Virginia’s Two-Decade Housing Construction Shortfall

by James A. Bacon

The pace of new housing construction in Virginia has fallen markedly since 2000 compared to the three previous decades, according to the Virginia Association of Realtors.

Between 1968 and 2000, 49,700 permits on average were issued annually for the construction of new housing units in Virginia. Since then, permits issued have averaged 37,600 new units yearly. Over the past two decades, the “housing gap” amounted to 243,000 units, writes Lisa Sturtevant, chief economist for Virginia REALTORS, in the association’s blog.

The deficit in housing construction drives up rents and home prices, Sturtevant says. “The consequences of the housing shortfall go beyond economic. Insufficient housing production has led to lower rates of household formation, more young adults living at home with their parents, and significant deterioration of the housing stock in many parts of the country.” 

The numbers are valuable but the analysis is incomplete. What if the slowdown in housing construction simply reflects a slowdown in population growth and household formation? Surging housing prices and homelessness suggest that shortages are in fact occurring, but we need to compare the number of housing permits issued with the growth in population and households to know for sure.

Here are some preliminary figures, which I’m sure Sturtevant could refine.

Between 2000 and 2019 (based on her numbers), housing permits were issued for roughly 714,000 housing units.

Between 2000 and 2019, according to Census Bureau numbers, the number of housing units in Virginia increased by 658,000, bringing the total number of housing units to just shy of 3,600,000.

Why the difference between housing permits and the actual housing count? One possibility is that not all housing permits resulted in new houses. Another factor: presumably some housing units were torn down during that period.

More importantly, did housing construction keep pace with population growth? The number of households over the same period, according to Census data, increased by 452,000. In other words, Virginia housing markets saw the housing supply increase by 200,000 more than the number of households. That looks more like a surplus than a shortage!

The story gets more complicated the deeper we dig. The number of occupied units is less than the number of total units. Why? Because some units are vacant. In 2000, the number of vacant units amounted to 205,000. I could not readily identify the number of unoccupied units in 2019 (or 2020, for that matter). However, these numbers imply that even if the number of vacant units had doubled over that period, housing supply and demand would have stayed in balance. Is a doubling of vacant houses in Virginia plausible given the urban revitalization and gentrification we’ve seen over the past decade?

Perhaps so. Perhaps the vacancies are occurring in rural areas that are losing population. Yet another possibility: Perhaps the number of weekend/vacation homes, which are vacant most of the time, has increased dramatically.

Crunching statewide numbers gets us only so far. Statewide averages obscure important regional dynamics. A supply-and-demand imbalance could be created if rural/small town counties were emptying out while fast-growth localities were having trouble keeping up with growth. Similarly, an imbalance could be created if most of the new housing units were vacation homes, weekend getaway homes, or Air BnB rentals.

My intuition tells me that Sturtevant’s analysis is correct — Virginia needs more housing. I’d feel better, though, if intuition was backed by the statistics.

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20 responses to “Virginia’s Two-Decade Housing Construction Shortfall”

  1. LarrytheG Avatar

    Yep – a good way to get overwhelmed by the data and one might think that construction responds to demand and in that context not sure what “gap” means.

    If demand outstrips supply and prices rise, that ought to bring more construction, although right now shortages have driven up the cost of material and in turn new home costs.

    Up Fredericksburg way, not only is single-family in demand, but apartments are hot, especially up-scale gated apartments with amenities.

    This is a field where knowing how to properly slice and dice the numbers is important in understanding the data and better understood by professionals actually in the housing fields.

    1. Nancy Naive Avatar
      Nancy Naive

      Where are all these people coming from? Was there a blackout in DC nine months ago?

  2. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    For my clarification, what constitutes a “a permit for a housing unit”? If someone constructs a condominium with 20 units, is the permit for one unit (the condominium building) or 20 units? Also, are apartments included in these numbers?

    1. WayneS Avatar

      According to the Weldon Cooper Center, this is how the Census data is set-up: “For multi-unit structures, the data indicate the number of units permitted rather than the number of buildings.”

      So, it looks like the 20 unit condo building would be counted as 20 housing units.

      1. Dick Hall-Sizemore Avatar
        Dick Hall-Sizemore

        Thanks. With that definition, it does seem that fewer units are being built overall. But, each locality is different–Richmond has seen a bunch of new units built over the past five years.

    2. Nancy Naive Avatar
      Nancy Naive

      Probably doesn’t help, but things look relatively the same yoy to me since 2008

      1. Dick Hall-Sizemore Avatar
        Dick Hall-Sizemore

        That does clarify the picture some. The downtown coincided with the 2008 recession. No surprise there. And, given the time it took to emerge from the recession, it is no surprise that housing starts have not gotten back to pre-recession levels.

