Features : : The Promise and Pitfalls of the Washington, DC, Region’s Strong Capital Flows

Photo by Rhiannon Newman for the Urban Institute


The Promise and Pitfalls of the Washington, DC, Region’s Strong Capital Flows

February 22, 2023

Home to the nation’s capital and millions of people who live and work in the area, the Washington, DC, region has both significant wealth and economic disparities. The area’s growing population has brought increased investment to the District and its surrounding Maryland and Virginia suburbs, but that investment—and the benefits that come with it—has not been evenly distributed across the region, limiting economic opportunity for residents and pricing many out of their communities. And even before the pandemic’s hit to the local economy, that investment expansion stalled, making the region’s future growth uncertain.

A steady flow of capital is crucial to sustaining strong communities. Investment levels determine where local entrepreneurs can secure a loan for a small business, whether residents can get a mortgage to buy their first home, and where housing and other community facilities are built and maintained. But previous Urban Institute research has shown that capital flows vary widely across cities and counties in the US, with some places being much more attractive to investment than others. And within cities and counties, investment levels vary across neighborhoods as a result of past and present policies and practices, with majority-white and low-poverty neighborhoods typically receiving a disproportionate share of capital.

In this new analysis, we look at investment patterns in Washington, DC, and its surrounding suburbs, exploring both how capital flows compare with other places across the US and how investment is distributed within the region.

Investment in the Washington region is among the highest in the country, but growth is creating challenges

Most counties in the Washington region lead the nation in overall investment. Among the 100 largest US counties by population, Washington-area jurisdictions hold the top four spots in overall investment per household, and all but one county in the Washington region are in the top third. That one outlier county—Prince George’s County, Maryland—is in the bottom half of large counties in terms of overall investment per household but is still not among the nation’s most disinvested places.

While the region attracts more overall investment than other places, this strength is driven largely by its housing sectors. High levels of single-family and multifamily investment mask weaknesses in some other areas, such as small business and nonresidential capital. There is also variation among Washington region counties and cities. Washington, DC, and some Northern Virginia counties, for example, are stronger than the region’s Maryland jurisdictions at attracting mission investment.

Average Annual Overall Investment per Household, between 2010 and 2020

How Washington, DC–area jurisdictions compare with the 100 largest US counties

Washington, DC–region jurisdictions

Even when accounting for population growth, overall investment in the Washington region rose rapidly between 2010 and 2015, increasing more than 50 percent in just five years. That investment growth brought new opportunities to the area, with more money flowing to nonresidential construction, housing, and small businesses. Since 2015, investment growth has tracked with population growth, meaning that per household investment levels have changed relatively little.

Overall Investment per Household in the Washington, DC, Region over Time

Note: We have excluded 2020 federal investment data from our analysis because of data limitations.


Investment growth in the region has also coincided with a rise in gentrification. As people and businesses move into formerly underinvested areas, capital flows in those communities increase. This trend is particularly notable in the eastern and northeastern areas of Washington, DC, which have seen a large influx of investment over the past decade and a coinciding rise in gentrification and demographic change. Although gentrification is not the same thing as displacement, it creates displacement pressures. One study found that from 2000 to 2016, Washington, DC, experienced the most displacement of people with low incomes among major US cities.

This rise in investment has also coincided with sprawl in the region as more capital and residents go beyond the inner suburbs. The suburban fringe, or “exurban” areas, like Loudoun County, Virginia, saw significant investment and population growth in recent years. And this type of sprawl can create environmental challenges for the region, such as loss of farmland, stormwater management issues, traffic congestion, and increased air pollution emissions.

Capital is not evenly distributed across Washington region neighborhoods

Even though the Washington region overall has seen growing investment over the past decade—including in previously disinvested neighborhoods—there are disparities in capital flows across the region. And disparities mean residents in some neighborhoods don’t have access to the same economic opportunities as others.

Most DC neighborhoods west of the Anacostia River had very high levels of investment between 2010 and 2020, as did communities in Maryland and Virginia radiating out from the Potomac River. Conversely, DC’s neighborhoods east of the Anacostia River, as well as much of Prince George’s County, received relatively low investment per household.

Investment Is Not Evenly Distributed across the Washington, DC, Region
Average annual between 2010 and 2020, by census tract
Note: Census tracts marked “Insufficient data” have too few households, owner-occupied households, renter-occupied households, employees, or small-business employees to be included in our analysis.

