OPINION: Will Increased Density Lead to Affordable Housing?
OPINION: Will Increased Density Lead to Affordable Housing?
Density is on the City Council agenda tomorrow night. Will this lead to more affordable housing? Not likely. So what's really going on? The answers will surprise you.
by Rick Pullen
GUEST COMMENTATOR
On Tuesday, Council runs for cover playing the affordable housing card while actually making housing more expensive.
Thanks to Fredericksburg City Council’s vote to build a new—but not needed—middle school and its need to renovate the city’s sewage treatment plant, real estate taxes and water and sewer fees are surging and will continue for the foreseeable future. Now Council may pile on with its consideration of another reckless policy that will send taxes even higher.
This week’s public hearing will be over residential density. Last year, after a huge protest throughout the city, Council voted down an effort to allow ADUs—accessory dwelling units. These are basically second homes in your backyard, which would drive up the density in the city. With two new members and probable supporters on Council, it’s renewed the debate again, and again under the guise of creating affordable housing in the city.
Councilman Jason Graham is leading the charge with Councilman Jon Gerlach close behind. The goal is to increase the city’s residential density to help young families move into the city. What this will do is add more school-age children, which will drive up government costs, your taxes, and the cost of living in the city. What it won’t do is lower the price of housing, which has surged in recent years. A few years ago, the median price of a home in Fredericksburg was $370,000. Today it’s around $450,000.
Graham’s argument is basic supply-and-demand economics. Increase the supply of existing and new homes, and prices will fall. In theory, that should work, but not with the Fredericksburg real estate market—not in the foreseeable future. And there are good reasons why.
New Housing
First is the underlying cost of building a new home and purchasing a building lot in the city. Unlike surrounding counties, the supply of buildable residential lots is small and finite. Material and labor costs are also stubbornly refusing to go down.
The new zoning proposal Council is considering would double the density in neighborhoods beneath the University of Mary Washington and those surrounding downtown and would quadruple it in other places, especially near Lafayette Blvd. Since the land supply is so small in Fredericksburg, the proposed rezoning is nothing more than a land grab to create more buildable real estate.
The goal is to increase the city’s residential density to help young families move into the city. What this will do is add more school-age children, which will drive up government costs, your taxes, and the cost of living in the city.
But would that make housing more affordable? Let’s see. You’re hard-pressed to buy a home below the college for the city’s median price of $450,000. (More likely they start around $650,000.) Then you pay to tear it down and build two new four-story townhouses on the lot (depending on how many and how tall Council would allow). You then sell them for a profit. But when you combine your high land acquisition cost with the high cost of tearing down a home and building two new ones on your lot, it becomes apparent why you haven’t solved the affordability issue. We’re talking houses in the $750,000 range at a minimum to make a decent profit. And this says nothing about what you’ve done to change the complexion of the neighborhood. How many homeowners near downtown want one or two four-story townhouses next door?
If the new homes are not affordable for young people, there is no practical reason to rezone the city. City residents need to ask Council the question: Why do you really want to do this?
Existing Housing
If you’re old enough to remember the early 1980s, then you’ve seen mortgage interest rates soar higher than 18%, and in the past decade you watched them drop and stay below 3% for years. Economists say in our lifetime it’s unlikely we will ever see rates drop so low again. Homeowners with low-interest mortgages today realize this and are unwilling to give them up by putting their home on the market and buying a new one with a much higher rate.
What are we left with? Small supply, big demand, equals high prices and unaffordability.
So why the need for the rezoning? Why is Council still debating the density issue after its citizens made it clear last year, they don’t want it increased? This is where political cynicism abounds and where political careers go up in smoke.
Distraction
Council has a history, and that’s important to remember in this rezoning effort. It’s been roundly criticized for its profligate spending and ever-rising taxes in recent years that have priced out the portion of the population it’s now playing to and claiming to want to help. The thinking is Council has to do something—anything—to show it actually cares about affordable housing (which it doesn’t, but I’ll get to that shortly).
This is the key to this whole debate.
Advocating greater density may appear at first glance to solve the problem, but in fact it only exacerbates it. But that would mean Council is not being straight with city residents. Again, ask why?
Our political leaders need to either create or join a public housing authority to help young people. There, it could compete for federal tax dollars that are already going to other, more responsible, urban localities facing many of the same issues Fredericksburg does.
Remember, we’re talking about a City Council that spent $5,000 on each trash can and each picnic table at Riverfront Park—and didn’t blink an eye. We’re talking about a Council that gave nearly $4 million in tax breaks to a developer to build a downtown parking garage, which he never built. There’s not a single member of Council taking on the role of guardian of the public purse. Not one. Let’s hope the two new members elected in November do a better job. We at least have to give them a chance to show their true colors.
So, where are we? What is Council really up to? It’s trying to cover its backside following criticism of its constant tax increases in recent years that are pricing young people out of the housing market. The rezoning is a distraction to cover the truth that Council is partially responsible for creating this problem with all of its spending. That’s the answer to one of the questions.
Now, do we have an affordable housing crisis? Yes. Fredericksburg can’t survive as a city of old farts, the very rich, and upper middleclass residents. That’s how inner cities go to die. Council needs to step beyond political cynicism and do something concrete to help.
Our political leaders need to either create or join a public housing authority to help young people. There, it could compete for federal tax dollars that are already going to other, more responsible, urban localities facing many of the same issues Fredericksburg does. Council would have a fairly wide latitude to then help young families with grants and gifts to purchase a home in the city. Most importantly, neighborhood densities would not be affected. With the right type of program, young families could afford to move into some of the more expensive existing neighborhoods. And Council wouldn’t have the majority of city residents up in arms.
But there’s just one problem. And it’s a big one. Neither Council nor the city staff want to do this. Council members aren’t serious about affordable housing, they just want you to think they are. Which is the answer to the other question.
Now that you have the answers, the next question for city residents is what are you going to do about it?
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The Free Market dictates home and rent prices. Housing is like a commodity. How can you make gold more affordable? It would require massive subsidies somewhere along the line. In doing so you raise taxes and make housing less affordable. Higher taxes are passed on to tenants.
I wrote this about Stafford, but it fits for Fredericksburg too.
There are many trends that bring people to Stafford. The housing costs are lower here than in Northern Virginia and the DC Area, so I believe that's the biggest factor. People move here simply to get a bigger house. Many come from Northern Virginia where they can sell their Condo or small house and buy a bigger one here. The rental cost are also much less. Federal workers that get transferred here also want more house for their money, so they move to Stafford.
Some say we need affordable housing, but what they neglect to see is Stafford is more affordable than the County's to the North of us. No matter what we do the appetite for affordable housing will never be satisfied.
This column is littered with ad hominem attacks, which hurts your case. You accuse City Council of acting in bad faith, yet provide no evidence members are proposing UDO revision with ulterior motives. Fredericksburg isn’t the first city to propose increasing density in an effort to offer more affordable housing. (See Alexandria.) Fredericksburg won’t survive if we bow to the vocal minority, some of whom seem to think only well-off empty-nesters should live downtown. Meanwhile, you spend very little time describing your solution to the lack of affordable housing. So let’s talk about your solution a little more. I’d gladly support public housing downtown as you suggest. But do you sincerely think downtown residents who opposed ADUs would welcome a local housing authority--particularly one with the stated purpose of offering more housing downtown for low-income residents? I can’t imagine the amount of pearl clutching if this were proposed. Not to mention, public housing has a poor track record for a variety of reasons, including discriminatory zoning and a laissez faire approach by the federal government. Your simple solution is naive at best, but I really don’t think you’re looking for a solution. You and other residents are perfectly fine with the status quo.