net revenues for the city to use elsewhere. In grossest terms, this is simply not supported
by the facts, even if ambiguous allocations are slanted towards the popular myth. Residents do
produce about 66% of the revenues, but they consume roughly 92% of DC's Operating Budget
(leaving aside the vast federal grants for human services). Moreover, small often unnoticed
demographic changes can unpset the fiscal balance.
The most controversial issue in allocating revenues between commercial
and residential sources is the very substantial revenue from sales taxes
(20% of total revenues). Some analysts assign it all to the residents
as the buyers. In fact, a relatively large share of sales taxes (42%)
result from business purchases, as noted in the excellentDC budget books. The question remains, however,
should the taxes on purchases by residents be allocated to the buyers
(the residents) or to the sellers (the businesses)? NARPAC strongly favors
the latter: it is the lack of some businesses in DC that currently limits
sales tax revenues--home building supply stores and automobile salesrooms
may be the most obvious examples that send DC shoppers to suburban malls.
Nevertheless, to avoid the appearance of slanting the data, NARPAC allocates
tax receipts from residents' purchases to the residential side of the
ledger. However, if all sales taxes were attributed to the business side
of the ledger, then it could be credited with providing 46% of the city's
Allocation of expenditures is less troublesome, and the approaches used by NARPAC and GWRP
in the Rivlin Visionappear to be similar.
Education and human services are all allocable to residents, while a portion of police, public
works, and emergency services is allocable to businesses (and to governnment and non-profits as
well). ("Overhead" items such as city administration, regulation, and financing are pro-rated to the
direct operating agencies.) What many casual observers underestimate, is how little is spent on
these three shared expenses. It is also possible to make educated estimates of the allocations of
residential costs by household income category, since upper income brackets use few of the city's
services such as the DCPS, or public health.
The simplest display of the balance is shown in the bar chart below combining actuals from
FY2000 and projections to FY2005. Expenditures for residents (red bars) overwhelm the service
costs allocable to the commercial sector (green bars). However, the revenues raised from
residents (the blue line) do not cover residential costs: only the addition of commercial tax
revenues (up to the black line), allows DC to operate in the black:
The next chart pursues this point from a somewhat different aspect but reaches the same
conclusion. If one simply divides the assessed value of all DC residential and commercial
properties by the allocated annual budget costs to service each, the results may surprise many
analysts. Residential properties taken altogether produce just about $100 in revenues per
thousand in assessment each year, while commercial properties generate closer to $50. But the
clincher is that residents consume over $125 in services, thus generating a net loss of $28 per
$1000, whereas commerce uses few services and generates a gain of $44 dollars. This may be an
oversimplification because of its highly aggregated approach, but DC can ill afford to assume that
middle class residents present an easy, reliable solution to improving its "fragile" financial
THE CHANGING CHARACTER OF DC'S
Distribution of Households
"Households" are one normal census unit of measurement and represent
those living in a single housing unit. The changing character of a city will be
reflected in these statistics. There are roughly 250,000 households, one half
living in about 100,000 single family dwellings and 25,000 condos. The other half
(55%) live in multi-family units, ranging from very upscale apartments that line
Connecticut Avenue in Northwest, to the various disgraceful public housing
projects still scattered about the city, primarily in the low income sectors.
Residential density is roughly equivalent to that of other cities of the same overall
size, despite DC's rich endowment with public parks and spaces.
Households are not necessarily what they might seem. In fact, the 20-year trends
from 1970 to 1990 could well portend the trends to come. In twenty years, the
population-living-in-households dropped 21% from over 700,000 to 565,000 in
1990. The big change has been in the proportion of family and non-family
households. 62% of all households were family-oriented in 1970, and three
quarters of those were headed by married couples. But family households have
dropped 25% in number. Now only 49% are family households, and married
couples make up barely half of those. Hence, there are 45% less married couples,
and 31% (75,000) fewer kids.
The other half of the family households are single parent families, of which just
over 80% are female-led. The number of kids per family has dropped only slightly
from 1.50 to 1.39. But there has been no drop in elderly residents: from 1980 to
1995, those aged 65 and over in DC have increased 4% from 74,300 to 77,200.
Three quarters of these senior citizens live in family or non-family households
(rather than "group quarters"). (More recent estimates indicate that the
number of older residents may now be starting to decline--see NARPAC, Inc.'s recent update in
Non-family households have increased by 27% since 1970. These were over 70%
one-person in 1970, and that has dropped slightly to 64%in 1990, as the number
of non-related persons living together increased. Altogether, then, the average
household size had dropped from 2.72 to 2.26 in 1990 and 2.16 in 1996, but
without a commensurate drop in wage-earners, or for that matter, in empty housing
units. DC residents are clearly having fewer children--and school enrollment
confirms this. Household size also varies across the city, averaging 1.9 in Ward 3,
2.1 in the middle income wards, and 2.5 in the lower income wards.
Another 42,000 "residents" live in "group quarters"--such as
hospitals (10,000), military barracks (2,000), college dormitories (16,000), jails
(4,000), and boarding houses or shelters (10,000). This sector has stayed
remarkably constant, despite the overall drop in DC population. In various ways,
these groups of residents can skew demographic statistics. They tend to be low-
or non-revenue producing, and in the case of DC, they tend to be more racially
integrated. By lowering the average income in some census tracts (like
Georgetown), they have erroneously made these areas eligible for subsidized
economic development. They can also warp statistics on voter registration, etc.
Categories of Household Income
The District can be divided into three different regions based on household income,
a spectrum including the "richest of the rich", and some of the
"poorest of the poor". There is also a middle class, largely government
workers (federal and district), most of whom remain politically invisible, while a few
are activists for a broad variety of causes. The upper income families are in the
north and west sectors, primarily in Ward 3, and parts of Ward 4. The lower
income residents are primarily in south and east sectors, Wards 5, 6, 7, and 8. The
middle income households are in the middle stretching down from the northern
corner through the "downtown" and federal enclave to the Anacostia
River--between two extensive sets of parks and non-profit areas.
Statistics on household income are gathered by income categories: $0-15K; $15-
25K; $25-50K; $50-100K, $100-150K, and "over $150K". For
simplicity, these can be aggregated and labelled as lower income: $0-25K; Middle
Income $25-100K; and Upper Income Over $100K, and communities can be
identified by the share in each category. For instance, the US as a whole in
1990 could be characterized as 37/57/6--standing for 37% Lower Income; 57%
Middle Income; and 6% Upper Income. By contrast, DC ranked 36/54/10--
seemingly not very different, but with 60% more upper income than the national
average. The neighboring states also departed from the national norm: Virginia
being 32/61/7, and Maryland with even larger middle and upper income fractions
These comparisons are shown on the table below:
PERCENT OF HOUSEHOLD INCOME IN EACH BRACKET
|Category|| Lower Income
0 -$25,000||Middle Income|
|All United States||37%||57%||6%|
|All District of Columbia||36%||54%||10%|
|DC - Lower Income Area||46%||50%||4%|
|DC - Middle Income Area||32%||58%||10%|
|DC - Upper Income Area||19%||55%||26%|
Notice that the District of Columbia is a richer region than the average for the
United States, or for the states of Maryland and Virginia. Note also that within the
three different income areas within the District, the middle category is essentially
the same: it is only the large differences in the upper and lower income areas that
determine the wealth of the neighborhood.
