Trump's calls to downsize federal government could hurt DMV economy
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Pedestrians in downtown D.C. Photo: Al Drago/Bloomberg via Getty Images
Former President Trump's talk of downsizing government agencies during a potential second administration threatens to disrupt the DMV's already struggling office market.
Why it matters: The federal government is a huge employer in the Washington region, and reducing its footprint could hamper the local economy, experts say.
State of play: Some of Trump's Agenda 47 rhetoric has centered on reducing the federal government's footprint, such as shuttering the Education Department, firing "rogue bureaucrats and career politicians," and moving up to 100,000 federal workers outside of the "Washington Swamp."
And these policy proposals are stoking fear in local leaders, including some within Trump's party:
- "[T]hese backward ideas would be a disaster for Maryland," former Maryland Gov. Larry Hogan (R), who's running for U.S. Senate, told the Washington Post.
- "[They] would threaten the jobs of tens of thousands of Virginians and those in the region," Barbara Comstack, a former Republican member of Congress from Northern Virginia, said to the Post.
- Additionally, D.C. Mayor Muriel Bowser has said such changes would cause the entire DMV to suffer.
The big picture: The Biden administration has struggled to get workers back in the office, while some federal agencies — like State and Housing and Urban Development — are planning to shrink their space.
- Six agencies, including Treasury and Justice, have upcoming lease expirations in which they could minimize space, reports the Wall Street Journal.
- It doesn't help that many agencies are housed in dated buildings, especially as companies increasingly pivot to fancy offices to sway workers back in, says Terry Clower, director of George Mason University's Center for Regional Analysis.
And the local economy's already being impacted: D.C. Mayor Muriel Bowser's recent budget proposal saw half a billion in cuts to make up for a $4 billion budget gap, due in large part to the local struggling office market and its ripple effects.
What they're saying: "I cannot imagine any scenario under four years of a Trump administration where we don't see a substantial impact on the sheer number of federal workers [in the DMV]," says Clower.
- He adds that this would in turn cause already shrinking federal agencies to further downsize, creating detrimental spillover effects into the region's wider economy.
By the numbers: D.C., Virginia, and Maryland take the first, third, and fourth spot on the country's list of states and territories with the highest number of federal employees, per a Congressional Research Service report from September (California is number two.).
- D.C. came in at 160,692 employees in 2023, with Virginia at 140,397 and Maryland at 138,942.
These federal workers comprise over 10% of Maryland and Virginia's civilian workforce, reports the Post.
- That jumps to a quarter when looking at D.C.
Between the lines: It also doesn't help that the DMV has a housing crunch.
- Clower tells Axios that he's heard anecdotally that many agencies are having a hard time hiring federal workers to Washington because of its high cost of living and housing.
The other side: A spokesperson for Team Trump Virginia told the Post that the DMV's economy would be improved by Trump's plans to double down on military investments and make D.C. the "safest" and "most beautiful" capital city.
Reality check: Should Trump be re-elected and attempt to carry out his proposed policy, some of it would likely require congressional action, which could be difficult if Congress is split.
- And, as the Post points out, such changes could be challenged in court.
Vice President Kamala Harris' campaign didn't return Axios' request for comment about the Democratic presidential nominee's stance.
Scott Homa, who heads up property research for the commercial real estate group JLL, doesn't think the local office market will be significantly impacted by either a Harris or Trump administration.
- "Federal elections are just one of many factors that impact the economy, financial markets, and real estate," says Homa.
In fact, Homa sees the struggling office market as an opportunity for Washington's economy to diversify: As the federal government downsizes and moves out of dated spaces, they'll be freed up to be developed into new offerings that could jumpstart the economy, he says.
- And Homa points out that D.C. has an enduring appeal to industry thanks to its educated workforce, transportation infrastructure, universities and research facilities, and proximity to government and culture — all of which "will continue to support its real estate market."
What we're watching: The next administration's spending policies, and whether there's continued pressure on interest rates, which Clower says could make it harder to do some of the bougie revamping necessary to make antiquated federal office buildings attractive to workers.