        This data does not reflect what has been happening in the Richmond area. Everywhere I go, I see new houses, townhouses, and condominiums going up. Based on that and based on what I know about one rural county in Southside, I suspect that the rural areas are where there has been a real decrease in the number of housing permits.

        1. Nancy Naive Avatar
          Nancy Naive

          Your wish is my command…
          I would have published the link and the chart but Disqus calls it “spam” if I include 2 or more.

          There’s a city chart .

          Personally, I’m expecting a drop by next summer in home prices.

          Rumor has it that zillow, redfin, and the such are currently doing a “buy & hold” on the entry level houses.

        2. CJBova Avatar

          True for Mathews, but besides aging population and slow decline in total numbers, the Floodplain requirements for coastal areas limit available sites and are expensive. There’s also the limitations for individual septic systems, and the HRSD forced main sewage transmission capacity to Yorktown is extremely limited. To add a new line is in the neighborhood of $20 million plus $2 million for each required pumping station–which the county would have to pay. All income would go to HRSD.

  3. Nancy Naive Avatar
    Nancy Naive

    Cool. Just received a mail flyer from William & Mary cruises and tours for a 7-day tour of the Civil Rights Marches trail through Alabama. I’ve got kin in Alabama and even with family, I don’t want to spend a week there.

    Also got one for Egypt. Looks like fun.

  4. CJBova Avatar

    It will be interesting to see what the 2020 census shows about the number of households and how many moved into housing units in recent years.

  5. Eric the half a troll Avatar
    Eric the half a troll

    I wonder how the 2008 housing recession impacted these numbers…

  6. CJBova Avatar

    “In 2000, the number of vacant units
    amounted to 205,000. I could not readily identify the number of
    unoccupied units in 2019 (or 2020, for that matter).”

    The American Community Survey 5 year estimate (2015-2019) says Virginia has 3,514,032 (margin of error +/- 633) housing units with 362,987 (margin of error +/- 7792) vacant.

    For the single year 2019, they reported 370,411 (margin of error +/-13,050) vacant units.

    for rent: 64,412 (+/-5,638)
    rented, not occupied: 19,055 (+/- 2,930)
    for sale: 28,460 (+/- 3,494)
    sold, not occupied: 11,572 (+/- 2,518)
    for seasonal, recreational or occasional use: 81,905 (+/- 5,830)
    for migrant workers: 880 (margin of error +/- 595)
    Other vacant: 164,127 (+/-8,208)

    Other includes undergoing repair or remodeling
    being used for income-generating purposes compatible with its zoning
    in foreclosure
    seized for tax delinquency/to be auctioned

  7. CJBova Avatar

    One more note on the years housing structures were built. The number peaked in the 1980s and not surprisingly, dropped dramatically after 2009:

    1. Eric the half a troll Avatar
      Eric the half a troll

      So the “two decades” cited by JAB above is really just one decade and can be explained as impacts from the 2008 real estate recession.

      1. CJBova Avatar

        He was quoting Sturtevant from the American Association of Realtors who was using a two decade to three decade number of annual average starts.

  8. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    The more I think about this, the more confused I am. Don’t we live in a capitalist economy? The government is not artificially restricting the number of housing units. The “gap” is between the number of permits issued in a previous time period and the number of permits issued recently. But, does that represent a “gap” between supply and need? If there is a need and demand for more housing, why isn’t the construction industry rushing to fill that gap?

    Also, it strikes me as a little ironic that the economist for the realtors is decrying the gap. When there is short supply of houses, that pushes up the prices of existing housing, which results in higher commissions for realtors. I am sure that, deep in their hearts, they are very thankful for the current lack of new houses on the market.

    1. Paul Sweet Avatar
      Paul Sweet

      The construction industry can’t rush to fill the gap because it was severely impacted by the 2008 recession and never recovered. Several contractors, subcontractors, and suppliers went out of business as a result of the severe downturn.

      Construction workers are aging and retiring faster than new construction workers are being trained. Many people think that people need a college education to be successful, and that manual labor is too demeaning. The job superintendent on a project I was involved with several years ago told me they couldn’t take on more work because they couldn’t get enough potential workers who could pass drug tests.

      Contractors and community colleges are trying to do what they can to train new workers in the construction trades, but they can’t force people who want a cushy prestigious desk job to work out in the weather, get their hands dirty, and be looked down upon.

  9. LarrytheG Avatar

    I’m confused also. Does a “gap” mean people are living in motels or tents or their cars?

    And why is it the government’s “responsibility” to “fix” this instead of the market?

    For all the “problems” being cited, isn’t that true of just about any industry and we let the industry and the economy correct the imbalances?

    And especially from folks who consider themselves Conservatives… no?

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