HSD

It doesn’t sound as good as HUD — but really, shouldn’t our federal housing program be called HSD: Housing and Suburban Development? That thought is prompted by the above-the-fold editorial in today’s Washington Post. “The FHA’s nose dive” takes the Federal Housing Administration to task for propping up the single-family housing market through imprudent mortgage insurance policies.  Meanwhile, Congress has authorized a $8,000 tax credit for first-time homebuyers. It seems that our economy is addicted to the credit cycle that is set in motion by the “purchase” of a home. And the land for those homes is in the suburbs.

Our local zoning laws already make it hard enough to build apartments. Fairfax City has an explicit “move up” housing policy that discourages the production of apartments. Well over 70 percent of Fairfax County’s housing stock consists of single-family homes or townhouses. But they are working in tandem with much larger forces that make single-family homes so much more profitable for developers than apartments. The FHA mortgage insurance policies will cover borrowers who put as little as 3.5 percent down on a house. If they default, the developer has already gotten his money. The bank gets its money. The buyer’s credit is ruined. We pick up the tab.

Apartment dwellers should be up in arms. They are subsidizing a massive public housing program. This has been going on for over 60 years. But now it is getting even more extreme.  FHA’s reserves have shrunk to less than 1 percent of the total loans it insures. China and the US’s economies are said to be joined at the hip; the one cannot prosper without propping up the other. Is the same true of our economy and the continued production of single-family housing?

Unaffordable housing

Fairfax City is updating its comprehensive plan this fall. That provides a good opportunity for residents to weigh in on bedrock policies underlying the town’s future. Not everything in comprehensive plans gets implemented. But nonetheless, the priorities in the plan guide decisions about development and transportation. So it’s worth getting the right priorities into the plan.

One of the more perplexing priorities — which the town has followed all too well — is a focus on “Move up” housing. The logic goes like this. Fairfax City residents have high median incomes. The value of Fairfax City’s housing relative to the median income of its current residents is lower than the relative housing-income ratio for Fairfax County. In other words, we have too much affordable housing, and not enough unaffordable housing. The town fears that residents earning a lot of money will move out to other parts of Northern Virginia that have more unaffordable housing than Fairfax City does. This focus on building more upscale housing has reliably guided rezoning decisions for the past two decades in Fairfax City, resulting in the development of enclaves such as Farrcroft and Pickett’s Reserve.

Fairfax City’s standard defense of this unaffordable housing policy is that the town has more than its fair share of affordable rental units. More upscale housing means a lot more money for public services, parks and schools. Fairfax City has a low property tax rate and excellent services. More upscale housing certainly has something to do with this.

But enough is enough. The real estate market will surely find a high enough price point for new developments without needing a government slant toward making housing even more expensive. The average assessed value of a detached house in Fairfax City is $469,467; for a single-family attached house, it is $718,075. Surely we’ve reached a ceiling. We should be thinking about not just the people who live here, but also the people who work here as well as people who might want to live here. Residents of outlying Northern Virginia counties such as Prince William and Fauquier have very long average commutes and high transportation costs. (See the Urban Land Institute’s Beltway Burden, p. 9 for facts and figures.) One reason is that they are  priced out of closer-in housing markets. Is this Fairfax City’s problem? Well, yes — if you want to do something about the traffic congestion that is caused largely by commuters from these areas commuting through, and to, Fairfax City.

A better set of housing priorities would include compact, walkable apartments or condominiums in Fairfax Circle, where the Vienna Metro station is a ten minute bike ride away. Fairfax City should declare (pyrrhic) victory in its upscale housing campaign and acknowledge the reality that homeownership is not for everyone. While the plan doesn’t have to embrace more rental housing, it should reassess where the town is now and look into a mix of housing options that serve people who both work and live in the Central Fairfax area.

Big Government, Limited Choices

Fairfax City's "step-up" housing policy has encouraged gated communities like Chancery Square.

This past Saturday’s Wall Street Journal has a great article on the need to reduce the huge government subsidies for homeownership and encourage the production of homes and apartments for rent. If you want to expose “Big Government,” look no further than the array of subsidies, loan guarantee programs and local zoning laws that have been developed over the past 75 years to encourage homeownership, drive up the cost of housing and stimulate real estate speculation. As author Thomas Sugrue writes, “The story of how the dream [of homeownership] became a reality is not one of independence, self-sufficiency, and entrepreneurial pluck. It’s not the story of the inexorable march of the free market. . . . We are a nation of home-owners and home speculators because of Uncle Sam.”

Now that we’ve come down to earth, will housing and land use policies change to enable developers to produce homes that people can afford? Fairfax County has a starkly limited housing market consisting of wide swaths of “single-family” neighborhoods, a smattering of garden and high-rise apartments, and townhouses. Fewer than one in every five homes in the county is a rental unit. One reason that families pool their resources to buy or rent in “single-family” neighborhoods mainly is that they cannot find affordable, convenient places to rent.

Retooling our secondary mortgage institutions to help people find homes that they can really afford without “easy” credit, and without “driving to qualify” is mind-bogglingly complex. The Department of Housing and Urban Development is taking steps toward a more balanced housing policy that provides more funding for rental housing. But there are local forces at work too. Fairfax City’s housing policy explicitly encourages less affordable housing and the production of more expensive homes to match the high median income of its residents. Officials say that the city already has more rental units in proportion to overall housing stock than the county does, which is true, although the difference is small and becoming even smaller. But the real estate “market” — however artificial — is already working hard enough to stimulate over-expensive housing, even with the real estate bust, and zoning codes already discourage more rental housing.

Local housing policy should not add even more deterrents to building affordable homes. Instead, the county and city should be looking at increasing rental housing in commercial corridors like Fairfax Boulevard and Route 1 where people can more easily use transit and reduce their transportation costs — the second highest average household cost behind housing.