“D.C. remains resilient, but the market is adjusting to new realities,” said James Tenret, Managing Director for the D.C. region at Chase Commercial Term Lending.

The D.C. area shed 104,000 jobs between January 2025 and January 2026, the largest decline since the region lost over 200,000 jobs during the pandemic, according to the Bureau of Labor Statistics. Job losses and weaker hiring slowed household formation and softened renter demand.

Uncertainty around federal workforce reductions and their spillover effects into the private sector continue to temper expectations for 2026. However, the worst may be behind us. According to Moody’s data, month-over-month rents are trending upward, reflecting a stronger spring leasing season.

“The pace of recovery will depend on federal employment trends, local election outcomes and broader economic conditions,” Tenret said.

Strong demand—and long-term opportunities—for workforce housing

Workforce and affordable housing continues to support more stable rents and lower vacancy rates in D.C.

“Occupancy levels for workforce housing is notably better than the luxury segment, with rental rates showing resilience,” Tenret said. Luxury properties saw vacancy rates rise to 11.9% in Q1 2026, while B and C class vacancy rates were 7.9% in the same time period, according to Moody’s data.

Higher-end multifamily owners are resorting to concessions to drive occupancy. “Nearly all new projects in lease-up are offering concessions—typically two to three months free, and up to four months in some communities,” Tenret said.

Workforce housing also provides opportunities for long-horizon investors in Washington, D.C. As some institutional investors are shrinking their D.C. portfolios, local capital with dry powder is stepping in to buy. “Bid sheets are shallow, and in some cases, appraisals are coming in 10% to 15% above purchase prices,” Tenret said. “We’ve seen some clients achieve up to a 10% cash-on-cash return after leverage in current yield—returns typically seen only a few years out of every 15. The current environment creates significant opportunities for investors to re-leverage down the road.”

Higher-for-longer interest rates

Interest rates remain elevated as the Federal Reserve seeks to achieve its dual mandate of maximum employment and stable prices. As of May, markets don’t anticipate any rate cuts from the Fed in 2026. However, the Fed could begin a series of interest rate hikes. 

The uncertain path ahead means investors looking to finance or refinance multifamily properties may consider prepayment options that allow for flexibility when interest rates decline.