Which Markets are Most Exposed to Federal Job Cuts?

The advent of the Department of Government Efficiency (DOGE) and looming budget cuts cast a cloud of uncertainty over local real estate markets that rely heavily on demand from federal employees. In this piece, the research team at Chandan Economics examines which metros are most vulnerable to shifts in the federal workforce, aiming to better understand where local real estate risks may arise.

As the nation’s capital and home to most federal agencies, residential and office demand in Washington D.C. stands to be most affected by federal government job cuts. Housing inventory in the D.C. area has already climbed substantially during the first half of 2025, with data from Altos showing housing inventory in the metro is up 44.8% year-over-year compared to a nationwide average of 32.5%.

However, the effect of federal job cuts on real estate demand is poised to stretch far beyond our nation’s capital.

While D.C. leads the nation in both the total volume of government employees and federal jobs as a share of all employment (15.2%), relative to smaller and more isolated metros, it enjoys an advantageous geographic position along the nation's Northeast Corridor—a key economic engine with several growth-bound industries.

Meanwhile, cities like Anchorage, AK, which ranks close behind Washington in terms of the federal share of employment (13.2%), lack a breadth of private employment alternatives for the local workforce, which elevates the risks of demand deterioration in its local property market.

Several smaller markets in the nation’s top 100 most populous metros paint a similar picture. Honolulu, Charleston (SC), and Oklahoma City maintain a significant federal workforce while simultaneously being far from other key centers of economic activity.

While pro-growth elements of the Budget Reconciliation package, poised to enact steep federal budget cuts, could eventually spur private investment in these regions, such investments may take several years to materialize, with local unemployment pressures creating household income constraints in the short term.

Between big cities like D.C. and more isolated metros like Anchorage are medium-sized markets where the local workforce has more private alternatives but may be exposed to regional demand risks.

For example, Baltimore (9.8%) and Virginia Beach (7.6%) both rank in the top 5 in federal jobs as a share of local employment, likely due to their proximity to the nation's capital. This proximity can be beneficial if private companies quickly fill the vacuum left behind by federal job cuts in the region, but it could exacerbate local headwinds to property demand if private investments fail to materialize sufficiently.