Within the District, the lower income sector--with nominally 300,000 residents--
ranked 46/50/4, the middle income sector--with about 200,00--was 32/58/10,
while the 100,000 upper income residents scored 19/55/26. In each case, roughly
half the households are middle income, the big differences being at the two
extremes of rich and poor. In terms of total DC income, 10% is generated by the
lower income groups, 60% by the middle income families, and 30% from the richer
households. More information on regional trends in revenues is available here.
DC HOUSING IS A MIXED BAG
Part of DC's problems in becoming an "ideal" modern American city is the condition of its
housing stock. While real estate values have continued to improve throughout the second half of
the '90s and into 2001, there remains a severe dichotomy between a limited supply f single family
homes and many too many lower income apartments, almost entirely populated by renters.
Real Estate Values Continue to Improve
Real estate agents abound, and real estate values halted their decline of the mid-'90s and are
on the rise again. Home sales in Ward 3 dropped slightly in average sales price
between the first half of 1996 and the first half of 1997 ($352K vs $340K). In
Wards 4, 2, and 1, the average price rose slightly from $144K to $146K, and in
the less affluent wards, the average price rose from $97K to $101K. There is a
larger distinction between home values in the three parts of town than in household
income. In all areas, there were more sales--and therefore more purchasers!-- in
1997 than the prior year. These trends have continued since then, with an exceptionally good
year both for DC and its suburbs in 2000.
The distribution of assessed residential property values is indicative of the spread in
wealth. As of July, 1993, the total assessed value was $2.1 billion in single-family
houses and condominiums, with the houses accounting for more than 85% of the
total. The average single family home was assessed at $188,400 while the median
was only $119,400, indicating many lower cost homes, and a few very expensive
ones. In fact, 30% of DC's homes are assessed at over $200K, while 35% are
assessed under $100K. The pattern for condos is similar, though the average price
is $109,200 and 60% of all condos are valued at less than $100K. As of 1993,
DC carried 96,800 single family homes on its tax rolls, and 27,700 condos.
Nevertheless, property values are significantly higher immediately outside the
District's borders on all sides except Ward 3, where Montgomery County, MD
abuts DC. Housing prices are 25% higher in Prince George's County, MD just
outside DC's middle and lower income areas, and well over twice as high across
the Potomac in Alexandria, VA. Hence, the District's income from property taxes
is, on a per capita basis, substantially lower than for the immediately adjacent
Housing Stock by Ward
The total housing unit stock in 1970 was officially 278,404, and in 1990, 278,489. NARPAC
concluded that much of the "mass exodus" over those 20 years was from overcrowded
apartments. Of the housing/condo stock, some 9000 condos and 35,000 single family houses
were assessed at between $100,000 and $200,000 in 1990, with two thirds of those below
$150,000. The majority of the 30,000 homes above $200,000 are in the wealthy sections of
Northwest, and now well out of reach of "middle income" families with kids. By far the majority
of the total housing was built in a relatively short period in the 1930-40's when the population of
the city first ballooned.
By 2000, there are now perhaps 10,000 "vacant" single-family houses, of which as many as 4000
may need to be razed, and their lots re-used, though most are in relatively blighted areas.. Among
the rest, many are relatively small and poorly suited to renovation for contemporary households.
Many of the multi-family units are now barely habitable, and certainly not appealing to mobile
middle income families with the suburbs as a readily available alternative. It would not surprise
NARPAC to learn that over 10% of DC's total housing (about 30,000 units) need to be razed.
Less than 1000 new units are being completed per year. Though a tour of residential Washington
does not lead to a conclusion that the city is overcrowded, there are only 9600 acres available in
toto for residential use. If apartment houses stack their households 100 to the acre, then single
family homes can average no less than 12 per acre, and would grow to over 20/acre with a major
increase in family households, as proposed in the new Rivlin Vision of DC's future.
The two charts below show the number of single family units in each ward by their assessment
category. The upper chart shows that there are well under 50,000 single family homes (the
American family dream) in DC assessed between $100- and $200,000, and they are concentrated
in a few wards. There are about 50,000 single family units assessed below $100,000. These
homes are not attractive to aspiring 2-earner couples earning over $100,000, and upgrading them
substantially will be considered "gentrification".(As a rule of thumb, the assessed value of
residential housing tends to run to three to five times household taxable income).
On the other hand, the lower chart shows that the poorer wards are awash in over 100,000
"apartments" (of the 153,000 throughout the city) in varying stages of disrepair after years of
neglect by absentee or disinterested land lords, making their living "on the backs of the poor".
The majority of the city's public housing units are also
located there. With no place else to go, their tenants are fearful of being displaced by
"gentrification" and provide ample targets for racial demagoguery and unrest. It is a significant
element in trying to get DC's impoverished regions "East of
the Anacostia" to share in DC's economic revitalization. The availability and condition
of DC's housing stock clearly contributes to political unrest, and provides an unnecessarily large
"relative advantage" for the suburbs. (See regional real
DC Likes Rent Controls
CONTINUING RENT CONTROLS IN DC|
There Are Unusually Few Owners and Too Many Renters
An abnormally low (compared to other cities) number of housing units
are owner-occupied, rather than rented. In fact, the average for the entire city is
only about 35%--half of what it is in other large metropolitan areas. The 35%
figure closely matches that for the low income sections of other urban areas. A
large portion of the city remains rent-controlled, with an onerous set of regulations
covering all aspects of owner-tenant relations. To the extent that renters are less
interested in improving their properties than owners, and perhaps less interested in
civic affairs than owners, the District loses out yet again. On the other hand, DC
laws were changed in the late 1980's to allow landlords making major improvements to their
rental properties to get out from under rent controls. Many landlords in the lower income areas,
however, appear to have found it more profitable to simply make no repairs or improvements to
their properties, with disastrous results for their tenants. They may have concluded correctly that
higher rents would not attract better tenants.
Cambridge, Mass. Benefits by Dropping Rent Control
In a stimulating article in mid-September, 1998, The Washington Post reports on
the significant economic impact in Cambridge, Massachusetts as a result of a
statewide vote to remove rent controls in 1995. Only four states in the US (plus
DC) still have rent control laws on the books: New York, New Jersey, Maryland,
and California. In fact, 31 states prohibit any of their local jurisdictions from
instituting rent controls. And many large US cities--including Atlanta, Baltimore,
Chicago, Cleveland, Detroit, Miami, and Philadelphia have no rent controls.
