In 2012, after years of conflict and then cooperation, the Zoning Commission approved Georgetown’s latest campus plan. One of the central parts of the plan is that the school commits to house 90% of its undergrads on campus by the fall of 2015. With that date rapidly approaching, is the rental market already feeling the pinch of reduced demand? Some residents have concluded as much in conversations with GM, and some anecdata supports that.
What people have noticed are homes still available for rent that would usually be already rented for the fall. And one particularly prominent house that has been rented for years (and is awfully shabby for it) is not only vacant but now for sale. Its the home at 3348 Prospect (seen above). This large home can be yours for $3 million.
One argument GM has made to those trying to force GU to house more students on campus is that the rental housing would simply be filled by non-students, primarily 20-somethings, who can be just as loud and annoying as college students (GM certainly was). But the Prospect St. house may point to a flaw in that argument. According to the listing, the house rents out nine “units” for a total rent of $18,000 a month. That wasn’t a typo.
It’s unclear how many bedrooms the house has (the listing could be read to say either nine or even twelve), but it’s very unlikely that anyone other than a Georgetown student would be willing to pay that much to share that building with so many people. And with so many new condos all over the city much closer to hipper neighborhoods, maybe there really aren’t that many 20-somethings that want to move to Georgetown period, let alone at the usurious rates that undergrads pay.
And it seems that a collapse in demand is about the only thing that would explain why someone would want to sell a property producing $155,000 a year net profit. The listing claims the $3 million price was arrived at to achieve a 5% capitalization rate. This would be a decent cap rate, but only if it’s actually true. And maybe the fact the owner is selling suggests that he or she doesn’t think it is.
The Georgetown Metropolitan 
Pingback: Will Georgetown's campus plan collapse the area's rental market? | leesgardens
I want to counter your anecdata with anecdata of my own: it’s absolutely not the case” that “it’s very unlikely that anyone other than a Georgetown student would be willing to pay that much to share that building with so many people.”
It’s true that there are “so many new condos all over the city much closer to hipper neighborhoods,” but almost all of them are luxury apartments and condos that are way outside the pricerange of the think-tank/non-profit/junior Hill staffer/overeducated-and-underemployed set. The filtering process is working to some extent, but because it’s a regional housing market, it’s not depressing prices in Georgetown, but rather in the exurbs, where the last dominos of increased fall and property values (and rents) have crashed.
I know lots of young adults in their 20s living in group homes all over Georgetown, Burleith, and Glover Park. I’ve also been inside that specific Prospect Street house, and it’s been internally subdivided to the point that it is a de facto apartment building.
The building itself is being sold because its maintenance needs are so expensive and so backlogged that $155,000 per year in rent isn’t enough to meet them and still turn a tidy profit, once the administrative cost of playing lardlord are factored in.