Amazon’s arrival in Virginia adds stress to strained housing market

This is what winning was supposed to look like in the tech-forward 21st-century economy. Last month, Virginia Tech announced that it would be building a new 1-million-square foot innovation campus in Alexandria, Virginia, positioning the area to better reap the rewards of the forthcoming Amazon HQ2 being built nearby in Crystal City, which will take over 6 million square feet of office space and bring at least 25,000 new jobs to the region by the mid-2030s.

Area leaders and politicians gushed about the implications for the northern Virginia economy, seeing the campus as validation of the multiplier effects of landing HQ2, the economic development prize billed as a once-a-generation chance for a city to reinvent itself. Local entrepreneur Sanju Bansal said the campus would foster collaborations that could “result in the next Googles and Amazons taking root in our own backyard.”

When Amazon announced its intentions to effectively split its new headquarters between northern Virginia and New York City last year, Virginia leaders felt that taking home half the prize was still an affirmation of the region’s bid.

“This is, above all, a validation of our community’s commitment to sustainability, transit-oriented development, affordable housing and diversity,” then-Arlington County Board Chair Katie Cristol said in a statement last fall.

AP

But a win for the bidders doesn’t necessarily mean a win for all local residents. As soon as the new headquarters location was announced—amid the high-rises of Crystal City just west of Reagan National Airport and the nation’s capitol—housing advocates and low- and moderate-income residents of the area felt uneasy. Since then, home prices have spiked 17 percent, advocates have warned about increasing displacement, rising prices, and speculation, and residents conceded in a survey that while Amazon’s arrival will be beneficial, it will also raise the cost of living in an already expensive region.

“Amazon isn’t creating a housing problem in northern Virginia,” says Terry Clower, a professor of public policy at George Mason University who studies regional development, “but it is highlighting an existing problem we’ve had for some time that’s been building.”

Advocates and local politicians all agree that the problem was here well before Amazon. According to Shelley Murphy, president and CEO of the Wesley Housing Development Corporation, a local nonprofit affordable housing developer, every jurisdiction in the region has been falling behind in producing enough affordable housing. But she hopes Amazon’s arrival could be the catalyst that gets leaders to finally address the problem.

“I don’t expect Amazon to come in and write us a big check,” she says. “Their role is to help spur growth. It’s not public versus private, it’s public and private. [Housing is] a huge problem. It’s a billion-dollar problem. Everybody has to pull together, if not to solve it, at least to increase the supply.”

Asking whether northern Virginia is ready for the impacts of Amazon’s HQ2 just leads to another, larger question: can any metro region in the U.S. quickly add housing and escape the present affordability crisis?

Despite cranes in the sky, housing shortage is getting worse

Murphy says that you can look back as far as you want, and there’s been an increasing dearth of affordable housing in the region. Market forces and high land prices have conspired to create shortages everywhere in the region: Alexandria, Arlington, and Fairfax County, all upscale D.C. suburbs that have traditionally benefited from government jobs and spending, have all lost significant amounts of affordable housing over the last decade. According to Michelle McDonough Winters, executive director of the Alliance for Housing Solutions, another area nonprofit, Arlington County lost 17,000 units of affordable housing between 2000 and 2018.

“There are all these cranes in the sky, but most of what’s being built is high-end, market-rate housing,” Murphy says. “As hard as we’re trying, we’re not keeping up. There’s simply not enough financial resources.”

David Cristeal, Arlington’s housing director, says the county has some of the same issues impacting other high-cost regions such as San Francisco and New York: relatively limited land supply, high costs, and zoning restrictions (such as single-family only neighborhoods and parking minimums). That leads to trouble producing housing, which impacts affordability and affects those who can least afford it.

According to a report from the Northern Virginia Association of Realtors, “local governments have not meaningfully increased the issuance of new single-family construction permits in more than 10 years,” which has meant the number of homes for sale has been declining for years, and the median sale price in the region, now north of $510,000, has steadily risen since the fall of 2016.

When Amazon held its pageant for cities during the HQ2 search, a constant refrain was that adding the headquarters was a “prosperity bomb” that would ruin local housing markets, already stretched tight without the slack to produce more affordable living options (along with questions about subsidies for jobs, this sentiment helped push Amazon out of its other HQ2 site choice, Queens). Is there a fundamental issue with local housing policy if it can’t accommodate a wealth of new jobs?

The county adopted a housing master plan in 2015 that set a goal of having 17.7 percent of Arlington’s rental housing be affordable for someone making $65,000 a year (in 2015 dollars) by 2040. Since the county was short about 9,000 units when the plan was made pre-Amazon, that means adding roughly 600 rental units a year. Increasing homeownership is even more challenging; when the average price in Arlington is $650,000, according to Cristeal, programs to support new homeowners become prohibitively expensive, and regardless, it’s hard to quantify the county’s goals.

“We have 26 square miles, and just don’t have acres and acres of vacant land where a developer like Toll Brothers can come in and do 300 spec homes,” he says. “We’re all built out.”

