‘Housing Albemarle’ Doomed to Repeat Failure?

By. Neil Williamson

Our community is stronger by virtue of our diversity.

The housing market is stronger with more housing, of all types, at all price points, for all people.

Most economists agree combining appropriate incentives with increased affordable housing requirements is a prescription that can generate new affordable units. On Wednesday, Albemarle County’s Board of Supervisors will consider the proposed ‘Housing Albemarle’ Plan.  As drafted, this plan is ‘all stick and no carrot’ — fulfilling only the requirements half of the economists’ prescription without any corresponding incentives to make the new requirements financially feasible.

But it can be fixed, please let me explain.

Inclusionary Zoning – In 2005, a previous well-meaning Board introduced a mandate that 15% of all new housing units in any rezoned development must be affordable to families making 80% of Area Median Income. As a part of this proposal, Albemarle agreed to provide qualified homebuyers to purchase the for sale units within 120 days of notice from builders that the houses would be available. Developers and builders did their part – they proffered the units, built them, and followed the prescribed process. Albemarle failed to produce those qualified homebuyers. To date, less than fifty families have been housed under this policy. Rather than fixing this broken program, which is fixable, ‘Housing Albemarle’ doubles down merely increasing the requirements further — requiring 20% of all new rezoned housing units be affordable.

Redefining For-Sale Affordability – No longer recognizing our unique place in the world and calculating affordability utilizing Area Median Income, the new policy uses 65% of the statewide maximum sales price from Virginia Housing (which produces a maximum sales price of $243,750) to define the For-Sale affordability mandate. This statewide maximum price is unrealistic in our specific market given current land and development costs that result in lot prices of $125,000+.

Redefining Rental Affordability – Current policy requires proffered affordable rental units to be affordable to those making 80% of Area Median (Household) Income [No more than 30% of that Median Income should cover housing costs] for 10 years. From project proffer experience, apartment builders have been able to comply with this current policy. The new policy would reduce the family income target to 60% of Area Median (Household) Income and increase the timeline required to stay affordable to 30 years. This represents an 847% increase in private subsidy (as shown in the example in the table below) over the current policy.

2 Bedroom Unit w/2 Person Household	Monthly Rent*	Monthly Subsidy*	Annual Subsidy*	Total Subsidy*
Market Rate	$1,625	$0	$0	$0
Current Policy (30% of 80% AMI)	$1,500	$125	$1,500	$15,000 (10 years)
Proposed Policy (Modified HUD Rents)	$1,272	$353	$4,236	$127,080 (30 years)

*excludes annual inflationary rent increases

To show how that per-unit subsidy would affect new multi-family development, a proposed 200-unit apartment community seeking a rezoning would be required to provide 20%, or 40, “affordable units”. This project would pay $5,083,200 (40 x $127,180) in total subsidy over 30 years. The economic reality is that absent significant federal, state, and local incentives to partially offset these new requirements, this project is not built, or the subsidy costs are passed on to the other 80% of the units. In this example, an annual rent increase of greater than $1,000 for the other 160 units will be required, or the project does not move forward further exacerbating an already constrained market.

Currently ‘Housing Albemarle’ is incomplete. It places unworkable burdens on the development and builder communities that will result in fewer rezonings (thus fewer affordable units), and reduced number of new units constructed thus restricting supply. Given anticipated demand levels, this could lead to increases in market rents, thereby negatively impacting affordability across all price points.

It does not have to be this way. Throughout the proposal there are suggestions of working with stakeholders to develop appropriate incentives to help offset the cost of developer subsidies and encourage the construction of new affordable housing. Tap fee relief, rent abatement, tax increment financing, and bond financing are a few such examples that must be fleshed out if the ‘Housing Albemarle’ goals are to be met. We believe staff acknowledges the importance of incentives to make the proposed policy viable.

The development and builder communities want to continue to do their part and stand ready and willing to engage in these discussions and develop new, equitable, workable solutions to our housing affordability challenges.

This Wednesday, we hope the Board of Supervisors will endorse the concepts of the ‘Housing Albemarle’ plan but postpone implementation until a full vetting of necessary incentives can be developed and formally adopted as part of the plan.

Absent the incentive half of the prescription, this aspirational plan, like the one before it, will fail. It will drive landowners to develop under the existing low density zoning rather than a diversity of housing product as envisioned by the Comprehensive Plan.

Perhaps worse, as drafted, ‘Housing Albemarle’ will restrict development, reduce housing supply, hinder housing affordability, and due to a lack of supply push residential development into the County’s rural areas and further into outlying localities (increasing sprawl). And then our diversity, our strength, will be lost.

Neil Williamson serves as the President of the Free Enterprise Forum, a privately funded public policy organization focused on central Virginia’s local governments. Learn more at www.freeenterpriseforum.org