The net result for Cambridge has been a doubling in average rents, plus a 50%
increase in building permits, generally for far more upscale apartments and condos.
And it has significantly increased the caliber of the retail commerce in the area--
reflecting the higher incomes of the newer residents. Clearly this has an equivalent
favorable impact on the city's income and real estate tax bases. On the negative
side, of course, some lower income residents have been obliged to relocate to
areas where rents are in line with their capacity to pay.
Unpleasant as it may seem, such "gentrification" is one of the economically-natural
consequences of sound urban growth, and a major means to avoid inner city
decrepitation. A very abnormal share of DC's population lives in rental housing
(well over 60%), most of which is over 30 years old, and almost two-thirds of that
is subject to rent controls. DC also has the lion's share of the metro area's low
rental units (under $300 per month). An additional problem for DC has been its
inability to properly administer its restrictive rent control laws, thereby making the
impact of those controls more detrimental than perhaps intended.
The longer the artificial regulatory constraints persist in DC, the greater the
dislocation when they are removed. NARPAC, Inc. believes that It behooves the
DC Government to stop stone-walling the inevitable, and to start developing a
compassionate plan for orderly de-control. Eliminating rent control was, in fact,
one recommendation in the final report of the Business Regulatory Reform
Commission but ignored in the Council's subsequent supporting legislation.
DC has tried to provide tax incentives for owner-occupied dwellings by offering a
$30,000 exemption from the assessed valuation of single-family homes and
condos. Some 88,800 owners benefited from this in 1990--down from 92,500 in
1990. This has cost the city $24 million in tax revenues, and clearly benefits most
those with more modestly assessed homes. DC also tends to attract senior citizens
by allowing homeowners over 65 whose income is more than half from pensions,
annuities and social security, to reduce their property taxes by 50%. In 1994,
some 23,800 seniors took advantage of this credit, at a cost of some $10.3 million
to DC real estate tax revenues. Regardless of its considerable social merit, this
program tends to perpetuate the existence of a rather large number of properties--
and individuals--generating little revenues for the city.
Another phenomenon influencing DC housing statistics somewhat may be the
number of residential units considered by their owners to be "second
homes". In the high-income areas, the second home label accounts for well
over 20% of the total (over twice the national average). This further lowers both
the revenue base and the registered voters, and in some cases, increases the
number of renters. This category alone, however, cannot explain the abnormally
low share of home owners in DC.
Despite the arguments of the prior several pages, DC decided in mid-2000 to
extend its rent controls, albeit for a shorter period of time. This section presents
NARPAC's summary of a recent Control Board instigated report--which it intends to
DC's Rent Control Act, implemented in 1975 (because of a housing shortage!) and
extended for 15 years in 1985, expires at the end of 2000 unless renewed by the
DC Council. Most economists, many urban planners, and many analysts long ago
concluded that artificialities introduced by rent controls may help poorer residents,
but they certainly skew urban land uses towards lower returns on investment. They
also tend to attract more renters--who are generally considered to have less of a
stake in the city's future (and its economic growth) than home owners. NARPAC
strongly shares these views.
It is disappointing, then, that the DC Council--on the eve of their elections--has
decided to extend rent controls for another five years, despite the recent
evidence of other cities such as Cambridge, Mass. (above) that such
controls constrain scarce urban revenues-- particularly if housing demand is
high. In fact, the DC Business and
Regulatory Reform Commission had recommended repeal of rent
controls as one means of improving DC's economic environment. It also suggested
that more thorough study was needed first.
A prior Urban Institute
study had found that long-term residents--largely comprised of lower income
renters, elderly households, and families with children--benefitted the most from
rent controls--as long as they didn't move (since rents are reset for new tenants).
NARPAC sees this as yet another form of 'poverty trap' for the poor.
Findings of New Report
The Control Board commissioned a new study by Nathan Associates Inc. (NAI)--
from which NARPAC quotes extensively here. On the basis of its findings, the
Board decided not to challenge the Council's 5-year extension decision. The
Control Board's press release essentially says the report is available on their web site if anybody wants
to read it (the analyst's worst disappointment!).
In fact, the report is well worth reading by those who wish to understand the
taxonomy of property rental/ownership in DC, even though proponents of rent
control repeal could claim NAI hid the light of its conclusions under a barrel.
It should be noted that DC's rent control laws are in fact quite lenient, allowing
substantial increases in rent (up to 10% per year) for various reasons, and re-sets
as tenants move on or landlords make major renovations.
The study concludes that:
a: eliminating rent controls would have "nominally deleterious effects,if
any", on DC residents that make up the demand for affordable
housing due to the high vacancy rates (i.e. low demand). Average rents for
units now below their allowable ceilings might increase by about $6 per month, and
for units now at their ceilings--only 17.3% of all controlled units--by
about $36 per month.
b: based on the above, eliminating rent controls would have "minor impact" on the
current supply, or future investment in, affordable housing.
c: Most interesting to NARPAC however, is NAI's carefully tempered statement to
the effect that this is therefore the best time to eliminate rent controls because the
impact would be small, but would grow larger and far more contentious if demand
for rental housing increases: i.e., fix the roof on the sunny day.
d: Also ignored in the findings is the conclusion from polls of landlords and
tenants that both feel the largest (unfavorable) effect on the rental housing
market is caused not by rent controls, but by other regulations concerning
tenant protections and rights of petition against landlord actions (or non-
e. if rent de-control is to be undertaken, there are many different ways to
accomplish it: blanket-lifting could be immediate or with advanced
notice; phase-out could be by vacancies, rent-level, contracting out,
"floating up and out", and leave certain protected classes; and could include
exemptions for vacancies, rent levels, building size or property holdings.
NAI narrowed the field to blanket-lifting or "floating up and out", and settled on
blanket-lifting with about 12-18 months advanced notice for a variety of reasons
NARPAC has no reason to challenge these conclusions, but was a bit disappointed
to find: a) no references to the possible impact of poor physical condition
of some lower-end rental properties on the demand for them now or in the future;
and b) no consideration of the possible role of rent control repeal on the seemingly
desirable incentives for renters to become home owners.
Most depressing, of course, is not the report, but the failure of both the Council
and the Control Board to make a politically tough decision for the long-term benefit
of the nation's capital city. Instead, they have opted for the easy way out, and--
albeit indirectly--settled once more for mediocrity in DC's future.
On the positive side, the report provides some interesting and more detailed
information on the taxonomy of DC's rental market than previously available (at
least to NARPAC):
Who Rents in DC?
Some 61.5% of all DC households are in rented housing units in rental properties,
down from 64.5% in 1980, indicating only a 3% shift towards home ownership in
almost 20 years. There are a little over 138,000 households now renting. Another
20,000 rental units are unoccupied, an all-time high for DC. Given that the average
renter has a lower income than the average home-owner, and that poorer
households tend to include more kids, it would not surprise NARPAC if 70% of
DC's population and 80% of DC's kids live under landlords and learn
little sense of property ownership or capital investment.
