“New Normal” Demands a New Affordable Housing Diagnosis

This editorial first appeared in The Daily Progress on Sunday, August 26, 2012


By Neil Williamson, President, Free Enterprise Forum

Over the years, Central Virginia localities have attempted to address the need for affordable shelter in a variety of ways.  Every locality is mandated by the Code of Virginia to have an “Affordable Housing” chapter in their comprehensive plan. The Albemarle County Planning Commission is discussing their plan on Tuesday, August 28th.

The Free Enterprise Forum believes the state mandate for an affordable housing chapter in comprehensive plans is both out-of-date and has created a myopic view of housing.  We encourage the Commonwealth and localities to use a wider lens and seek to understand how local actions, proffer requirements and regulations impact housing affordability across all price points.

The Free Enterprise Forum believes affordable housing must include the region’s significant affordable rental opportunities in addition to affordable for purchase housing.  Housing policy needs to be timely and comprehensive in addressing the needs of residents at all ages, income levels, and lifestyles.

While each locality is different in its approach, the Free Enterprise Forum believes there has been a misplaced emphasis on the supply side of affordable housing; we contend in most localities there could be an ample supply of affordable housing choices if financing and regulatory hurdles could be removed.

Further, as many of these policies were first written at the top of the housing bubble, it would be wise to revisit the concepts and the assumptions with the “new normal” in mind. 

If there is any lesson learned from the latest housing crash, it is that not everyone needs to, or should be, a homeowner.  Homeownership is of great value to a community but it is not for everyone.  National housing experts seem to agree 60-65% homeownership is sustainable.    Most of our localities already exceed this measure. 

What is each locality’s homeownership goal? 

Should a locality have a goal?

homeownership chart

Source US Census 2010

It is important to note that the City of Charlottesville’s percentage of homeownership is significantly lower than the neighboring localities. 

Is this a bad thing?

Much of the City’s housing is rental student housing.  The University of Virginia generally houses just 30% of its full-time students on grounds.  The balance fills rental opportunities in both the City of Charlottesville and to a lesser extent the urban ring of Albemarle County. In addition, the compact design and availability of public transit increase viability of city rentals.

For the purposes of this discussion, affordable is defined as dwelling units with a monthly cost equal or less than 30% of the household income at 80% of area median income.  If we use an annual median income of $50,000, 80% of that income is $40,000 which suggests a budget of $1,200 a month for shelter (30%*40,000).  Albemarle County currently defines affordable as “Maximum sales price of $211,250.  Rents would be determined based on bedroom size and tenant-paid utilities; ex. 2br $1,029 maximum with owner paying all utilities”

Failure of Financing – The Federal Housing Administration (FHA) provides financing for the vast majority of “affordable” buyers.  The FHA is reluctant to finance condominium purchases, wary of the restrictions placed on property owners holding such property.  This regulatory roulette keeps many families off what could be their first step on the homeownership ladder.

A recent property search of the Charlottesville Area Association of REALTORS® (CAAR) Multiple Listing Service (MLS) resulted in 582 properties being listed at $175,000 or less.  When condominiums were eliminated from the search, the number of properties available dropped by more than 18% to 473.  If FHA financing regulations were reduced, the number of truly affordable units for purchase would increase without building one “new” unit.

Down Payment Catch 22 – Down payment assistance money is being left on the table.   Financing issues are by far the most difficult to conquer.  Despite interest rates being at a historic low point, the number of folks who can qualify for a mortgage in the current market is relatively small.

With this difficulty of folks being able to qualify for mortgage financing because of  tightening of credit terms, the unintended result is the inability of down payment assistance funds to be distributed to those in need.  In order to qualify for the assistance, applicants must not exceed certain income limits and such a limited income (and a low credit score) will not qualify for the needed underlying mortgage financing.

Cost of “Public Services” Harms Affordability – Most planners agree locating affordable shelter near services makes for more efficient delivery of such services.  To build in such “development areas” requires the unit to hook up to public water and sewer.  The cost of these hook ups is $10,000 each in Greene County (slightly lower in the other localities). 

When presented with this question last year, Albemarle County Service Authority (ACSA) Executive Director Gary O’Connell said that the ACSA is about building and maintaining infrastructure as well as providing water and sewer service efficiently to its customers; affordable housing is not an ACSA issue.

Cost of Community Design Harms Affordability – Many of the localities have pursued a complete street philosophy regarding new neighborhood construction.  A complete street may include curb, gutter, bike lane, on street parking, street trees and a sidewalk.  Each of these mandated amenities comes at a cost, making the delivery of affordable housing even more challenging.

Overlapping/Conflicting Agency Responsibilities Harms Affordability – Super agencies such as Virginia’s Department of Environmental Quality (DEQ), US Army Corps of Engineers (ACOE), and Virginia Department of Transportation (VDOT) often have overlapping jurisdiction with localities and each other, the additional time it takes to sort out this alphabet soup of regulators adds time and cost to every project.

Rental Stock Blinders – While the state code is very clear that rental housing is a part of the housing equation and several localities include the use of “affordable housing” proffers on rental assistance, rarely is such housing considered when calculating the availability of affordable housing.  

A recent review of the Blue Ridge Apartment Council website showed 158 properties currently available for rental under $850 a month.  While no such rental database exists for the outlying counties, it is reasonable to assume a significant portion of the affordable housing in those communities is being provided by private landlords both with and without the use of Housing and Urban Development (HUD) vouchers.  Comprehensive plans must recognize the significant role affordable rental stock has on the market.  In addition, localities should embrace the property owner community and build bridges to better serve these important taxpayers and service providers.

As localities prepare their five-year revisions of their comprehensive plans, the Free Enterprise Forum has several questions related to their housing policies:

  • What is the locality’s goal percentage of owner occupied housing and why?
  • What is a sustainable rate of homeownership?
  • Is rental stock considered a part of the locality’s affordable housing inventory?
  • How is the locality helping property owners achieve affordability?
  • What is the level of community investment dedicated to affordable housing?
  • Is the locality providing financial literacy training?
  • If new affordable housing stock is created how will is stay affordable?
  • Should dwelling units be distributed equally throughout the community or should they be focused close to services (transit, employment opportunities etc.)?
  • Some of the affordable housing stock is of low quality.  This makes it less desirable for purchase and more expensive to maintain.  Can/should affordable housing policies include incentives to upgrade, or replace, substandard housing stock?
  • Can, and should, localities forgive or reduce required fees on new affordable housing creation?

Just as the housing market is dynamic, the discussion of affordability must be an ongoing conversation.  The Free Enterprise Forum welcomes an open, comprehensive discussion regarding how to best support our community’s housing goals.

Respectfully Submitted,

Neil Williamson


Neil Williamson is the President of The Free Enterprise Forum, a privately funded public policy organization covering the City of Charlottesville as well as Albemarle, Greene,


2 responses

  1. […] The Free Enterprise Forum believes Skyline Cap is a part of the affordable housing solution we wrote about earlier this week in a Daily Progress Guest Editorial. […]

  2. The way to more affordable housing is to let prices fall.

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