The numbers behind Washington

One building, underwritten at D.C. market inputs. Every figure below comes from the calculator at the end of this page.

1. Program

	Units	Net SF	Rent / mo
Studio	10	484	$1,821
One-bedroom	22	697	$2,302
Two-bedroom	8	996	$3,090
Total	40	28,142	$2,450 avg

Efficiency 80 percent. Gross building area 35,178 SF.

2. Development budget

Line	Basis	Total	Per unit	Share
Land	estimate	$2,400,000	$60,000	14.7%
Hard cost	$275 / gross SF	$9,673,812	$241,845	59.2%
Parking	20 spaces × $35,000	$700,000	$17,500	4.3%
Soft cost	20% × (land + hard + parking)	$2,554,762	$63,869	15.6%
Entitlement carry	land × 8% × 14/12	$224,000	$5,600	1.4%
Construction carry	(hard + parking + soft) × 50% × 8% × 18/12	$775,715	$19,393	4.8%
Total development cost		$16,328,290	$408,207	100%

Entitlement carry runs on land only. The building is not financed until construction starts.

Construction carry uses the average drawn balance. The loan funds in over 18 months, so on average half is outstanding.

3. Stabilized operations

Line	Basis	Annual
Gross potential rent	40 × $2,450 × 12	$1,176,000
Inclusionary zoning discount	4 units × ($2,450 − $1,550) × 12	−$43,200
Other income	+3%	+$33,984
Vacancy and credit loss	−7%	−$81,675
Effective gross income		$1,085,109
Operating expenses	$9,500 / unit	−$380,000
Property tax	0.85% of value	−$98,253
Net operating income (NOI)		$606,856

Expense ratio 44 percent of income.

Tax is circular. It is charged on value, and value depends on NOI after tax. Solved directly:

NOI = (EGI − opex) ÷ (1 + tax rate ÷ cap rate) = $705,109 ÷ 1.162 = $606,856

4. Value and return

Value = NOI ÷ cap rate = $606,856 ÷ 5.25% = $11,559,166

Value − cost = −$4,769,124

Return on cost = NOI ÷ cost = 3.72%

Hurdle = cap rate + developer spread = 5.25% + 1.25% = 6.50%

Gap = 278 bps

The spread is the premium for construction and lease-up risk over buying a finished asset at the cap rate.

5. Lever attribution

Each lever run alone against base. The package runs all zoning reforms together.

Lever	Return on cost	Change	Share of gap
Base	3.72%
Entitlement 14 → 4 months	3.75%	+4 bps	1%
No parking minimum	3.93%	+21 bps	8%
No inclusionary set-aside	3.93%	+22 bps	8%
Full zoning package	4.37%	+66 bps	24%
Property tax to zero	4.32%	+60 bps	22%
Rent +10%	4.25%	+53 bps	19%

Components do not sum to the package. Levers interact.

Entitlement is the weakest lever by an order of magnitude. Ten months of carry on $2.4 million of land is $160,000, or 1 percent of cost.

6. Breakevens

What each input would need to be, alone, to hit 6.50 percent:

Input	Base	Breakeven	Move
Average rent	$2,450	$3,726	+52%
Hard cost / SF	$275	$119	−57%
Land	$2.4M	−$2.96M	n/a

Under the full zoning package, residual land value is still −$1.48 million. The deal fails at any land price, so land drops out of the argument.

7. Sensitivity

Value minus cost, $ millions.

Cap rate ↓ / Rent →	$2,205 (−10%)	$2,450	$2,695 (+10%)
4.75%	−5.5	−3.7	−1.9
5.25%	−6.4	−4.8	−3.1
5.75%	−7.2	−5.6	−4.1

No cell clears zero.

Pro Forma Calculator

40-Unit Apartment Building, Washington, D.C.

Every input below carries a source. Drag any slider to test the model against a different assumption.

40 units·35,178 sq ft·$16,328,290 total·$408,207 per unit

The building

Units40

Assumption

Unit mix

10.0 × Studio

484 SF · $1,821/mo

22.0 × One-bedroom

697 SF · $2,302/mo

8.0 × Two-bedroom

996 SF · $3,090/mo

Verified

Efficiency ratio · net rentable / gross80.0%

Estimate

What it costs

Land cost$2,400,000

Estimate

Hard cost per gross SF · shell and core$275

Verified range

Parking ratio · spaces per unit0.50

Estimate

Parking cost per space · below grade$35,000

Verified

Soft costs · % of land + hard cost20.0%

Estimate

Entitlement timeline · land carry only14 mo

Estimate

Construction timeline · draw period18 mo

Estimate

Construction loan rate8.00%

Verified range

What it earns

Achievable rent per unit$2,450

Verified

Inclusionary zoning set-aside · % of units10.0%

Verified

IZ unit rent · approx 60% MFI$1,550

Estimate

Vacancy and credit loss · % of gross rent7.0%

Derived

Other income · % of gross potential rent3.0%

Estimate

Operating expenses per unit · annual, ex property tax$9,500

Estimate

Property tax rate · D.C. Class 1A0.85%

Verified

Exit cap rate5.25%

Verified range

Required developer spread · over exit cap1.25%

Estimate

Return on cost

3.72%

Earns3.72%

Needs6.50%

Total development cost

$16,328,290

Of which, entitlement carry (land only)

$224,000

Of which, construction carry (avg. draw)

$775,715

Effective gross income

$1,085,109

Property tax (solved iteratively)

$98,253

Stabilized annual NOI

$606,856

Implied stabilized value

$11,559,166

Value minus cost to build

-$4,769,124

8. Inputs and sources

Every input carries a status:

• Verified. Taken directly from a published source.
• Verified range. The source gives a range. We picked a point inside it.
• Derived. Calculated from published figures.
• Estimate. Our judgment, flagged for checking.
• Assumption. A modeling choice.

Other sources

• Permits by year: U.S. Census Bureau Building Permits Survey via FRED
• Zoning share, appeals and appeal delays: D.C. Policy Center
• Permit review times: D.C. Department of Buildings

What we’re checking next

These estimates are being checked against real project data from a D.C.-area construction firm:

• Fees and design percentage
• Approval timeline
• Construction timeline
• Running costs per unit

Land is not on the list. The building fails even with free land, so the land estimate doesn’t change the conclusion.

Reproduce it

The full model is a standalone Python script. Same inputs, same outputs as the calculator. Download dc-model.py

How the model works: Method →