The housing challenges Virginia’s next governor faces

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Communities across Virginia face a variety of housing-related pressures. Over the past year, home prices in the state’s largest metropolitan areas have increased by more than 10%, putting pressure on first-time buyers. During the height of the COVID-19 pandemic, more than half of tenant households suffered income losses and around 20% fell behind with their rent. Even before the COVID-19 pandemic, Richmond had one of the highest eviction rates in the country, especially in historically black neighborhoods. As Virginia voters prepare for a new governor to be elected this year, they should evaluate candidates’ plans to address the housing challenges.

Well-functioning housing markets are critical to the Commonwealth’s economic success. High housing costs make it difficult for employers to attract and retain a good workforce – especially as teleworking and hybrid work become more common. Communities that can offer high quality amenities – such as public schools, parks, restaurants, and cultural attractions – at reasonable prices will be most attractive to workers who can choose their location. Access to stable, decent quality housing in safe, healthy communities enables people to be productive in school, work, and other social and economic activities.

While housing construction has typically been left to local governments, four key challenges would benefit from government attention: monitoring regional housing supply, income support for poor households, investments to improve housing quality, and efforts to achieve climate resilience.


Virginia doesn’t have a statewide housing shortage, but there are local warning signs

In the last 10 years, the housing market in Virginia has developed well in one important dimension: The housing supply has grown faster in the places where people would most like to live. House prices are a useful indicator of underlying demand as people are willing to pay more for homes near well-paying jobs and in communities with good public schools, parks, and other facilities. Between 2010 and 2019, housing supply grew in the counties of Virginia and independent cities, which had relatively high residential values ​​in 2010 – an indicator of healthy national housing markets.

However, there are some local warning signs of shortage, particularly in the Washington, DC area. Figure 2 shows the relationship between initial housing values ​​and housing growth for each of Virginia’s three largest metropolitan areas. Richmond and Virginia Beach show similar patterns to the state as a whole: both have strong positive correlations between real estate values ​​in 2010 and housing supply growth over the next decade.

Greater Washington, DC – the largest region in the state – shows a significantly different pattern. The correlation between initial home prices and supply growth is much lower there (flatter slope) than in Richmond or Virginia Beach, reflecting large differences in growth rates between communities with similar home values. While some expensive communities, such as Loudoun County and Falls Church, saw housing growth rates in excess of 20%, Fairfax County and Alexandria saw housing growth of 6% and 8%, respectively – well below the region’s average. Fairfax has the largest population in the state (over 1 million people) and is home to major job centers like Tysons Corner; Any housing shortage in the county will affect the entire subway area.

Fig2

Outside the largest metropolitan areas, there are also signs that the supply of housing in some regional job centers is lagging behind demand. Housing affordability and availability have become increasingly controversial issues in both Blacksburg and Charlottesville, where the Commonwealth’s flagship universities have fueled regional employment growth in related industries such as medicine and technology. Some of these jobs pay high wages so workers can afford housing close to where they work. However, workers in low-paid part-time jobs – such as office workers, catering and domestic help – often have to look for cheaper housing in neighboring counties, which leads to longer journeys and higher traffic volumes.

How much living space is built in which locations does not only depend on market forces; local governments regulate housing development through guidelines such as zoning and building codes. Excessive zoning such as large minimum plot sizes, housing bans and complex building processes can reduce the supply of new living space and increase housing costs. In states like California and Massachusetts, local zoning regulations now add up to a significant drag on the entire statewide housing supply – a cautionary story Virginia should avoid.

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Low-income Virginians across the state are struggling to pay for their homes

Even where enough new housing is created to keep pace with employment growth, low-income households have difficulty paying for marketable housing. The incomes of many low-wage earners have not kept pace with rent increases.

The US Department of Housing and Urban Development recommends households not to spend more than 30% of their income on housing. Among the poorest households in Virginia, both tenants and homeowners spend around 60% of their income on housing costs (Figure 3). High housing burdens mean that many households save on food, health care, transportation, and other necessities, while hindering their ability to save for a rainy day. The gap between income and housing costs exists across all parts of Virginia – urban, suburban and rural – similar to longstanding national trends.

Fig. 3

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Quality of living is a concern in both cities and rural communities

While more attention is being paid to housing affordability in general, the related concern is the prevalence of poor quality housing. In Virginia, older homes are particularly common in large cities; for example, more than 30% of Richmond homes were built prior to 1940.

Some older houses have recently been renovated and are valued for their historic architecture (for example, Alexandria’s Old Town and the Fan Quarter in Richmond). In general, however, older homes are prone to health hazards such as undiminished lead paint and asbestos, require more energy to heat and cool, and have higher maintenance costs for their owners.

In the rural communities of Virginia, meanwhile, there is a high proportion of vacant homes. Vacant homes can be a source of corruption for the surrounding community, create health and safety risks for neighbors, and lead to higher crime rates. Suburban communities, on the other hand, have both new housing and lower vacancy rates than cities or rural areas.

Fig 4

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Climate change is already damaging Virginia’s homes and communities – and is getting worse

The physical, economic, and human costs of climate change are becoming increasingly tangible in Virginia and across the country. Intense storms and rising sea levels cause wind and water damage to homes and businesses. Extreme heat poses health and safety threats, especially to older adults, people who are homeless and whose homes do not have air conditioning.

The damage caused by climate change is disproportionately borne by low-income, black, Latin American or Hispanic and Indian communities. Richmond’s neighborhoods, which used to be outlined in red and were mostly black, suffer from higher heat loads. The Virginia Beach-Norfolk-Newport News metropolitan area – home to nearly two million people – is already experiencing frequent flooding due to rising sea levels. Even inland communities like Roanoke Valley are more likely to experience flooding from heavy storms. The energy used to heat and cool homes is a major contributor to climate change, as is the transportation costs associated with the ever-increasing commuting distances across the Commonwealth.

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What Virginia’s next governor can do to help

Strategic housing decisions by the next Virginia governor can boost the state’s economy, reduce the financial burden on households, and improve climate resilience. State intervention would make the most sense in five areas:

1) Encourage high-potential communities across the state to expand their supply of affordable housing. Providing policy guidance, technical assistance and financial incentives would help local governments modernize their land use regulations and related development policies. It is necessary to allow enough housing in various price ranges to support state and regional economic growth while reducing the financial burden on middle- and middle-income households.

2) Expand the fund for housing vouchers to low-income tenants and invest in the acquisition or development of subsidized apartments. Support from the state’s congressional delegation would be useful in increasing the availability of federal housing vouchers.

3) Invest in building maintenance and upgrades for older homes across the Commonwealth. Expanded access to low-interest loans or grants for energy-efficient modernization would improve the quality of life for both homeowners and tenants and at the same time reduce the household’s carbon footprint.

4) Better integrate housing, transport and land use to improve climate resilience. Virginia and the federal government are currently negotiating a one-time investment to expand rail passenger services. This plan provides an opportunity to strengthen links between the parishes of Virginia and stimulate economic growth. However, to get the maximum economic and environmental return on this investment, transportation, housing and land use near train stations need to be coordinated.

5) Enabling better guidelines through better information. Gathering and disseminating regular information on housing market conditions and unmet needs would be beneficial to state and local governments, as well as housing advocates and the real estate industry.

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