The federal government shutdown is expected to have a “direct impact” on the Washington, D.C. housing market, experts say, delivering another blow to the capital after headwinds caused by the Department of Government Efficiency’s (DOGE) mass firings earlier this year.
“The Washington, D.C. housing market is more exposed to the government shutdown than anywhere else in the country, given the region’s deep ties to federal employment and contracting,” Bright MLS Chief Economist Lisa Sturtevant said in a statement shared with Newsweek.
“One immediate impact of the shutdown is the potential for delays in home sales transactions, with potential slowdowns in FHA [Federal Housing Administration] and VA [Veterans Affairs] loan processing and a lapse in the National Flood Insurance program which will shut out buyers needing flood insurance,” she said. “But in the Washington D.C. area, there will be a more direct impact on housing demand and supply.”
Why Is Washington, DC, More Vulnerable to a Shutdown?
As the pulsing heart of the federal government, Washington, D.C, is obviously no stranger to government shutdowns. The previous one started in 2018, ended in 2019 and lasted the longest—35 days. Since 1976, the country has faced a total of 20 shutdowns, not counting the current one, that have lasted an average of eight days, according to Statista.
As of Thursday, we are only two days into this shutdown, but it is unclear how long it might drag on.
“In general, previous impacts of a federal government shutdown on the local economy and housing market have been modest and temporary,” Sturtevant said. This time, however, things are different, she said—and the potential for negative impacts on the economy and housing market are more significant.
“The region has been caught up in a series of other federal initiatives, including DOGE layoffs and budget cuts, return-to-the-office mandates and the deployment of the National Guard in the District of Columbia,” Sturtevant said.
“The current shutdown is also different because the White House has directed federal agencies to plan for permanent workforce cuts, firing staff in roles that do not support the Trump administration’s initiatives,” she added.
In prior shutdowns, non-essential federal workers were sent home but brought back and received back pay once the government reopened. Now, President Donald Trump has vowed to use the shutdown to “clear out dead wood” from the federal government, continuing with the workforce cuts launched by Elon Musk’s Department of Government Efficiency (DOGE) earlier this year.
How Would Washington, DC, Navigate the Shutdown?
One of the main issues that could exacerbate a potentially negative impact on the Washington, D.C. housing market is that this was already struggling before the country entered a federal shutdown.
“Even before the shutdown, the Washington, D.C. area housing market was weaker than other Mid-Atlantic markets, with more listings, slower home price appreciation and longer time on market,” Sturtevant said.
While this did not translate into a major downturn in the region’s housing market, this shutdown could lead toward that direction.
“The uncertainty created by this shutdown will cause prospective homebuyers to hold back and could cause more existing homeowners to leave the region,” Sturtevant said.
The impacts of the shutdown, she said, will vary across the region, depending on the number and concentration of federal workers in particular locations. According to data from the Census Bureau, about 14 percent of the Washington, D.C. metro area workforce are employed by the federal government.
“However, some local jurisdictions have higher concentrations of federal workers and therefore are more exposed,” Sturtevant said. “For example, nearly 20 percent of working residents in the District, Arlington and Alexandria are federal workers. By contrast, the workforce in Loudoun County, Virginia is only 8 percent federal government employees.”
At this stage, it is difficult to predict the extent of the impact of the current shutdown on the D.C. housing market. However, a prolonged shutdown—or a shutdown that results in permanent workforce cuts—would lead to a slowdown in housing market activity and likely to year-over-year declines in home prices, Sturtevant said.
“Existing homeowners who do not have to move, or who have a significant amount of equity in their homes, won’t necessarily feel an impact. Prospective buyers with jobs not tied to the federal government will find opportunities to get into the market with more inventory and softer prices,” she said.
“Longer-term, the Washington D.C. area will always be the seat of the federal government and will also be a major metropolitan area economy, attracting new jobs and residents and the housing market will rebound.”
