Virginia’s housing problems, like the nation’s, date back to the 2008 financial crisis. The influx of homes created a bubble that burst and saw foreclosures at record rates. Developers have been reluctant to ramp up home construction ever since.
Only now is the U.S. starting to reach pre-2008 levels of new construction for privately owned housing. Virginia is smack dab in the middle of the national average for such new construction, according to real estate industry trackers Construction Coverage. Their lead data analyst Michael Stromberg said incentives to build lean towards new luxury homes.
The builders and localities make more money from them, both from the sale and from property taxes. Stromberg said that’s a problem for those outside the luxury home market: “All these incentives, from the people to the municipalities, to the builders, they’re all kind of misaligned and not incentivized to provide housing, and a lot of it, that is affordable,”
States have moved to try to address the issue, but localities have long controlled zoning and permitting. That leaves change in the hands of city council and county supervisor meetings where the loudest voices in the room may be the ones least interested in new homes.
Stromberg said fixes usually fall into an either top-down approach— changing state laws to step on local zoning authority— or bottom up— incentivizing localities to build more via carrots and sticks
Newport News Mayor Phillip Jones is more interested in the bottom-up approach.
“We’re always going to support legislation that provides resources, not mandates,” Jones told Radio IQ. “At the state level we’d appreciate and encourage resources and ways to incentivize some of these local strategies, especially around affordable housing.”
That’s an opinion shared by many localities— they don't want to lose control.
State Senator Schuyler VanValkenburg has been a driving force around new housing efforts at the General Assembly. He’s helped pass laws to remove parking requirements for new construction, allow accessory dwelling units on existing lots and other measures that could open up the doors to new construction. But all those changes empower localities to change their laws.
Many haven’t and VanValkenburg is tired of it. To that end he worked to pass a bill earlier this year that, “creates supply targets for localities and then gives them a bunch of tools that they need to implement to try and reach that target or else have some of their zoning authority taken away,” VanValkenburg said of his effort with Delegate Dan Helmer.
Helmer’s version made it further due to timing, but both failed to sway enough people in time and their efforts died. VanValkenburg plans to work over the summer to bring it back next year.
But next year will see a new governor in Richmond.
Here’s Democratic candidate Abigail Spanberger on housing: “I want to work to make sure we’re giving localities and cities the flexibility that they need in order to build more housing,” Spanberger told Radio IQ in her first interview on the topic.
Among ideas she shared with Radio IQ were empowering localities to use their bonding authority to help finance housing, allow affordable tax credits to be transferable, looking at state certifications and requirements to keep builders in Virginia among other concepts.
“We could open a lot more opportunity by just making sure localities can take some of the actions they want to take that are necessary for their own ability to build,” she said.
Republican candidate Winsome Earle-Sears pointed to cooperation between the state and localities.
Earle-Sears said preserving local authority was about quote “partnership—not paralysis.” She also pointed to matching infrastructure grants, streamlining approval processes and expanding tax initiatives for public-private affordable housing partnerships. She pointed to the carrot and stick theory but hoped to use the stick more as a tool for "accountability, not coercion."
"Ultimately, housing affordability isn’t about ideology. It’s about whether Virginians can live near where they work, raise their families, and build wealth," Earle-Sears said. "That’s why I believe in carrots that work—and the courage to act when they don’t."
Bernard Harkless is a partner at the affordable housing builder Lynx Ventures. He said the issues he runs into depend on the locality, often involving different interpretations of different codes and rules. But localities know their constituents better than the state does, he said, and creative policy making aiming to increase housing stock can and should be multipronged.
“There’s multiple paths to get to that outcome. It could be policy; it could be financing. There may be 5 or 6 ways to solve a problem better,” Harkless told Radio IQ. “Tell me what it is you’re trying to solve for and maybe there’s some creative ways we can get there.”
No modern housing stock conversation is complete without looking at outliers; states like Texas which have seen massive influxes of housing.
“Good jobs bring great opportunities, but brings a housing supply crisis,” Christy Gessler, Chairman for Texas Realtors, told Radio IQ about why she thinks the Lone Star State saw thousands of new homes built in recent years. “We have a lot of demand in almost every city in our state and we’re just not keeping up.”
