Affordable Workforce Housing Forum
By Helen E. Dragas
(Dragas made these remarks at the Affordable Housing Symposium
at the Contemporary Art Center of Virginia June 30, 2004)

I believe that I have been asked to speak to you today so that I can provide a glimpse at the practical reality of bringing more moderately priced housing to the large market that exists for it in Hampton Roads. The Dragas Cos. have been building homes in the Hampton Roads region for over 30 years, and so we have been witness to the evolution in product development and housing prices over that time period. I am going to focus my remarks about affordable housing on the condominium market because it has the greatest likelihood of providing affordable housing (being the entry point for price), but the general principles I will discuss apply just as well to the single-family detached home market.

When condominiums were first introduced to this market in the late 1970s and early 1980s, they served the function of providing affordably priced housing to small households such as single professionals and young married couples with no children. The prices for condominiums predominately were in the $60,000 to $80,000 range. In the ensuing years, structural shifts in people’s lifestyle started attracting people to condominiums for different reasons. During the decade from the mid-1980s to the mid-1990s, technology significantly accelerated the pace of life, more and more women worked outside the home and average household sizes continued to decline. Condominiums then took on a lifestyle appeal – homebuyers began to choose condominiums because of their low maintenance. Still, home prices in general, including condominiums, stayed within a moderate range.

But beginning in the mid-1990s, the availability of zoned, developable land in our region began to be severely strained. Anyone can take a drive through southern Virginia Beach or Chesapeake or Suffolk and see that there is plenty of land out there, but it is either environmentally constrained or restricted from development by the land-use plans of the municipalities. There is significant pressure on city council members to limit residential growth, as it is viewed by vocal groups of citizens as being responsible for road congestion, school crowding, storm water system flooding, and general environmental deterioration. This very difficult environment for land acquisition is, in my opinion, the driving factor behind the significant escalation in home prices that we have seen in the last five or six years. It is a basic function of supply and demand – low interest rates, the relative unattractiveness of investment alternatives, and the growing desire of people to make their homes a haven and refuge from an increasingly threatening world are all factors that have driven the demand for housing through the roof at the same time that we have simply run out of zoned, developable land.

Because the supply of land is so tight, land prices have escalated significantly. We are now paying double the amount per acre that we did just five years ago. The market value of residential land in many cases now exceeds the price of commercial property. The lack of residentially zoned land puts the developer in the position of having to request the rezoning of land zoned for other uses from the municipalities, a process that involves satisfying all the demands and desires of surrounding residents and businesses, as well as the individual concerns of seven to 11 city council members. Equal to or greater than the cost increases due to rising land prices are the added costs that result from enhancements a developer must add to the home and the neighborhood as he or she guides the land through the rezoning process. These enhancements, in my estimation, can add $20,000 to $40,000 to the price of a condominium, if the developer is even successful in obtaining the rezoning. More importantly, this process precludes a lot of housing from ever coming to market at all.

Anyone who wants to survive the exhaustive and expensive rezoning process must quickly come to the realization that they had better propose something of higher or greater value than what could otherwise be done with the property by right. In other words, the pot needs to be sweetened for the city, for adjoining property owners and for surrounding civic leagues. What follows in creating a successful rezoning application is like preparing the bride for her wedding day. It is an architectural and landscaping beauty pageant – onto the houses goes the brick, off comes the vinyl siding. Into the landscape buffers go the oversized ornamental and flowering trees, the golf-course-sized earthberms, the brick entry monuments, the granite signage, the magnificent fountains in newly created lakes, the arched gates, the trellised gazebos and designer clubhouses. And out goes the fleeting thought of proposing high density. Depending on the circumstances, to the city, perhaps, goes a right-of-way dedication for an eventual road widening, a proffer of money for school capital construction, a contribution to an open-space preservation fund, or maybe a direct improvement to surrounding roads. And then there’s the big clincher – the only way to get the support of the neighboring civic leagues – the promise that the sales prices of the homes will be equal to or greater than that of the surrounding properties.

The developer is happy to make these promises and concessions – he or she knows the market will bear the price of all the add-ons. In this red-hot real estate market, a developer has to be fairly clueless to build something that won’t sell, so they don’t worry too much about the cost of all these goodies. Besides, the resulting community is beautiful, and it enhances the developer’s reputation and therefore his or her chance of obtaining the next zoning approval. The only group that loses in this process has, at least until recently, been relatively silent. This silent majority is that group of households that earn the median income or less and can’t afford (or do not desire) to pay a quarter of a million dollars for a condominium or over $300,000 for a new home.

