The Trump administration’s aggressive moves to reduce the federal budget and cut millions in federal jobs are creating hurdles for multifamily developers in the D.C. area, making it harder to attract investment capital.
Investors have grown cautious about placing their money in the District, Northern Virginia, and suburban Maryland, with many expressing concerns about the administration’s approach to government efficiency, led by Elon Musk’s Department of Government Efficiency.
Panelists at Bisnow’s Northern Virginia Multifamily and Master-Planned Communities event recently discussed how the suburbs of Virginia are standing out as the most attractive market in the D.C. metropolitan area, despite the overarching uncertainty fueled by job cuts and budget reductions.
Mill Creek Residential’s Senior Managing Director of Development, Joe Muffler, highlighted the pervasiveness of concerns surrounding these cuts, stating, “We haven’t spent a day this year without talking about DOGE in some capacity, or rather, a day since February.”
This sentiment is reflected in the significant layoffs under the Trump administration, which CNN reports have targeted at least 128,709 federal employees.
Additionally, the ongoing federal budget slashes are expected to affect private companies that rely on federal contracts and grants, creating a domino effect of economic challenges across the region.
Despite these challenges, the panelists at the Hilton Alexandria Mark Center defended the resilience of the D.C. multifamily market, citing positive fundamentals, particularly regarding strong rent growth outpacing national trends.
Muffler noted, “We’re seeing rents grow at a rate that far outpaces the national rate,” emphasizing it as a reflection of the strict supply-demand dynamics at play.
Importantly, the panelists observed that there hasn’t been a significant exodus of residents, countering fears that the region would suffer from the DOGE-related cuts.
For instance, Mill Creek manages about 3,000 homes and reported only ten renters requesting to exit their leases due to the impacts of jobs being lost in the region.
Additionally, Greystar’s Senior Managing Director, John Clarkson, remarked, “We’re not seeing an impact. It’s all headline risk-related.”
However, the panelists acknowledged that even if the immediate implications of these federal moves are not being felt as deeply in the region, the surrounding media coverage is still a significant hurdle.
Muffler explained that, “Capital is still very apprehensive to invest in the D.C. metropolitan area because of headline risk.”
As capital becomes increasingly wary of investing, the panelists indicated that Northern Virginia is considered a more appealing option for investment.
D.C. and its nearby Maryland counterparts have stronger tenant protection laws, leading some investors to further shy away from those areas.
“Portfolio managers and investment managers that sit in New York and LA and Chicago that see the headlines, they don’t want to be there,” Muffler noted, advocating for investment in projects along the Dulles Toll Road instead.
The challenges are exacerbated by the shortage of new development experienced in the area over the past few years compared to record-high construction elsewhere in the country.
This scarcity, coupled with the difficulties associated with financing projects under high interest rates and construction costs, positions the developers who can initiate apartment projects today as likely to succeed in the coming years, when supply is anticipated to dwindle.
EYA President and CEO McLean Quinn expressed optimism, suggesting that, “I don’t think that the DOGE impacts two years from now are going to fulfill our worst nightmares.”
He further stated, “Projects that get started this year and next year will be some of the best-vintage projects that we see.”
He added, “Every single business cycle has this. When you start projects in the dips, you are there for the demand on the other side.”
As signs of recovering demand begin to emerge in Northern Virginia’s multifamily sales, Clarkson noted, “Volume, cap rates, and values are all starting to trend in the right direction.”
Muffler concluded with a forward-looking perspective, suggesting that the market may soon see remarkable sales that demonstrate “consistency at how low these cap rates are and what these price per pounds are.”
image source from：bisnow