32,000 rental units (24%) are single family dwellings (attach or detached);, 39,500
(30%) units are in properties with more than 50 units, and another 25,000 (19%)
are in apartment houses with 10-19 units. 77,000 (58%) have no more than one
bedroom, and only 16,000 (12%) have three or more. Only 13.5% have more than
one bathroom. 92,800 (70%) of the units were built more than 40 years ago--29%
are more than 60 years old. The median building age is 51 years old.
35,400 (27%) of the rental householders are white, non-Hispanic, and 98,500
(75%) include two adults or less, and no kids. The average householder
age is 39, with 84,000 (63%) younger than 44. 69,000 (52.3%)went to college
and two-thirds of those graduated. Only 27,000 have lived in one place for more
than 10 years, and the median stay in a unit is less than four years.
70,000 (53%) households have an income below $25,000, but 30,000 (23%) are
above $50,000--and could presumably afford to buy a home. The median income is
$23,600. 98,100 (74%) of the units have no rental subsidies of any sort, and
47,400 (36%) rent for under $500 per month. 27% pay more than $800/month.
The median is $564. The median monthly housing cost is 24% of current
How Many Rental Units and Properties are Rent-Controlled
Of the 138,000 rental housing units all over the District, some 101,500 (74%) are
under rent control in some 13,700 rental properties. Because the larger properties
are located primarily in NW, NW contains 43% of all rent-controlled properties
(5,900) and 52% of the controlled units (53,100). NE has 30% of the properties
and 18% of the units, and SE/SW has 26% of the properties (3600) and 29% of
the units (29,600).
Of the 101,500 units and 13,700 properties under rent control, 91% are rented to
households with income below $50,000, equating to 95% of the units. 50% of
these lower income rental householders still live in NW.
How Many Rent-Controlled Properties Have Some Units at Rent
Almost exactly 50% of DC's rental units (50,900) are in properties that have
some units at rent ceiling, and those properties account for about 41%
of all properties. According to the NAI survey, however, only about one-third of the
units in those properties (18,000) are actually at their ceiling rentals. Presumably,
under conditions of higher rental demand, some 30,000 more units could reach
their limits--and make repeal far for difficult.
A very sizeable number of DC households are renters (100,000+) and about half
are potentially susceptible to rent controls, though less than 20,000 are now at
their ceilings. Many of these households have a very low income and do not
appear to be readily convertible into home owners. They are surely a politically
important segment of the population, albeit a major factor in the "fragility" of DC's
economic posture, consuming far more in expenditures than they provide to the city
NARPAC has no reason to doubt the NAI conclusion that rent control removal
would have at best a small impact on renters at this juncture. We agree it would
make sense to remove controls at this time--and generate a lot less political heat
than if the low-end rental market were to pick up, no matter how unlikely. We also
agree that rental regulations probably discourage modernization or enlargement of
this rental market. As economic growth raises property values, developers seem far
more likely to invest in housing units for sale rather than for rent.
Of considerable interest to NARPAC, but not the focus of this study, are the almost
40,000 relatively well-off renters who seem to have chosen not to become home
owners. Subtracted from the 138,000 renters and added to the 85,000
homeowners, however, they would swing the balance from 62% renters to 56%
homeowners. Unfortunately, it is likely that many of these relatively young,
relatively single renters are transients--a segment of DC's population which is
probably substantially larger than in other cities due to short-term jobs with
Congress, the Federal Government, the military, and over 130 embassies.
Improving the city's economic posture with more homeowners and less long-term
renters is still a worthwhile objective. However, it is not likely to be achieved by
simple conversion of existing households. Eventually, a goodly number of perennial
renters should move elsewhere, and a goodly number of customary home buyers
should be attracted to live in DC--all over DC, for that matter.
THERE ARE STRONG RACIAL, POLITICAL, AND ECONOMIC DIVISIONS
The city is by no means racially integrated. The black share of the population is still
dropping (now about 62%), and the number of "other minorities"
(Hispanic and Asian) is just beginning to increase to a few percent (lagging well
behind the suburbs). In the wealthiest part of the town (Ward 3), the racial mix is
16:1 white, and 14:1 black in the three lowest income Wards (5,7, and 8).
However, the second wealthiest parts of town (Wards 4 and 6) are 4:1
black. The most urban Wards (1 and 2) are less well off, and roughly 3:2 white.
But most important, while some blacks may have a corner on the poverty end of
the scale, whites clearly do not have a corner on the wealth, particularly in the
middle income domain. This is even more true in the immediate suburbs. NARPAC
has found no applicable statistics in this area, but the Washington metro area may
well have the largest number of successful middle/upper income blacks in the US.
The majority of them now live in the suburbs, primarily in Prince George's County,
MD. How they relate socially, economically, and politically to those in dire need in
the central city could be an important factor in the future of the national capital
The political landscape of the District is no less starkly drawn. It is clearly a
Democrat's town--with over 78% of registered voters throughout this decade. The
Republicans are also steady at about 7%, with the remaining 15% scattered among
other groups--including the Statehood Party at around 1%. While it is true that the
poorer sectors are more solidly Democratic, even Ward 3 counts only 18%
registered as Republicans at best, while Wards 5-8 average 4%. Elections are
generally decided by a plurality in the Democratic primary, making it possible for a
well-organized minority group to hold the reins of power indefinitely. Nevertheless,
in the 1994 mayorality election, the white, female, Republican candidate garnered
42% of the votes cast, while Mayor Barry got 56%. Only 51.5% of the registered
voters turned out, however.
Within the ranks of registered voters, there are also noticeable differences between
the sexes. Female voters outnumber males 56% to 44%, with the biggest female
majority in Wards 7 and 8--where the most single parent households are. The
elderly follow a somewhat different pattern, with roughly 20% of all registered
voters in Wards 3, 4, and 5 being over 65. At the other extreme, only 9% of Ward
8 registered voters are over 65.
Public Housing and Welfare|
The city gets its bad name from any number of statistics about high crime and child
mortality rates, welfare recipients, unwed mothers and unschooled students.
These numbers are collected by census tract, and it is quite clear--and regularly
published--which tracts contain the bad actors. With little exception, all the bad
numbers come from the same low income tracts, and a good percentage of those
tracts, not surprisingly, contain public housing units. This is demonstrated on two call-up
charts, each showing the distribution of bad news for four separate factors. The first chart shows those census tracts with higher
numbers of welfare recipients and poverty rates, as well as lower levels of adult education and
performance in school literacy. The second
provides equivalent information for high crime rates, major public housing units, low household
income, and few working parents.