What’s to be done, then? Assuming that we all agree that measured, responsible growth is good, we have but two choices. Do we accommodate that growth by using more wisely the land that is presently served by infrastructure (i.e., by increasing densities) or through a policy of allowing growth to spread to the outer limits of our available land (i.e., through sprawl)? If we agree that we want to preserve the rural areas of our cities and that we should be responsible stewards of our environment, then allowing for increased densities is the only way to accommodate this growth. This is a tremendous public relations challenge for anyone attempting to further the cause of affordable housing and in my opinion it is the most difficult obstacle facing this cause because, unfortunately, there is a widely held and deeply felt misconception in the general public about the meaning of word “density.”
“Density” is a word that can strike fear in the heart of many a good civic league president, and therefore, understandably so, fear in the heart of many an otherwise well-intentioned elected official. As a developer, I have come to the conclusion that some civic activists believe that the word “density” is defined as follows: “A developer’s desire to cram as many low-end housing units as possible on the property near my home without any regard to the effect that this will have on the value of my home and therefore my personal balance sheet, the importance of which far exceeds my concern that anyone else be able to afford a home.”

The working definition of density is actually as follows: “the number of housing units physically located on one acre of land.” It is a purely quantitative statistic that in and of itself carries no subjective meaning. It says nothing about the amount of open space provided, the quality of the buildings, the beauty of the architecture, the look of the landscaping or the development’s advancement of any particular land use principle. And yet the general public, some municipal planners and many politicians perceive that increasing density on a property is generally a negative proposition. I have had citizens send council members e-mail in opposition to an application or attend a city council meeting to oppose an application solely on the basis of its density, without ever taking the time to look at the proffered development plans. I have had a rezoning application rejected on the basis of “density” and opposed by planning department staff members on the basis of “density,” when the resulting communities were much more aesthetically pleasing, fiscally beneficial to the municipality and even had more open space than their lower-density alternatives.

What we are fighting here is pure and simple human nature. I am not making a value-judgment here. I have the same self-interested desires and urges as everyone else and I will continue to try to run my business in a way that makes it successful – by responding to the needs of the market, and that means all of the interest groups that weigh in on what we do.

But I would like to believe that the objective of providing more affordable housing is not unattainable. We first have to overcome the anti-density sentiment, and we need political leaders willing to support good rezoning applications for more moderately priced housing. We need to have the spine to call citizens on it when they seemingly eliminate from their memories that part of their lives when they were younger and didn’t have as much income as they do now. We should remind them of the inevitability of aging when they decide to temporarily suspend any thought about the possibility that in their older years they may be on a fixed income and not of the means that they are now. We need to encourage them to realize the effect of the lack of affordable housing on the people who teach our children and ensure our public safety, people who don’t have especially high incomes but also don’t want to live 40 miles away from where they work.

In particular, we need our elected officials to reject the position of planners who provide the necessary excuse in the form of this statement: “We have plenty of that type of housing stock.” We do have a lot of affordably priced housing, but it is not sitting vacant. And most of it is now functionally obsolescent and therefore needs to be addressed through renovation incentives. But even if it were not obsolescent, it is not nearly enough to accommodate new job growth and new household formation. Until all the new jobs created or attracted by our capable economic development folks are $70,000 per year jobs, we don’t have enough affordable housing to match our growth rates. I believe that the business community should become actively engaged in this issue because it is contributing to personnel cost increases. We have to pay higher wages to attract workers to live here. The same is true of municipalities who are large employers of median-income workers.

The thought that struck me immediately as I walked through the dynamic affordable housing design exhibit at the Contemporary Art Center of Virginia yesterday was this – “Wow, wouldn’t it be a luxury if all we had to debate was the question of applying some of these unique and progressive home designs?” But unfortunately the thought of sitting at a table with a talented design team and charging them with producing creative plans for affordable housing such as is hanging on these walls is purely an exercise in fantasy. Every design I viewed here was a design for a single-family detached home. It is practically impossible to bring an affordable multifamily product to market in Hampton Roads – much less a real detached home for a family to enjoy!

In sum, I think that the path to providing more affordable housing options lies in the hands of our planners, planning commissioners and, most importantly, our city councils. Yet it would be naïve and impractical to expect any one of these groups to die on the sword of an unpopular issue, and so it needs to be made acceptable through serious public relations efforts such as this important forum, and through quality building and development examples.

The conditional zoning process gives a city the control tools that it needs to ensure quality. The development community is standing by, ready to respond to green lights from our elected officials and city planners. We would welcome the opportunity to be more creative with our designs and to produce innovative and attractive affordable housing, providing all citizens of our community with quality housing opportunities.