DOGE Trepidation Making Investors Wary Of D.C.-Area Multifamily

With the Trump administration’s moves to slash the federal budget and cut hundreds of thousands of federal jobs, multifamily developers in the D.C. area are fighting an uphill battle to woo capital. 

Investors are skittish of putting money to work in the District, Northern Virginia and suburban Maryland, but panelists at Bisnow’s Northern Virginia Multifamily and Master-Planned Communities event this month said the commonwealth's suburbs are the best-positioned market in the DMV.

Still, the sentiment that the administration’s moves — championed by Elon Musk's Department of Government Efficiency — are gutting the region of its economic vitality, workforce and residents looms large in the local discourse. 

“We haven't spent a day this year without talking about DOGE in some capacity, or rather, a day since February,” Mill Creek Residential Senior Managing Director of Development Joe Muffler said onstage at the event. 

“It has dominated every conversation we've had with every capital partner trying to make deals work,” he said.

Since President Donald Trump took office for the second time, at least 128,709 federal employees have been laid off or targeted for layoffs by federal agencies, according to CNN. 

In its effort to slash federal dollars, the administration is also cutting billions of dollars in federal grants and contracts, resulting in a domino effect across private companies in the region.

But panelists at Hilton Alexandria Mark Center said the fundamentals of the D.C. multifamily market are strong, citing the D.C. metro area's strong rent growth.

“We're seeing rents grow at a rate that far outpaces the national rate,” Muffler said. “And that's a strict supply-demand narrative right there.”

They also said that, from their experience on the ground, there hasn’t been a concerning exodus of residents. Of the 3,000 homes in the greater D.C. region that Mill Creek manages, the company has only had 10 renters ask out of their lease because they were swept up in DOGE-related cuts, Muffler said.

“We're not seeing an impact,” Greystar Senior Managing Director John Clarkson said. “It's all headline risk-related.” 

Unfortunately for developers in the region, news coverage of sweeping cuts, even if the impacts aren't being felt deeply on the ground, still matters.

“Capital is still very apprehensive to invest in the D.C. metropolitan area because of headline risk,” Muffler said.

As investors are cautious about wading into the region, panelists said Northern Virginia is an easier sell — D.C. and its closest Maryland neighbors have stronger tenant protection laws — and that's where they're following the capital. 

“For 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 said. “So you know what? Instead of building in Upper Northwest, send me the wood frame deal along the [Dulles] Toll Road.”

Because of the area's lack of new development over the past few years relative to the record-high construction in the rest of the country, combined with the difficulty capitalizing projects with high interest rates and construction costs, those that can build apartments today will be at an advantage in a few years when there is a dearth of deliveries, panelists said. 

“I don't think that the DOGE impacts two years from now are going to fulfill our worst nightmares,” EYA President and CEO McLean Quinn said. “I honestly think that projects that get started this year, next year will be some of the best-vintage projects that we see.

“Every single business cycle has this,” he added. “When you start projects in the dips, when you start projects when no one else is starting them, you are there for the demand on the other side.”

That expected level of demand is already starting in Northern Virginia multifamily sales, Clarkson said, where the volume, cap rates and values are “all starting to trend in the right direction.” 

“You all are about to see some sales in this market that are going to be eye-openers in terms of their consistency at how low these cap rates are and what these price per pounds are,” Muffler said.