by Jon Baliles
I think RVA needs to recruit retired New York City politician Jimmy McMillan to come to Richmond and run for office. He was the straight-talker who ran for Governor of New York under the Rent Is Too Damn High Party banner in 2010 and said more genuine truths in 35 seconds at a debate introduction than many politicians say in their career.
In the wake of COVID and all of its turbulence, it was reported this week that rent in the Richmond region is going through the roof and increasing even faster than 40-year-high inflation. WRIC reports:
Data from rental listing site Apartment List showed that from March 2020 to May 2022, city-level rent estimates increased significantly throughout Virginia. In Glen Allen, rent grew approximately 19.5%; 25.3% in Richmond; and 26.8% in Chester.
Rent.com reports that the increase in Richmond over last year was more than 35% (to an average of $1,512 for a one-bedroom), the 8th-highest rent for a single-bedroom in the country (the U.S. average is $1,701 per month, up 25.3%). A 2021 study by Virginia’s Joint Legislative Audit & Review Commission (JLARC), revealed approximately 44% of renting households were cost-burdened in 2019, meaning more than 30% of their income was being used for rent.
The flood of information even included Congress doing something useful when they released a report highlighting the corporate buying spree of homes in recent years, purchased strictly to rent as a long-term revenue stream, and the harmful impact this is having on communities. Mix all of this together along with the well-known eviction Scarlet letter Richmond has earned in recent years and it is a toxic brew.
And if you are a renter and want to buy a home, it is not exactly a sunny forecast either. Dana Markland had a recent eye-opening op-ed detailing rising interest rates, falling inventory, and regulations and their collective impact on prices.
Among a sample of builders, who all are Home Building Association of Richmond members, the average price — for both single-family homes and townhouses — was $393,366 in June 2020. By June 2022, the average price was $518,384, an increase of 32%.
Her detail on financing points out that even with all of your financial ducks in a row (like zero debt and good credit score, etc.), at a 6% mortgage interest rate you “need to make $88,619 annually to qualify for the average new home.” She also points out Census data showing the average income in the Richmond region is about $71,000. Don’t need a calculator for that math.
She also points out that the tightrope government must walk to encourage growth without suffocating housing inventory and supply is tricky. She notes that home builders’ numbers were down 45% in the last ten years and down 20% in the past two years. So we are growing in population and shrinking in new housing construction.
Don’t worry, though, government is here to help! Every municipality in the region knows housing affordability is important, but the adoption of new/different land-use policies that would help encourage growth is politically challenging (to put it mildly). “Local government did not keep pace with the demand for housing.” Then, Markland drops the whopper:
Government regulation at all levels accounts for an estimated 23.8% of the final price of a single-family home, or $123,375 on the local average price. This amount is directly attributable to regulation during development and construction. The cost to the homeowner taking on this additional $123,375 debt, at a 6% interest rate for a 30-year fixed mortgage, equates to a $740 monthly payment. This amounts to an increase of $8,877 each year, or $266,292 over the entire 30-year mortgage period.
It is reasonable to assume (although Markland doesn’t mention it) that this type of regulation applies to the cost of an apartment building, whether it is on Richmond Highway or in Scott’s Addition. Delays in zoning, permitting, and approvals (especially in the City) drive the cost of all housing higher just at a time when we can afford it least.
She concludes with a polite warning, which essentially is that we need to address and meet the challenge or we will end up like San Francisco. Yikes.
As we watch and applaud economic development wins — AutoZone, Lego, Amazon and more — where do the workers sleep at night? Will we learn from the housing failures of communities like San Francisco, or will we repeat them?
It is time to course-correct the region’s economic development efforts to include housing in the strategy. If regulation is left unchecked, demand for housing once again will outpace supply, and consequently drive up the cost of homes to the region’s detriment.
This column has been republished with permission from RVA 5X5.