The District's public housing mess has been a subject of scandal for years, and was
placed in receivership in 1995. There are about 12,000 units, populated primarily
by single unemployed women with several children, some of whom have children of
their own. 45% of the 24,000 occupants are below 18 yrs old, and 15% are over
62. Hence only 40% are potential wage earners, and the average household
income was $6,156 in September, 1995--almost exactly half the poverty threshold
of $12,590 for a family of three.
Half of the units were built before 1960, and 92% of them are over 30 years old.
Many suffer from serious lack of maintenance, and many stand idle, or have
become havens for gangs and youth offenders. Nevertheless, the 1995 operating
budget for the DC Housing Authority was $55.7 million, averaging nearly $5,000
In addition to the 12,000 public housing units, there are another 31,000 subsidized
rental units, many of which are also in very poor condition. Two thirds of the
rental units, and three quarters of the public housing units are, not surprisingly, in
the low income sectors of town. Less than 3% of either category is in Wards 3
and 4. Nearly 100,000 people live in public or subsidized housing, about 15% of
the city's population. Many of the District's 25-30,000 unemployed live in these
All the bad news tends to come together. For whatever original reasons, these
projects are now the major source of most of the embarrassments accruing to the
nation's capital. The low income sections have the most kids (58%) attending and
dropping out of school; their schools have by far the lowest utilization rates (61%)
(because of the drop in population--and kids), and their math test scores, literacy
levels, and graduation rates are lower than DC's abysmal "norm". For
instance, 90% or more of the students in 14 out of DC's 18 high schools perform
"below basic proficiency levels" in math, meaning "little or no
mastery of fundamental knowledge and skills" in the subject. Almost all
schools in the high-poverty, high-crime rate census tracts have less than 20% of
their students reading at a "proficient" level or higher.
NARPAC, Inc. can demonstrate a clear correlation between
increasing poverty levels and decreasing scores in math
and reading. This is discussed--and graphed--in the section on
DC school test scores.
These depressed parts of town also have the lowest per capita income ($10,500, compared to
$14,400 in the middle income areas, and $25,600 in Ward 3). They have the highest
percentage of poverty households (55%), lowest value homes, and so forth. They
also suffer the highest crime rates. These circumstances inevitably contribute to
greater drug use, vagrancy, ill health, etc. DC's ranks near the top among inner
cities in deaths due both to HIV/AIDS (almost 8 times the national average), and to
homicides and "legal interventions" (almost seven times the national
average). Clearly, these areas meet the criteria set by the DC Council for eligibility for attention
from the proposed National Capital Revitalization Corporation as "blighted areas"
Recent Testimony (2/98) from the Center of Labor Market Studies at Northeastern
University before the Senate Committee on Labor and Human Resources confirms
the accumlated problems of pockets of poverty. These seriously blighted areas
appear to be getting worse: from 1989 to 1996, the poverty rate grew from
16.9% to 23.3%. One fifth of the city lives in areas with greater than 30% poverty
rates, greater than 50% high school drop-outs, over 70% are single-parent families,
and less than 50% of those adults work at all. These numbers are in stark contrast
to those for the metro region as a whole, where only 7% are below the poverty
level, only 15% are high school drop outs, less than 20% are single parent
families, and 77% work. With only 16% of the metro area's population, DC has
over 40% of its poverty-stricken. To make matters worse, the available jobs for
unskilled workers is continuously declining. Experts see little choice for DC's low-
skilled workers to find employment in the private sector inside the city. If their skill
levels cannot be raised, then employment may only come from government-created
(or subsidized) jobs. More likely, they will remain on the public dole.
The very high number of single moms contributes significantly to the city's high costs of poverty, both
directly because of their relatively low family income, and indirectly because so
many of their kids become wards of the city. Almost 3200 kids have been taken
out of homes and placed in foster care because they have been neglected, abused,
or both, and another 3000 are classified as "in-home cases" or in programs
managed by non-profit organizations. According to a January OpEd piece in the
Washington Post, "96% of the District's homeless families are headed by single
mothers; 40% of those families are headed by single mothers between the ages of
18 and 21; 78% of the heads of families had their first child as a teenager and
have no high school diplomas; and 93$ receive welfare as their main source of
income". The societal impact of these incomplete families cannot be
overestimated--nor their impact on the environment in the schools they
To the casual observer, the total number persons benefitting from the various DC
human services programs is staggering. In 1994 a full 33% of DC's population
(195,700) received services from one or more DHS programs. 150,300 received
Medicaid; 140,100 got food stamps; and 94,900 received assistance for families
with dependent children (AFDC). 83,400 DC residents benefited from all three
programs. Whether due to changes in reporting systems, eligibility criteria, or
circumstances, the number of recipients of Medicaid payments increased 33%,
AFDC, 14%, and food stamps, 53% between 1987 and 1994--despite a significant
reduction in population (at least 5%) during that time.
Transferring Wealth within DC
Knowing the major sources of revenues (real estate, sales, individual income and
business income taxes) and who they come from, and the major categories of
expenditures (government, schools, justice, and human services) and where it is
spent, it is possible to make a reasonable first estimate of the transfer of funds
within the three major sectors of the district. Ward 3 generates about 20% of all
DC revenues, but consumes at best 9% of expenditures. Conversely, Wards 5
through 8 generate no more than 40% of DC's revenues, but consume about 56%.
The middle income sector also generates about 6% more than it consumes, which
is also transferred to the low income sector. It is clear that the economic health of
the city can best be restored by reducing both the poverty of the city and its
debilitating long-term consequences. (See following section.)
It will not be enough to alleviate the poverty in the future. It will be necessary to
alleviate the consequences of past poverty: well over one hundred thousand people,
and now their offspring, who are essentially unable to perform competitively in our
national society. Right here in our nation's capital. See the Control Board's recent reports on
poor educational test scores.
The presence of the huge federal government, legislative, executive, and judicial,
topped by the leadership of the world's greatest power, and surrounded by the
representatives of all the world's nations, and the lobbyists for most of the world's
greatest businesses, places a mantel over the city. World and national events
consume the attentions of the media, and of many of the middle and upper class
residents who are part of those events--or wish they were. The net result has been
a lot less attention to the growing municipal problems. In addition, Americans from
across our country visit only the finest parts of our city: the parts that aren't really
a part of our city. It is a shame. And it is a national embarrassment.
