Housing Needs Assessment for Newport News



Housing Needs Assessment for York CountyThomas HallAssociate Professor of Finance & Economics,Joseph W. Luter, III School of Business,Christopher Newport UniversitySarah StaffordProfessor of Economics, Public Policy & LawChair of the Economics Department William & MaryNovember 30, 2019Introduction/Executive SummaryThis report is the result of a grant funded by the National Association of Realtors written and submitted by Susan Gaston. The authors were engaged to address five important issues related to the existing housing stock of York County. To address these issues, the study uses data from the United States Census (American Community Survey) as well as proprietary data provided by the Real Estate Information Network (hereafter, REIN) and the Williamsburg MLS. The scope of work entailed the following issues:1. What are the characteristics of the County’s current housing stock?2. What is the population make-up of the County as it aligns to the housing stock?3. What are the current market and pricing trends?4. Does York County produce enough affordable housing?5, What patterns characterize commuting into and out of York County?The purpose of the report is not to set priorities or establish policy, and it makes no implied or explicit guarantee of accuracy related to current conditions. The report uses data provided by third parties to understand the current housing situation for York County, Virginia and to a lesser extent, larger areas such as the Virginia Peninsula and Hampton Roads.The key findings of the analysis are as follows:The residential real estate market in York County is active and robust:The number of sales has grown to about 700 per year over the last decade.The average price per square foot, adjusted for inflation, has held relatively steady at about $145 to $150, down from over $165 in 2010.Affordable housing represents a key issue for York County:The addition of numerous new units of affordable housing would be one way to alleviate its lack, and other remedies exist as well, including encouraging zoning ordinance flexibility to allow Alternative Dwelling Units (ADUs), “tiny houses”, and container homes. The latter have been used in Richmond, and two were recently provided to Newport News Housing and Redevelopment Authority by the Virginia Housing Development Authority.More affordable housing will likely be attractive to current residents from other jurisdictions in addition to York County residents, so housing affordability initiatives are best addressed at a regional level.Substantial geographic variation exists in the county:Some census tracts located in York County had an average price per square foot over the 2010 – 2018 period of $156, others were as low as $126.Housing affordability was a much greater problem in some areas than others.Issue 1: What are the characteristics of York County’s current housing stock?The majority of housing units in York county are single-family homes – 65 percent are detached and 15 percent are attached homes. Close to 20 percent of the housing units are in multi-family structures, most commonly in settings with 10 or more units. Only 1 percent of units in the county are mobile homes.Figure 1: Existing Housing Stock by Unit TypeSource: American Community Survey (five-year average, 2003-17)Issue 2: What is the population make-up of the County as it aligns to the housing stock?Numerous demographic factors are associated with housing demand, and “stylized facts” about this are generally identified in the housing literature. Decisions about rental vs. ownership follow age-based demographics, because housing demand is clearly related to the number of people living in a household. Young, single people generally are less interested in large lots or with long-term contracts associated with home ownership, and often choose renting instead because this gives them flexibility to take advantage of job offers located elsewhere. Families tend to have higher demand for more rooms per dwelling, for example, whereas seniors and younger single people have more demand for apartments and condominiums. Families with children also generally value school quality as well as larger lot sizes. Older “empty nesters” sometimes downsize household size and/or lot size. Of course, housing characteristics such as home and lot size cannot change over time, which can lead to a mismatch between the existing housing stock and the current population, particularly as the demographics of an area change. In York County, the bulk of the population consists of adults between the ages of 20 and 70. This means that schools for children and government services for senior citizens are supported by a strong tax base of able-bodied adults who can productively participate in the labor force. The breakdown by age is revealed in Figure 2.Figure 2: Current Population by AgeSource: American Community Survey (five-year average, 2003-17)Households in York County also vary substantially by income, as indicated in Figure 3 (next page). The distribution of household income more or less follows the standard bell curve, with a median income of $86,781. This is higher than the state-wide median income of $68,766 as well as the median income of both James City County ($80,722) and Newport News ($51,082). The largest number of households have a gross annual income between $50,000 and $75,000. The smallest group, with fewer than 500 households, has income less than $10,000. As we will discuss in more detail later in the report, a substantial number of households in York County are unable to find affordable housing in the current market environment.Figure 3: Households by Income GroupSource: American Community Survey (five-year average, 2003-17)Issue 3: What are the current market and pricing trends in York County?A number of approaches exist to answer this question, and several data sources could be used to address it. One method would be to consult information generated by tax appraisals of real estate conducted by the County. But there are two reasons we rely instead on data provided by REIN, MLS, and the American Community Survey (ACS), which is conducted by the US Census. First, although assessments of property values for taxation purposes are highly appropriate for an individual property, they are of course only estimates of market value. A given property might be purchased for an amount either greater than or lesser than its assessed value. Because we are able to examine the housing stock of York County on an aggregate level (and are not focused on the price of a given house or multi-family unit), we are able to use the market-based measure of actual sales price. From an economic