These trends are evident for neighborhoods with different racial and income demographics. Overall, high-poverty neighborhoods in the Washington, DC, region receive less investment per household than low-poverty neighborhoods.

Overall Investment in the Washington, DC, Region, by Census Tract Poverty Level

Average annual investment dollars per household, between 2010 and 2020


Disparities in investment measured by neighborhoods’ racial and ethnic makeup are even more stark and are the result of a history of public and private efforts to strip wealth from communities of color and exclude them from wealth-building opportunities.

In the Washington region, in general, the greater the share of white residents in a neighborhood, the more investment that neighborhood receives. On average, neighborhoods with the largest shares of white residents (more than 80 percent) receive 2.3 times more overall investment than neighborhoods with the smallest shares of white residents (20 percent or less).

These trends are largely the reverse for majority-Black and majority-Latine neighborhoods, meaning lower shares of Black and Latine residents correspond with greater levels of investment. On average, neighborhoods where Black residents make up less than 20 percent of the population receive 2.1 times more investment than neighborhoods that are more than 80 percent Black. Neighborhoods where Latine residents make up less than 10 percent of the population receive 1.9 times more investment than neighborhoods that are more than 30 percent Latine.

There is a positive relationship between the share of Asian residents and the investment a neighborhood receives, and neighborhoods with the largest shares of Asian residents (more than 20 percent) receive among the highest level of investment.

Overall Investment in the Washington, DC, Region, by Census Tract Racial and Ethnic Composition

Average annual investment dollars per household, between 2010 and 2020


Because of these racial disparities in capital flows, neighborhoods with larger shares of white and Asian residents in the Washington region—especially in Northern Virginia and in the District west of the Potomac River—have greater access to the investments that generate economic growth and opportunity.

Mission-driven and federal financing help funnel capital to less-invested places but constitute a very small share of the market

Investment from mission-driven and federal community development sources can help counteract disparities in other investment sources and direct capital to neighborhoods in ways that lead to more equitable outcomes. In the Washington, DC, region, even though low-poverty neighborhoods receive more investment overall, the highest-poverty areas receive substantially more mission and federal investment. These investments are important in both counteracting disparities in the private market’s allocation of capital and in paving the way for more equitable private investment in the future.

The Washington region has one of the strongest mission financing sectors in the country, but its strength is uneven. Although the District is especially robust in mission finance, two other jurisdictions—Prince George’s County, Maryland, and Fairfax County, Virginia—are lagging in mission investment compared with other large US counties. Most Virginia counties and cities in the Washington region have high federal investment compared with other counties in the US, but the Maryland counties attract less federal money.

And even though the Washington region’s mission and federal financing are stronger than many other places in the US, these sectors make up a very small piece of overall investment, and they are unable to overcome gaps in the broader market. Mission capital makes up just 1 percent ($4.6 billion) of all investment in the Washington, DC, area, and federal investment makes up less than 1 percent ($1.8 billion). So although these investment sectors should not be overlooked, they are constrained in the scale of their impact for the Washington region.

Mission and Federal Financing Constitute a Very Small Share of All Investment

Total investment in the Washington, DC, region by category, between 2010 and 2020


$122 billion

Single family

$310 billion




$16 billion


$35 billion

Promoting equitable investment in the Washington region requires place-based and people-based solutions

Looking ahead, the Washington, DC, region faces two key challenges: finding new avenues for growth amid the pandemic’s effects on work and residential patterns, and ensuring growth is equitable to rectify the region’s poor track record of inclusion.

Prioritizing place-based and people-based community development policy tools can fuel growth and investment while avoiding the acceleration of gentrification and displacement. Specific strategies include investing in capital and training for small businesses, providing job training and apprenticeship programs, attracting and retaining emerging sectors, repurposing unneeded office space, preserving and building new affordable rental units, expanding long-term affordability covenants for owner-occupied housing (such as through community land trusts), using public land for affordable housing and mixed-use development, promoting infill development and upzoning (especially in affluent communities), and ensuring high-quality transit infrastructure and systems.

And because the region spans Washington, DC; Maryland; and Virginia, its future success and struggles are all interconnected: some strategies are better addressed regionally rather than locally.

By implementing both people-based and place-based solutions, the Washington, DC, region can slow the negative effects of gentrification and help neighborhoods and residents benefit from the influx in investment and economic opportunities in the area.