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Dog-friendly places can be few and far between in DC - a lot of rentals and condos have constraints on how large a dog you're allowed to have, how many, etc.. In addition, DC is by and large so densely populated, finding parks in which to walk your dog can be a bit of an issue. I've been living in Glover Park for about six years now and, in the fifteen years I've been in DC, I've never encountered as pet-friendly a neighborhood.
Ultimately, though, a lot of where you live is going to boil down to how much you're prepared to spend. One bedroom apartments throughout most of the "respectable" northwestern quarter of DC will start at $1,500/month and go up rapidly from there. If you have need for significant space, you'd better count on either 1) spending a lot of money on your rent or mortgage, or 2) living a fair ways out. Among people with families who need actual houses and who aren't Rockafellers, commutes of an hour or more into work in town are far from uncommon. The subway system is fabulous, but bear in mind that it's also expensive and even outlying neighborhoods with metro access are pricey by virtue of being metro accessible.
As a single person, I haven't traditionally needed a whole lot of space, so I've opted to live in smaller places in prime neighborhoods like Dupont Circle, Adams Morgan, Georgetown, etc., feeling that what extra I spent on rent was compensated for by savings in both time and money associated with commuting. But I'm having to re-think that as I'm about to get married (to another DUer, btw) and space is becoming more of an issue. And I can tell you, it's a real problem. The cost of housing in the more centrally located areas is just going through the roof.
If you don't mind apartment dwelling, my feeling is that you might as well stay in town: apartments in Arlington and Bethesda and such aren't really that much cheaper and then you have to deal with a commute (unless of course you end up working in a more outlying area). In terms of DC, I'm not sure how to say this without sounding horribly elitist, but the "nicest," for want of a better word, neighborhoods tend to be in the northwestern part of town. There are exceptions, of course, such as Capitol Hill, as well as little pocket enclaves here and there throughout the eastern half of the city, but DC is a very segregated city, in part along ethnic lines, but more importantly along economic lines, and the eastern part of the city is undeniably the poorer half, more run-down, more polluted, fewer trees, more strip malls, more industrial, more crime, etc., etc.. Again, there are lovely areas in eastern DC, but they're fewer and farther between and it helps if you know what you're doing and where to look. For a newcomer who doesn't yet know the city well, northwest is a safe place to start.
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