VIRGINIANS rightly celebrated following Amazon’s announcement that it will locate one of its two new HQ2s in Arlington’s Crystal City. Snagging even half of the largest economic development project in U.S. history is a major coup, especially since the commonwealth offered Amazon just a fraction of the economic embellishments that other states were putting on the table.
Gov. Ralph Northam called the state’s winning proposal “a new model of economic development for the 21st century,” which will bring high-paying jobs and new revenue, the bedrock of any vibrant state economy.
However, the downside of bringing 25,000 people to Northern Virginia, an area that already lacks affordable housing, is that it will have a domino effect that extends far beyond Crystal City.
Realtors in Crystal City are already seeing condo price increases as investors position themselves for the influx. Housing is sky-high in Arlington, where the average income is $110,000, the average rent is $2,500 a month, and the median home price is $664,600, according to Zillow.
Although Crystal City is 50 miles from Fredericksburg, some of the 25,000 HQ2 employees are expected to seek cheaper housing in this area, especially since the Virginia Railway Express makes a stop in Crystal City. As home prices ratchet up in Northern Virginia, people who already live there will also be driven south to the Fredericksburg region. It’s a simple matter of supply and demand.
This will not happen overnight, of course. It will take a few years before the Fredericksburg real estate market, which already has a dearth of affordable housing, feels the full effect of HQ2. But it is on the near horizon.
At a panel discussion on housing at the Fredericksburg Regional Chamber of Commerce’s recent legislative breakfast, real estate professionals pointed out that there is already “a real lack of inventory” for home buyers in the Fredericksburg region, many of whom have been pushed out of Northern Virginia by rising home prices and mortgage interest rates.
Two years ago, 30 percent of all new homes in the commonwealth were built in Northern Virginia. Today, it’s only 20 percent. And as developers look for buildable lots near transportation and other amenities to meet consumer demand, it’s only natural that they look at the Interstate 95 corridor. That trend will only accelerate with HQ2.
In both Northern Virginia and Fredericksburg, HQ2 is good news for homeowners who should see their equity increase as a result. It’s bad news for renters who will likely see rent increases as more people compete for the same available units. But it will be catastrophic for people in the region who are barely able to keep a roof over their heads now.
Gene Brown, president of the Fredericksburg Area Builders Association, told the chamber that construction starts were up 10 percent this year, adding 175 new homes to the region’s housing mix. However, the average price for a single-family detached home was $430,000; and $275,000 for an attached unit. Rising housing prices will push a lot of people, including millennials with heavy student-loan debt, out of the home-buying market and put more stress on the rental market.
Brown pointed out that builders have to pay no more than $60,000 for a buildable lot in order to keep the final price tag under $300,000 – the upper limit of affordability for many families in the region. But such lots in Stafford County are going for $150,000 to $200,000, and between $100,000 and $130,000 in Spotsylvania County.
Builders could make more efficient use of the available land with higher density, multi-story developments, but they often face resistance from established neighborhoods and zoning officials who balk at granting special use permits in residential areas.
Homes in the Fredericksburg region appreciated 5.5 percent during the past year, John Reid, branch manager of Embrace Home Loans in Fredericksburg, told the chamber, and prices are expected to increase another 4.7 percent in 2019.
While a 10.2 percent gain in just two years is great news for homeowners, it will put homeownership out of reach for a lot of other families, who will then be forced into the local rental market. That, in turn, will force many low-income tenants out. And that’s even before HQ2 sets up shop in Virginia.
Fredericksburg area officials still have time–but not much time–to figure out where all these current and future residents are supposed to live.