GROWING DISPARITY BETWEEN RICH AND
According to a recent study (Jan, 2000) by the Center on Budget and Policy Priorities,
the income gap between the richest and poorest households in our society has
continued to grow more extreme. For instance, the ratio of total income between
the richest one-fifth of American households and the poorest fifth is now 10.6:1,
with Maryland at 9.2:1, Virginia at 10.7:1, and the District at a remarkable--and
unique--27.1:1. Twenty years earlier, the national ratio was 7.4:1, with Maryland
at 6.9:1, Virginia at 7.4:1, and the District at 10.6:1 -- still a substantial national
high. The table below indicates the extent of these variations, aggregating the
bottom 40%, middle 20% and top 40% (to reduce the extremes):
AVERAGE OF HOUSEHOLD INCOME IN EACH GROUP ('96-
|Jurisdiction|| Lower 40% |
|Middle 20% |
|Upper 40% |
|All United States||$22,000||46,500||$103,000|
|All District of Columbia||$14,000||$36,900||$137,000|
It should be noted that DC values are for a core city, where the income extremes
tend to be higher, while the other numbers are for either whole states or the whole
US. From these numbers, it is also possible to calculate how much of the total
income is contributed by the various groups, again aggregated to avoid
PERCENT OF TOTAL DC HOUSEHOLD INCOME IN EACH GROUP ('96-
|Jurisdiction|| Lower 40% |
| Middle 20% |
| Upper 40% |
|All United States||16%||18%||68|
|All District of Columbia||8%||11%||81%|
Since income taxes are progressive, it is also clear that well under half of the
District households contribute as much as ninety percent of total income taxes
collected. Most of these richer residents live in just two wards. Income from
sales taxes is also likely to be proportional to gross household income. Recent
information from the DC"s Office of Tax and Economic Policy also indicates that over seventy
percent of all property taxes are collected from Wards 2 and 3 (see the next table).
In short, as is discussed again further on under Transferring Wealth within DC, a
relatively small fraction of DC residents are responsible for the preponderance of
revenues raised, while the preponderance of expenditures goes to the poorest
residents, primarily East of the
Anacostia. Efforts and goals to increase the number of "middle class"
(moderate income) taxpayers would be largely misplaced. If the city cannot
significantly reduce the number of its very poor, then it better aim to increase
significantly the number of very rich--households with little dependence on city
It should also be noted that there is a wide variation in the number of jobs available
in the different wards. Ward 2 represents most of "downtown", and the remainder
of the Wards are primarily residential. Well over half of the available 580,000 jobs
inside DC are held by non-residents. Moreover, there are 650,000 more jobs in the
inner suburbs, and another 1,260,000 'beyond the beltway'. There is an
unexpected similarity between the distribution of jobs in DC between the wards and
their shares of property taxes. These are shown on the table below:
DISTRIBUTION OF JOBS AND REAL PROPERTY VALUES INSIDE DC
|Ward|| Jobs Available
||Pct of DC Jobs
||Pct of DC Prop Taxes|
It is of particular concern that only 2.9% of the jobs, and 4.1% of total real
property value is in Wards 7 and 8, East of the Anacostia.
DC: A HAVEN FOR THE HOMELESS|
Not only is the District home to a disproportionately large share of the region's poor, according
to a 2001 one-day survey, it also has far more than the region's average share of homeless. In fact
DC has 7.3 times as many homeless per resident as the suburbs. The result is that DC must also
devote a disproportionate share of its budget and charitable energies to caring for these destitute
Furthermore, the city's burgeoning economic turnaround is leaving the homeless with even less
promise of better public accommodations. An April '01 Washington Post story relates to the
decision not to convert an old downtown firehouse (dating from 1862!) into a homeless shelter
for 90 women who are now living in trailers a few blocks away. Reason: the properties on each
side will soon become 765 luxury apartments, as part of the "NoMA" revitalization. A homeless
shelter has thus become "inconsistent with the housing plans for the area".
This marvelous old firehouse has stood at this location
at 438 Massachusetts Avenue since 1862, now with empty lots on each side,
and overshadowed by the huge GSA building behind it. Plans to convert
the firehouse into a homeless shelter have been scrapped.
Nearby, squeezed under the trees on a
sliver of land between the north entrance to Rt 395, and 4th St NW, is
a cluster of seven old 48-foot trailers housing some 90 homeless women.
A new location other than the firehouse above is now being sought.
Few of DC's truly embarrassing problems in poverty-sharing are better suited to
regional solutions than caring and rehabilitating the national capital metro area's
almost 15,000 homeless.
ESTIMATING THE "PRODUCTIVITY" OF DC'S
PEOPLE AND LAND|
Although some may find this approach antiseptic at best, it may be useful to make
general estimates of how much each person or acre of land contributes to the city
in the way of revenues, and how much each withdraws from city coffers in
expenditures. While there is no intent to suggest that each person or acre of land
should be equally productive, there is clearly substantial import to the balance
between the "givers" and the "takers".
For simplicity, NARPAC has divided the city's resident population into three
categories: about 50,000 "high income" residents with very much higher than
average adjusted gross incomes (see prior sections); another 300,000 middle
income people; and about 180,000 low income people, a large fraction of whom
are below the poverty line--including the "non-household" individuals made up of
students, hospital patients, jail inmates, etc. In addition, three non-resident
categories of people are included who come to the city for business, pleasure, or
their livelihood--and thereby consume some city services.
Estimates are made of income, sales, and property taxes paid by each category,
and the current costs are allocated for providing city services to each of these
categories. For example, some costs are shared evenly among the total population,
resident and non-resident: NARPAC includes government oversight, economic
development efforts, metro costs, road and bridge maintenance, and overall city
financing in this category. Some costs are borne disproportionately by the less
wealthy, including use of the city's educational facilities, police, emergency
services, and corrections facilities. Other costs are directed almost exclusively at
the poor in the form of welfare, housing subsidies, and public health.
Exact allocations are not required to see the trends:
o the "rich" each pay on the order of $18,000 annually in all kinds of taxes, but
receive direct city services worth well under $2000--for a "net" productivity to the
city of over $16,000;
o For the large middle income category, the per capita net is much smaller ($2200),
but still positive: paying some $5600 in taxes, and receiving about $2400 in
o The poor, on the other hand, understandably pay little in taxes, perhaps $500 a
year each on average, but receive services of over $12,000 each from DC
revenues, and another $9,000 from the federal government;
Using the same general rules, NARPAC estimates that each commuter costs the
city something over $800 per year, while a manyear of visiting businessmen costs
DC about $400 per year. Tourists on the other hand, contribute perhaps $2000 on
an annualized basis--in large measure because they spend more while on vacation,
and more in the immediate area than do residents, thus appearing as very wealthy
It is of course the proportion of the population in each category that
determines the overall tax levels for all. As is discussed elsewhere about the high cost of poverty in DC, if
there are too many poor for the local taxpayer base, then taxes will necessarily be
unusually high. This is the situation between DC and its neighboring jurisdictions.
It also leads to the stark reality that DC must either get more taxpayers (or tax
receipts) from elsewhere, or it must find ways to decrease the number of poor
concentrated in the inner city.
Incentives for change
It seems to be fashionable to " Bribe" productive people to stay within a jurisdiction,
as Montgomery County is now illustrating by offering tax breaks to keep the
Marriott corporate headquarters from moving away. With Congressional approval,
DC is now " Bribing" people to come into the city with various tax breaks and home
buying subsidies. Prince George's County is raising the financial incentives for
businesses to move to underdeveloped Capitol Heights. But it does not yet seem
acceptable to provide inducements for people to relocate elsewhere.