Tales about Texas “abolishing zoning laws” have been greatly exaggerated, though Houston doesn’t have publicly enforced zoning and similar efforts have been floated.
Texas’ success may have more likely been an amalgamation of good market conditions; folks were moving into Texas during the pandemic driving up values, which inspired developers to ramp up production. And much of this happened before interest rates shot up during the pandemic recovery.
"Think of all the ingredients together - rising rents, rock-bottom interest rates and a huge amount of migration to Austin from other cities," University of Texas at Austin real estate economics professor Jake Wegmann told NPR late last year. "It seemed like a really great place to get into the apartment-owning business if you weren't already in it.
Still, the ramp up in demand led to an estimated 10s of thousands of new units since 2021.
Austin also saw much of their local government become more pro-housing which allowed for more policies— ADUs and lot size minimum decreases— but its large apartment buildings going up most frequently right now.
This influx also saw the market correct itself; rents are falling, the average cost of a house fell to just over $330,000 (Virginia’s average is around $425,000) and the time a home stays on the market increased to about 4 months. It’s half of that in the Commonwealth.
The new builds haven’t stopped, but Gessler said it’s slowed.
“The race was on,” she said. “Now it feels like a more normal pace.”
There were some statewide reforms in Texas according to Stromberg with Construction Coverage. He said the legislature took steps to reduce risk for developers; a new law freezes relevant zoning laws once early paperwork is submitted, locking them out from any future changes.
“Even though it's a top-down approach, it's taken more of a ‘removing barriers to development’ kind of approach rather than incentivizing with funds,” he said.
Redfin Chief Economist Daryl Fairweather also theorized a cultural difference for Texas; states like Virginia give neighbors a say in lot changes and Texas doesn't.
“They don’t extend property rights to other people’s backyards,” she said of a kind of libertarian-approach to Texas housing laws. “The state is giving back liberty to property owners.”
That doesn't mean it's always worked. Some large housing reforms in Austin were struck by courts after locals pushed back.
Other states have taken or tried more dramatic top-down approaches; California’s ADU law impacted every locality, they nixed single family zoning in some and streamlined project approval with a 60-day deadline. But the single-family zoning law has faced hurdles.
“It's controversial, but it's been in place for a while now and it's putting houses in places that were firmly against increasing density,” Stromberg said.
Utah requires localities of a certain population to plan for moderate income housing, and changed their definition of affordable housing, but statewide ADUs and a rumored, bolder state-wide upzoning plan failed to pass.
Colorado pushed for expanding housing on church and school-owned land, but the effort, a big goal for Governor Jared Polis, died during this year’s legislative session. Local reports suggested it was push back from localities, usurping their power and “upending” their own local planning efforts, which killed the bill.
Back in Virginia, the state has some publicly funded systems. The Virginia Housing Trust Fund, created in 2013, is among financial fixes to address the problem. These days it’s valued at about $87 million. It helps with gap financing to make a lot of deals work, and averages about $1.1 million per project. Its total allocations float around 80% to a competitive loan fund for affordable housing while 20% goes to homeless reduction.
But a 2021 report from the Joint Legislative Review Commission suggested Virginia was underspending on housing by billions of dollars a year. It said direct assistance to meet low income rent support demand could cost about $3.5 billion, low-income homeowners would need $1.3 billion.
Fairweather with Redfin said state funds can help housing a lot, but not unless, “you remove barriers to increasing supply.”
And as for local pushback, Jones said they're working to overcome complaints against new housing in Newport News. He pointed to a project expected to bring over 600 new units to the area; it took plenty of local listening sessions and collaboration to get it as far as it has.
“You can’t hide from [Not in my Backyard]-ism, I think you have to approach it head on," Jones said. "People have valid concerns about a house they bought 20 years ago and now there's going to be an apartment complex, they can’t see the river, or there's already bad traffic.”
That brings us back to Senator VanValkenburg, whoever the next governor is and any dreams the legislature and the next executive can agree upon.
“We just want to get into an environment where we can actually start building at the rate we need to,” he said, noting stakeholders were coming together in some places.
“We are so far behind,” he warned. “Virginia is nowhere near an Austin-like circumstance.”
This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.
