Thursday, August 04, 2005

Affordable Housing In Virginia Beach

There isn't any, according to a study cited by this Virginian-Pilot editorial. And besides making it tougher for businesses to find employees, the lack of houses for those making $50,000 a year or less means more cars on the highways as people accept long commutes in exchange for being able to own a home.

A group called Empower Hampton Roads is pushing one solution - letting developers build more units that zoning would allow in exchange for making some of them affordable. It's called "mandatory inclusionary zoning" and it's in use in Fairfax County, says the editorial.

Making inclusionary zoning an option doesn't work - Suffolk has had such an ordinance for years, the Pilot says, and no developer has ever used it.

2 Comments:

At 9:49 PM, Blogger Ray Hyde said...

Mandatory inclusionary zoning doesn't work either. All that amounts to is yet another form of proffer or bribe in exchange for the "right" to construct a building, otherwise known as doing a job. Maybe some builder will attack Virginia zoning regulations under the right to work statutes.

Any kind of proffer results in existing owners staying put longer, increases the cost of new homes, reduces the pool of those who can qualify for a home, and reduces the trickle down of used homes.

I have a set of study papers on constructions costs. It compares eight cases for a hypothetical 50 acre subdivision. Basically, the higher the density, the lower the price of the homes, and the more money the builder makes. If there are fees and proffers, the homes cost more, and the builder makes more.

The study papers assume a 20% profit, so if the fees increase building costs, then the dollar amount of assumed profit goes up. The problem is, that if the resultant final price is too high, the builder assumes the houses will not sell, and so he moves on to another location. What he does not do is cut his profit margin to absorb the cost of the fees.


If there are affordable homes in the mix the remaining homes cost more, the average home price is more (because the affordable homes requirement comes with a density bonus), and the builder makes the same or slightly less profit. If the slightly less profit is too much less, then he moves on to another location.

The conclusion is that you have to stop screwing around with the market, if you want affordable homes. Otherwise you have to buy the homes at market rates, and have the public absorb the losses through higher taxes.

Even if you stop screwing around with the market, you may still not have affordable homes. Affordable homes require that there exist jobs that pay enough to afford a home. The market does not guarantee that homes will be affordable, only that they will be available at the lowest price a reasonable profit and existing regulations allow.

Considering the loss of jobs to offshore locations, and the resultant lowering of pay for the remaining jobs, and the increased costs of material and energy for a home, it may turn out that homes are just not available.

That is part of the market, too.

 
At 8:49 AM, Blogger Matthew said...

The housing market recovery in the U.S. during 2012 was helped by the bottoming out of home prices, record-low rates, decline in foreclosure activity and healthy rental markets.

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