As the most extreme case in point, DC's Housing Authority Receiver is in the
process of spending over 130 million federal dollars to keep less than 10,000 low
income families in DC public housing. Those 30,000 individuals, many of them
small kids, will each continue to cost the city $12,000 annually, and the federal
government another $9000 annually. There needs to be some practical and
humanitarian way to explore what those same expenditures might do to encourage
relocation to the richer, less burdened, and less segregated suburbs where the
opportunities for self-fulfillment are almost certainly greater.
NARPAC therefore dares to raise the following question for consideration:
Offered a $25,000 cash payment, how many of DC's unfortunate
households below the poverty line would opt to move to greener pastures
elsewhere in the Washington metro area outside the DC limits?
Another way to look at urban finances is to approach them as an exercise in
constrained land utilization. In DC's case, there are only some 30,000 acres, each
of which can either produce more revenues than it consume in services, or vice
versa. NARPAC has simplified the issue by estimating the potential revenues
produced per acre in various commercial and residential applications. On the
residential side of the ledger, land productivity appears to vary from about
$250,000 in the wealthy parts of town with about 10 homes per acre, to as much
as minus$900,000 for low income areas with 30 housing units per acre.
Worst of all would be a public housing development with perhaps 100 housing
units per acre (apartments): these can consume as much as $3 million per acre per
At the other end, NARPAC has looked at three kinds of high-rise commercial
activities: office buildings; hotels; and apartment (condo) houses. Each one
includes two ground-level floors for shops, restaurants, or groceries stores, above
which there are five, ten or fifteen floors devoted to the building's primary
business. Sensitivity to input parameters is explored by using two different
assumptions in each category. Hence:
o Office buildings are probably the most productive use of scarce urban land,
returning anywhere from $2.7 million per acre for five floors of offices (over two
floors of shops) occupied by personnel 30% of whom reside in DC and pay $2400
in DC income taxes, to $9.3 million per acre for 15 floors of offices occupied 50%
by DC residents paying on average $3600 in income taxes.
o Hotel buildings are almost as productive, bringing in $3.4 million per acre
annually for five floors of $130/day hotel rooms, with 70% occupancy rate, above
one floor each of shops and restaurants, to $8.7 million per year for 15 floors of
$160/day rooms, occupied 80% of the time.
o Apartment buildings are somewhat less productive (because of the larger area
per occupant). Five floors of condos of which 40% are owner-occupied, and all of
which have an average household income of $60K--over one floor of groceries and
one of restaurants--yield $2.3 million per acre per year. Conversely, 15 floors of
condos, 60% owner-occupied with $90K incomes, produce $5.3 million
o The specialty uses on the ground floors are also productive--with good
restaurants producing the most per acre ($900K), retail shops considerably less
($500K), and grocery stores even less ($300K)--though perhaps providing the most
important service. This also suggests requiring that some non-profit
organizations devote their lower floors to high-revenue businesses--for the city's
It is also clear that additional building height adds $200,000 to $300,000 per acre
per floor. Hence it seems obvious that a "city without a skyline" (like DC) is
probably having trouble paying its bills. Moreover, it takes three or four acres of
good commercial usage to provide the revenues to cover the expenses of one acre
of low income/poverty level homes. One cannot rationally encourage hospitality for
the poor, press to maintain low-density residential areas, and reject commercial
growth all at the same time. It also suggests that DC relax its heretofore
sacrosanct building height limitation at decent distances from the capitol.
NARPAC also proposes this for East of the
Sharing Responsibility for Productivity
Clearly, individual neighborhoods should not fight too hard for the right to remain
non-productive little enclaves, expecting all their needed services to be paid from
some remote pot at the end of the rainbow. In fact, one eminently sensible way to
develop responsible local development within the city would be to consolidate
neighborhoods into clusters that aim to become at least neutrally productive.
Leaving out DC's high-density downtown area, there are perhaps 90 identifiable
neighborhoods over some 25,000 mostly "residential" and "untaxable" acres.
There are also about 20 metro stations outside the immediate "downtown" area
which would be the natural focus for commercial developments. Better community
planning--at least from a financial viewpoint--would doubtless result if
neighborhoods would voluntarily group themselves into larger planning units
around individual metro stations. Not just a NARPAC flight of fancy, this is
what was done by Arlington
County as they organized to take advantage of their new metro
system some 20 years ago.
An acre of high-rise commercial activity can match the productivity of 30-40 acres
of normal single family residences. It can also be used to provide substantial returns
from otherwise untaxed properties. Hence, at the risk of alienating DC's avid
environmentalists, a financial analyst could easily visualize carving a few acres off
either Rock Creek Park or Ft. DuPont Park, adding upscale highrise apartments, and
thereby "paying the way" for the rest of the park. The same approach might find
application to other large tracts owned by non-profits.
It is of some interest to note that this 30,000 acre city will raise just over $3 billion
in revenues in Y2000. That amounts to $100,000 per acre--the same figure as is
generated by an average acre of middle class single family homes. Alternatively,
one could readily raise that same $3 billion from 500 acres of uniformly high-rise
(17-story) commercial buildings--with non-tax-exempt clients! This could produce
$6 million per acre and thereby permit zero productivity from the rest of the city.
In between these two limit cases, there would appear to be plenty of
room for sound economic development.
By combining various data sources, and making practical allocations of expenditures among the
likely recipients, it is possible to compare those sectors of DC's economy that generate more or
less revenues than they consume in city service costs. This has been demonstrated in prior
NARPAC analyses such as "Land/People Productivity",
and has been more recently adopted in a study by Rivlin and O'Cleireacain under a
Brookings/Greater Washington Research Program (GWRP) attempting to stir debate on DC's
NARPAC has now combined the results of its FY02
DC Budget Analysis with its latest update of
IRS Statistics of Income to provide additional ways of looking at fiscal productivity in
The chart below looks at this productivity issue from the standpoint of the individual tax returns.
Here revenues and expenditures are allocated to the four household income categories and
divided by the number of tax returns in each category. Clearly, "no income" and "low income"
households consume more than they provide: $13,300 more for the truly poor, and $7700 for the
marginally poor. Even the "middle class" (defined here as having household incomes between
$50,000 and $100,000 only begin to provide more revenues ($3900) than costs. Only the
wealthy with AGI's over $100,000 serve as the "revenue cows" for DC's struggling farm system.
It takes two middle income households to offset one "low income" neighbor, and 3.5 to carry one
welfare household. In a land-limited DC environment, the city would do well to attract the
wealthiest, least service-demanding households they can--regardless of "diversity" and school age
kids. The next best choice from a financial point of view is even more obvious: reduce the city's
abnormally high population of very poor people. This is discussed in NARPAC's tutorial on the impact of income mix.