perspective, actual market transactions are superior in aggregate to estimates made by real estate assessors. Second, because we have a broader remit in this study to consider not only York County, but also to consider other nearby areas that “compete” for housing occupants, we relied on REIN and MLS data which are guaranteed to be comparable among the various districts and jurisdictions of the Virginia Peninsula and broader Hampton Roads region.So how can the current housing stock of York County be characterized? To answer this question, we included sales of homes in the County from 2010 through 2018. The result is shown in Figure 4, which depicts a year-by-year breakdown of the total number of transactions (blue line, left axis) as well as the average, inflation-adjusted price of all housing sales in REIN data for the period 2010 through 2018 (red line, right axis). Figure 4: Average Nominal Sale Value and Number of Transactions, York CountySource: REIN data, author calculations But the nominal sales price figures are potentially misleading, for several reasons. First, although the housing stock is relatively stable, it is true that new homes tend to be larger than older ones. So the fact that the newer homes will generally have higher prices, as a function of square footage alone, tends to make recent housing sale prices look “higher” than they otherwise would. Second, it is also possible that larger homes are bought and sold with less (or more) frequency in certain years, and either of these would create bias in the numbers used to calculate Figure 4. Finally, although inflation has been relatively low in recent years by historical standards, for a proper apples-to-apples comparison, we should adjust the prices for the ever-eroding buying power of the U.S. dollar. So to correct for these potential sources of error, we used an inflation index to construct a real price per square foot figure for each transaction from 2010 through 2018, with the result indicated in Figure 5. Housing prices (on a per square foot basis) declined at the beginning of our period, but remained relatively stable since then, in a range between about $145 and $150. Figure 5: Inflation-Adjusted House Prices (per Square Foot)Source: REIN data, author calculations Another consideration of housing stock is its age. There are two measures for this, one of them the ACS and the other sales data from REIN. For the REIN data indicated in Figure 6 (next page), we define a “new” purchase as that where the year of the sale is the same as the year of construction. In York County, about one in twenty sales (about 5%) were of new houses, which was about average for the region of Hampton Roads. Figure 6: “New” (built year-of) Houses as Percentage of All Sales Transactions, 2010 - 2018Source: REIN data, author calculations What about the age of the housing stock in York County? Figure 7 presents these data. Although the newest housing stock (based on sales from 2010 through 2018) is in Williamsburg and James City County, York County has the second-newest housing stock of the municipalities indicated.Figure 7: Portion of 2010-2018 Sales for Homes Built Since the Year 2000Source: REIN data, author calculations Are there any price points that are either highly liquid or illiquid, in terms of sales volumes? The difference between the dark blue bars and red bars in Figure 8 shows this. Generally, houses built before 1990 were “flipped” or with a lower frequency compared to most houses built in 1990 or after. This could reflect the fact that older residents living in earlier-built houses have not moved out of them yet, or at least not as frequently as homes built after 1989.Figure 8: REIN Sales Data vs. ACS Housing Stock DataSource: REIN; American Community Survey (2017, 5-year average); Author CalculationsA general overview of housing prices is provided by Figure 9, which shows the price per square foot for homes in York County that were sold in 2010-2018. Home prices in the southern part of the county are the highest and the lowest prices are in the areas most closely surrounding the Naval Weapons Station.Figure 9: Geographical Distribution of Price Per Square FootSource: REIN MLS Sales Data, Williamsburg MLS Sales Data, Author CalculationsIssue 4: Does York County Produce Enough Affordable Housing? As is the case in much of the rest of the United States, the affordable housing situation is quite different between homeowners and renters. The situation for the latter is illustrated in Figure 10, which shows that about 40% of renters pay between $1,000 and $1,499 per month. In fact, the median gross rent in the county is about $1,488. According to the 2000 Census, the median gross rent (which includes monthly utilities) for York County was $708 in 2000. Thus the increase in median rent since 2000 has well exceeded the rate of inflation. If median gross rent had increased exactly at the rate of inflation, in 2017 it would have been only $1,011. The median rent may have increased by more than the inflation rate because of a change in the types of rental housing available such as more luxury or upscale units. Alternatively, it could also indicate an increase in demand relative to supply for certain types of rental units in the county. York County has a higher median rent than its nearest neighbors as Newport News’ median rent is $985, Williamsburg’s is $1,118, and James City County’s is $1,202. Figure 10: Monthly Rental Costs for Households in York CountySource: American Consumer Survey (five-year average, 2013-17)Housing affordability is typically measured by computing the fraction of a household’s income that must be expended to provide the household with housing. Housing is deemed to be affordable if the household spends 30 percent or less of its income on housing costs. Those paying more than 30 percent of their income on housing are defined to be “cost-burdened.” As shown in Figure 11, renters are more likely to be cost-burdened, with 46 percent of all renters reporting that they are cost-burdened while just over twenty percent of owners report being cost-burdened.Figure 11: Percentage of Renters and Homeowners in Affordable Housing Source: American Consumer Survey (five-year average, 2013-17)These impacts are not distributed uniformly across the county. Figure 12 shows the percentage of households that are spending over 30% of their income on housing, that is, cost-burdened households. The figure ranges from a high of 49% in the very southern end of the county to a low of 14% in the Kiln Creek area. The red area in the very south of York County indicates military housing mostly associated with the United States Air Force.Figure 12 Lack of Affordable Housing