In earlier posts, I outlined where Montgomery County stands in terms of jobs and wages, discussed the related issue of income inequality and pointed out that the older segment of our population is going to grow disproportionately to other age groups over the next two decades.
Now let’s assess the past and future rate of population growth, job openings and housing construction, and the relationship of these factors to lagging wage growth in contributing to one of most significant economic challenges: a shortage of affordable housing.
Population and job growth
Before we can evaluate how much new housing and office space is needed in the future, we first have to understand how many people (and jobs) we might reasonably expect to live and work in Montgomery County. You might be surprised to learn that the rate of population growth is now – and is expected in the coming decades to be – less than 1 percent a year, a rate well below historic levels. This chart shows the average annual population growth during each decade since 1950, with projections for the future:
Of course, even a slow rate of growth adds up to a lot of people when we’re starting from a current population of almost 1.1 million. An anemic rate of population and job growth over the next three decades would still imply around 200,000 more residents by 2040:
These projections are based on econometric models that rely on relatively conservative assumptions about job growth (no Amazon headquarters, no new dot com boom, no striking oil in the backyard). In fact, if the regional economy generates substantially fewer jobs than these forecasts predict, we will be dealing with economic stagnation. In other words, our growth rates are modest, and if they were any lower we would be confronting much more difficult problems.
If you drive down Georgia Avenue through Silver Spring or travel on Wisconsin Avenue through Bethesda, you might think Montgomery County is experiencing a building boom. The sky is filled with cranes, pedestrians and drivers contend with lane and sidewalk closures, and apartment buildings seem to be going up everywhere you look. The highly visible development activity in our downtowns obscures the bigger picture reality, which is that the rate of new housing construction is well below levels typical of recent decades and is not nearly enough to keep up even with moderate rates of population and job growth.
In my next post, I’ll explain how this constrained supply affects housing costs.