Northern Virginia Updates

By Krasi Henkel, Broker

After attending the Loudoun County Chamber of Commerce ‘PolicyMaker Series: Postelection Aftermath’ I walked away with concerns and considerations. This blog is not intended to make or take a political stand, but to outline possibilities and current actions. Keeping you informed so that you can make the best possible decisions, is always my goal.

Politicians and analysts banter the term, affordable housing.  Let’s unpack this concept and discover how, if at all, affordability can be affected.

The variables of affordability consist of the following obvious pieces:

• The price of real estate
• The mortgage interest rate
• The mortgage term (number of years)
• Cost to insure
• Taxes
• Income tax incentives (if any)
• Housing supply and local zoning

To improve affordability, one or more of the above variables must be influenced as follows:

• Private property values are subject to market forces.
• Mortgage interest rates while variable, can be subsidized by jurisdictions or offset by tax savings
• The term of the mortgage 15-30-50 affects the monthly payment
• Insurance is partly environmental risk based, and partly determined by your desired value to insure and what to include.
• Taxes – real estate taxes are based on jurisdictional assessments. You can appeal assessments. You can elect officials who would reduce tax rates.
• The Federal government or even the state can make interest, taxes, etc. deductible at higher rates – AKA – subsidizing through deductibility.
• Supply and demand shifts from scarcity to accessibility can partially be accomplished through thoughtful zoning and maybe expeditious reviews.

Below are possible solutions but will require bold federal and state participation.

Let’s clear one thing up – homeowners do not plan to decrease the asking prices for their houses in a scarcity scenario. Insurers have suffered massive losses and will likely not be reducing their rates, and their reinsurers will most likely not be doing the same.

Property taxes – you can evaluate your jurisdictional budgets and determine potential austerity measures with which to justify tax reductions. We all know that this is a long term project involving studies, hearings, and elections.

While on the topic of property taxes and local jurisdictions, one way to increase supply would be to loosen zoning regulations and shorten permit and inspection periods. All of that requires public hearings. Realistically, when was the last time a voting block voted to increase density?

Income tax deductibility or credits could be useful subject to income limits. This will require political maneuvering, bills, vetoes, and committees, and lots of talk and perhaps a little help.

Mortgage interest is a possible variant. When affordability is addressed, it is often addressed for first time home buyers.  The US government, states, and local governments offer mortgage loans to offset cash down payments, and structure loans based on a variety of criteria. This is where creativity can set in and offers interesting options to consider.

Let’s look at Virginia for example. There are several assistance loan products including down payment and closing cost grants. After that there is Virginia Housing (formerly VHDA), which is funded through bonds and are not and do not affect the tax base.  These loans come with quite a few strings and qualification can be onerous. Looking at today’s mortgage rate, I note that VHDA is offering their loan for 6.5%. Yet FHA, VA, USDA are all below 6%.

Another mortgage alternative is increasing the loan amortization terms from 30 to 50 years. Yes, the total interest paid will be higher, but the monthly payment can become affordable. Consider the example below:

It will cost more over the life of the loan. The reality is that most people move every seven years. Loans can be refinanced if rates decline. I have met very few people who retained their original loan to its final payment. The 30-year mortgage was originally tied to the 30-year treasury bill. Though, the 10-year Treasury Note is a more direct benchmark. The 30-year treasuries are called “long bonds.”

Zoning:

Zoning adjustment measure has been on Virginia’s local jurisdiction radar for over five years. Since 2020 initiatives to modify local zoning to permit density increases have been proposed.

Last week, a circuit court judge recently ruled in favor of the City of Alexandria in the “Zoning for Housing” lawsuit, dismissing the case and allowing the city’s zoning reforms to stand.

The case had been brought by local property owners, Coalition for a Livable Alexandria, protesting the density changes and their perceived impact on their properties.  This ruling allows the city’s “Zoning for Housing” ordinance to proceed. 

A question: with the decision in place, can a developer now buy a single family house, tear it down and build a multi-family structure? What are the limits? What are the safeguards? Where will those residents park?  How will the existing infrastructure support the additional density as far as education and traffic?

In Tysons, a similar initiative has been enacted. Click here to learn more about these and other Virginia measures.

While political promises abound, reality sets in. The recent election platform was heavy on affordable housing. When I inquired at the recent event, about the “how” of the promises, the moderator ‘ran out of time.’ I asked why VHDA loan rates outstrip all other loan rates. When I approached one of the State senators, he told me that they are “looking into it.”  The urgency? Subject to interpretation. They seem focused on zoning changes as the primary solution.

There is no easy fix. Everyone must get involved and ask the hard questions: When politicians promise ‘affordable housing,’ ask them: Affordable to BUY, or affordable to RENT? Those are two very different things – one builds wealth and independence, the other creates permanent tenants beholden to landlords and government programs. The days of happy ambivalence are gone. You should pay close attention and make your decisions thoughtfully.

If you want to buy your first home, contact Broker Krasi Henkel. Her nearly 40 years of experience and exceptional lender network, produce dream-come-true scenarios. If you want to be one of the lucky few – text Krasi today – 703-624-8333.