in York County by Census TractSource: American Consumer Survey (five-year average, 2013-17)Figure 13 shows the number of households in York county that are living in non-affordable housing, broken out by income while Figure 14 (next page) shows the percentage of households in non-affordable housing. Not surprisingly, relatively high income households (earning $75,000 per year or more) are less likely to be living in housing that exceeds 30% of their gross income. However, even though the percentage of these high-income households who are cost-burdened is low, in absolute numbers there are almost 1,200 of these households. For low-income households, both the percentage of households that are cost-burdened and the absolute number of households are higher. As one might expect, at the lower end of the income scale there are more cost-burdened renters but as income increases, the cost-burdened are more likely own their home. The number of households in York County living in housing that is beyond their means (as traditionally defined) is indicative that strong demand exists, and that the supply of affordable housing is not sufficient to meet that demand. This is especially true for individuals of below-average income. Figure 13: Number of households in non-affordable housing, by income groupSource: American Consumer Survey (five-year average, 2013-17)Figure 14: Percent of Households in Non-Affordable Housing, by Income GroupSource: American Consumer Survey (five-year average, 2013-17)To determine whether the existing housing stock in York County is affordable for residents in the different income groups, we compare the number of households in each income group to the number of owner-occupied houses and rental units in the county that are “affordable” for that income group. More specifically, we estimate the number of housing units available for less than 30% of the upper bound income level. For rental units, we look at the gross rent while for homeowners we include mortgage principal and interest, taxes, insurance and utilities. As shown in Figure 15, for the very-low income group, the number of affordable rental and owner-occupied housing units is significantly less than the number of households. Thus almost half of the households in this group are likely to be “cost-burdened” as they will have to spend more than 30 percent of their income on housing. The situation is only slightly better for those households in the low-income group, i.e., those making between $20,000 and $34,999. There are almost as many housing units that are considered affordable for this income group as there are households in this group. However, since the total demand for housing for households making less than $34,999 includes those in the lower income group who could not find affordable housing, overall a significant proportion of households in these two groups will be cost-burdened. For both the moderate and middle income groups, the stock of affordable housing is greater than the demand. While the stock of “affordable” housing for the upper income group may at first look to be insufficient, the total number of housing units is greater than the total number of households, so there is sufficient housing stock for households in this income group.Figure 15: Relative Demand and Supply of Affordable Units by Income LevelSource: American Consumer Survey (five-year average, 2013-17)The issue of affordable housing dominated discussions during presentation of this report’s findings on two different occasions, once to the committee working on York County’s new Comprehensive Plan and the other at the Virginia Peninsula Association of Realtors including the policy committees of both the VPAR and the Williamsburg Area Association of Realtors. The addition of numerous new units of affordable housing would be one way to alleviate its lack, and other remedies exist as well, including encouraging zoning ordinance flexibility to allow Alternative Dwelling Units (ADUs), “tiny houses”, and container homes. The latter have been used in Richmond, and two were recently provided to the Newport News Housing and Redevelopment Authority by the Virginia Housing Development Authority. However, as discussed in the next section, many residents of York county work in other jurisdictions and vice versa. Thus, new affordable housing units are likely to be attractive to residents from other jurisdictions in addition to York County residents. To solve the larger issue of housing affordability in Hampton Roads, all jurisdictions will need to work together to develop regional solutions.Issue 5. How much commuting to and from York County takes place?On important factor that helps determines housing demand is proximity to employers. According to US Census data, a majority of workers living in York County commute to neighboring jurisdictions. Additionally, a large number of people living elsewhere commute to jobs within York County. To answer the question of how many people might live here, a natural starting point is to consider the population of people who live elsewhere but work in the county. Of course, some people will choose to live in jurisdictions far from their place of work for various personal reasons (affordability, a working spouse at a different employer, school quality, proximity to family, etc.). Figure 16 indicates the number of individuals commuting to/from York county and other jurisdictions. Figure 16: Commuters within, to, and from York County LocationNumber commuting in to York from locationNumber Commuting out to the location from YorkYork4,0964,096Newport News3,9467,494James City County2,4352,300Hampton1,6862,909Gloucester*1,222Williamsburg*1,085Norfolk*964VA Beach628894Henrico*650Fairfax*562Poquoson396*Chesapeake382535Suffolk357*Portsmouth354*Other5,0224,866*Less than 300, included in the total for “Other.”Source: LEHD Origin-Destination Employment Statistics, U.S. Census Bureau 2017.This is portrayed cartographically in Figure 17. Note that just under 4,100 individuals who live in the county also work in the county while over 23,400 individuals commute from York County to other jurisdictions to work. By far the most common destination is Newport News which receives almost the same number of York commuters as do Williamsburg, James City, Hampton, and Gloucester combined. Newport News is also home to the largest number of individuals commuting in to York County, although on net about 3,500 more individuals commute out to Newport News than commute in.Figure 17: Commuting Patterns Within, To, and From York CountySource: LEHD Origin-Destination Employment Statistics, U.S. Census Bureau 2017 ................
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