AFFORDABLE HOUSING

Commentary: To Lower Tax Bills and Home Prices, Support Rezonings

It’s the spring housing market and by now new real estate assessments have made it to every homeowner’s mailbox. While tax rates remain the same, property taxes continue to ascend. Here is the underlying reason why:

Historically low resale inventory leaves little opportunity for those moving into the area, or existing homeowners looking to upgrade or downsize. Fortunately, a dynamic local building community offers every new home product imaginable. Yet, there remains a large gap between the number of new homes constructed in the region and the pace of demand, which drives up real estate values, and hence tax bills, for every homeowner in this region.

According to data from MarketNsight, 12,500 new construction homes are necessary each year to meet demand in the Richmond region. While builders can produce this volume, available land, the entitlement process and government regulation allow for 5,100 permits on average over the past five years, according to data from Integra Realty Resources. Not all zoned land is feasible for development due to a variety of factors — infrastructure, topography, environmental regulations. Any land already zoned that is suitable for development is under development.

More residential rezonings are imperative to unlock inventory for new homes.

As Richmond continues to attract jobs and people, the contradiction between the number of homes available to the population will continue to expand and deteriorate housing affordability. The average new home sale is north of $500,000 in this market. That includes town houses and condominiums. Due to fierce competition, land is at a premium and plays the largest part in price fluctuation.

In 2021, five out of 16 of the region’s top high school districts reported an average new home sales price under $375,000, according to MarketNsight data. That same list in 2023 reports only one high school district under $375,000. Just as a resale house may see a dozen competing offers, so does a tract of land for development. The value of the land becomes whatever someone is willing to pay for it. The raw land price spirals upward, which is reflected in the price of new homes.

Whether you purchase a new or existing home, your wallet will feel the impact. Assessments of existing homes correlate to the overall supply, which means homeowner taxes rise at an abnormal rate when there is insufficient new supply in the market. This region is experiencing that today and should serve as a sign of risk. Homeowners who experience assessment sticker shock should voice their concern and support more residential rezonings to ease the frenzied acceleration of home values.

Think of it as a heart attack. The necessary flow of inventory is severely blocked due to a buildup of demand. The absence of sufficient residential rezonings (or blood flow) forms a clot that results in a supply/demand heart attack, causing affordability tissue to die. Under Maslow’s Hierarchy of Needs, shelter is a physiological (survival) need, along with breathing, food, water and sleep.

Heart attacks are preventable with proper health and care, just as this frenzied price acceleration is preventable with proper rezonings to increase the flow of supply. The only way to treat this supply heart attack is by voicing support for more housing in your area.

By Danna Markland, Apr 14, 2024