The next chart pair is more informative, and in NARPAC's view, displays the nub of the problem
between the revenue providers and the revenue consumers. The bars on the two charts below are
identical, showing revenues and expenditures for each household income category for DC.
Expenditure distribution is as described above, and revenue distribution is taken from a separate
analysis on Statistics of Income (using the same
proportions as "taxable income"), while the content is taken from the FY02 DC budget books.
The upper chart displays the "layers" of revenues from the different sources, leaving the
expenditure bars undifferentiated, while the lower chart highlights only the allocation of major
The Stark Reality of Racial Economic Inequality
Finally, NARPAC displays the manner in which these allocations change depending on the overall
economic status of its residents. The undeniable differences in personal wealth for American
blacks and whites is explored in detail in a separate analysis of back and white earning power. From that it is possible
to develop a hypothetical household income distribution for a city like Washington with a total
population of 600,000. Taking published demographics into account, an all black city would have
somewhat fewer households (since each household has somewhat more kids per adult), and the
number of these households in each income categories is interpolated from the earning power
analysis. The expenditures for each major function are assumed to be exactly the same as for
today's Washington, and the variations are due entirely to the differing numbers of households in
each income bracket. Yet the differences are stark. An all-black DC would incur expenditures
substantially higher, and generate revenues very substantially less. An all-whIte DC has much
greater ability to pay for public services, and much less need to provide them.
It is difficult to believe that an all-black Washington would be economically viable at all. Until the
day comes that there is greater equity between black and white earning power, it is essential to
maintain--if not expand--the white resident component. This comparison is also particularly
applicable to the comparison between DC and its neighboring suburbs which in the aggregate
have a very much lower share of black residents. This presents a powerful argument for either
redistributing the region's (primarily black) poor, or redistributing the region's wealth to pay for
THUMBNAIL STATISTICAL UPDATE:
(from DC Statistical Handbook, INDICES, 1997-1998)
DC's Office of Policy and Evaluation puts out every two years a useful handbook of
DC statistics of every conceivable kind. While these numbers may not be perfect,
they are quite consistent across the years, and much data is available annually
since 1982 (by consulting prior issues). There have been--and continue to be--many
myths about what has happened to DC over the past ten years, and many goals
and projections for the future based on dubious extrapolations from the past.
Here are some of the numbers NARPAC finds interesting:
The population has continued to decline, although the 1990 census data of
606,900 apparently undercounted as many as 10,000 mostly immigrant, mostly
poor, mostly young people. By 1998, the official number was down to 528,900,
but probably from the wrong 1990 base. Compared to 1970's population of
756,500 the biggest loss has been through 135,000 kids (under 19). The elderly
(over 65) has increased by 2500, and the "productive adult" (NARPAC's term) has
dropped by about 94,000.
In the eighteen years from '80 through '97, while DC's population dropped by 109,000, the
population of the metro area grew by 995,000 to 4,250,000. The "core city's" population thus
dropped from 20% of the regional total to less than 13%.
In the city, the black population has, not surprisingly, dropped faster than the white population
(with fewer kids), and only the non-black minorities have increased in numbers.
Employment has dropped some 58,000 since its peak in the late '80s, driven primarily by a
significant drop in government employment and non-service businesses (-88,000), only partially
offset by a gain in service industries jobs of 30,000. Total tax returns dropped as bit less than
60,000 to 256,000--as did car registrations (to 243,000). On the other hand, total hospital beds
rose 2% to 4905. (Live births, incidentally, dropped 25% to 7900 in '97, while deaths from all
causes dropped 19% to 6100.
In the past five years, employment at DC's ten largest private businesses rose by about 1000 to
22,100, but the payroll at the ten largest non-profits increased by 9500 people to 43,800. The
city is clearly attracting non-profits and service industries--both of which pay less taxes to the
city. Nevertheless, over the past decade the number of private firms located in DC rose 14% to
23,700, their total employees rose 12% to 430,500 and their average wage rose 32% to $36,600.
These are not the statistics of a dying city.
On the other hand, only 15 of the "top 100" private firms in the metro area are located in the
District. Together these 15 firms had revenues of $16.5 billion in '99 and employed 76,600
people--but less than 15% of them worked in DC. In fact most of those firms have only a token
presence in the city, presumably for prestige purposes. These are not the statistics of a thriving
Per capita income in DC rose 63% in the decade from '88 thru '97--well ahead of the US as a
whole (54%). Total personal income of all DC residents rose 40%, adjusted gross income (for tax
purposes) rose 28%, and total income tax paid rose 52%. Sales tax receipts increased 38%,
although real property tax collections rose only 5%. DC had significant growth during the past
decade, but the US as a whole did even better--with total personal income rising almost
On the other hand, in 1998 there were 32,200 unemployed in DC, up 12% from a decade earlier.
The number of unemployed over 40 yrs old climbed 600 to 6950, while the unemployed between
22 and 40 dropped by almost 8500 to 7100. Under 22, only 400 were recorded for '98. This does
not seem consistent with the conventional wisdom of thousands of unemployed youth, and
perhaps it has something to do with statistical categorizations.
High Government Costs--Due to High City Poverty?
Government is still responsible for some 40% of DC employment, and the average annual wage
in the public sector rose 59% to $53,500, while the average annual wage in the private sector rose
54% to $42,700. These statistics are contrary to the all-US average, where public sector pay rose
31% to $30,100, and private sector annual wages rose 47% to $31,900. Average wages in DC
($46,800) are now 54% higher than the national average ($30,300), and the public sector makes
25% more than the private sector, rather than the national average of 5% less. DC remains
strongly a government town.
Income tax returns tell a somewhat different story: in the five years between '91 and '96, the total
number of tax returns dropped 18% from 313,000 to 256,000. The number of returns for people
making less than $15,000 dropped by more than half to just under 80,000. At the other end of the
scale, those reporting more than $50,000 rose by a factor of 2.2 to 53,400. Those in the bracket
from $15-50,000 stayed virtually unchanged at 122,000. Clearly, DC's rich are getting richer,
but its 'middle class' remains about the same.
Somewhat more puzzling, however, is that during the same five years ('91-'96) the total number
of "unduplicated participants" in health services programs dropped by only 22,000 (to 161,200),
with the number of food stamp recipients climbing from 105,000 to 129,000, and the number of
Medicaid recipients rising a few percent from 123,700 to 126,100. One would have to conclude
that the poor are getting poorer. 42% of DC's population is under 19, over 65, or unemployed.
30% is receiving some form(s) of health and welfare assistance. The gap between rich and poor
is growing, not just between the core city and its suburbs, but within the core city.
NARPAC again concludes that DC's drop in population has produced a net increase in
socioeconomic polarization, with the rich getting richer, the poor getting poorer, with a net
increase in burden to the remaining taxpayers. Our analaysis of the impact of income mix on per capita government costs
This page was updated on Oct 5, 2005
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