HQ2’s arrival added urgency to the situation. State and local government has added millions to the affordable housing fund—Arlington and Alexandria will dedicate $150 million for affordable housing over the next decade—and local leaders are warming up to more zoning changes to increase supply.

Alexandria Mayor Justin Wilson pointed to new tools to increase density, such as adopting new parking standards a few years ago to allow multifamily developers to build without requiring as many parking spots, or pushing an Accessory Dwelling Unit (ADU) ordinance that would allow property owners to erect apartments and smaller homes on their property. Amazon’s arrival, he says, is “shining a light across the region” illustrating that housing is, at its core, a supply issue.

“There’s been a tendency to believe that we can throw more money at this problem, and I don’t think you can,” he says. “It’s a problem that can’t entirely be solved by money. We simply don’t have enough.”

Amazon

The true impact of Amazon’s arrival

Putting housing aside, the arrival of Amazon to the Arlington and Alexandria area could be seen as a relief for a region beholden to the ups and downs of government spending. One of the reasons the Crystal City site was so attractive to Amazon was all the empty office space—there’s a 16 percent vacancy rate—that was once filled with government and military contractors. The Base Realignment and Closure (BRAC) process, which started in 2005, meant the Crystal City area lost tens of thousands of jobs over the next few years. Add budget sequestration and the recent government shutdown, and northern Virginia is ready to embrace private sector employment, says Mayor Wilson.

“We’ve been an affluent community for generations, since we’ve been able to rely on the federal government and government activity, but that’s something we can no longer rely on,” he says. “Amazon is part and parcel of a realization that we have to diversify our economy.”

Amazon’s arrival by itself might not be as world-changing as many believe. The company is slowly adding jobs—only 400 or so employees have arrived thus far—and studies predict the company will only add a percentage and a half to the area’s underlying employment growth rate. A study by the Stephen Fuller Institute found that the region would add roughly one additional non-Amazon job for every one new Amazon job created. While economic development groups have predicted HQ2 and related growth will add a “major” surge of new restaurants and retailers and lead to more than 100,000 more hotel room bookings a year, it won’t completely upend an economy that’s still 38 percent government jobs.

“We’ve been creating 50,000 jobs a year, so over 12 years of Amazon growth, that’s a half a year’s worth of job growth,” says George Mason’s Clower. “There will be indirect jobs and other positions created here, but the most important impact will be showing that the region is more than government driven, that it’s a vibrant location for tech sector businesses.”

Hyperventilation, home speculation, and displacement

That job growth, however, becomes a problem when the housing market can’t take on the slack, or isn’t prepared to rapidly build more units. As tech-fueled growing pains in Seattle and San Francisco suggest, the shortage will hit those with moderate to low incomes without housing security. A report from the New Virginia Majority, a progressive political group, bluntly predicted that “unless questions of housing density, affordability, and transit expansion are fully addressed, Amazon’s headquarters will lower the quality of life of many residents, with the most directly and adversely impacted being the area’s low-income communities of color.”

While Amazon has slowly filled just a small portion of the total jobs coming to HQ2, the housing market has already reacted. In addition to the 17 percent jump in home prices in the region, realtors have received a flurry of calls from investors, and homeowners, seeing the value of their homes jump, have delayed sales or taken homes off the market, waiting for the real hiring spree and the crop of highly paid new arrivals. A study by real estate analysts at Bright MLS found that new listings decreased 85.3 percent in a single zip code, 22202, in November 2018, as Amazon’s choice was being publicized.

Murphy, of the Wesley Housing Alliance, says even before Amazon arrived, real estate investment trusts and private developers have bought up apartments that used to be naturally occurring affordable housing, planning to do minimum upgrades and raise the rent.

”It’s not Amazon’s fault we have an affordable housing problem,” Winters, of the Alliance for Housing Solutions, says. “It’s speculators and the way the market works. I call it hyperventilation. People are excited, concerned, and worried. There are a lot of communities near the site, and in the general commuting range of HQ2, that feel like they’re under pressure and going to be displaced. That’s a valid concern.”

One of the neighborhoods considered most at risk is Arlandria, a pocket of relative affordability just south of the HQ2 site. Roughly half of the population is under 30, and almost 50 percent of the population was born in Latin America, according to Census information. Many members of the region’s Salvadorian population arrived in the mid-’80s, fleeing civil war (so many hailed from the town of Chirilagua that their new home briefly took on that name as well).

Ingris Moran, a lead organizer with Tenants and Workers United, which advocates for renters, workers, and communities of color, says Arlandria has been on edge since the HQ2 announcement. Roughly 90 percent of community members are tenants, she says, and pay much less than surrounding areas; as the Washington Post reported, the median monthly rent for a two-bedroom apartment is $1,856, compared to $3,142 in Old Town and $2,733 in Pentagon City.

“We’re already hearing that when residents went to renew their leases, they’re seeing tons of rent increases due to Amazon arriving,” says Moran. “We’re hearing rents going up $100 a month, a lot for working families. And this is with just a few hundred Amazon employees.”

Moran says the battle is about “preserving housing where our communities are already at,” but even that was challenging pre-Amazon: many families are already living in overcrowded conditions, even doubling up in apartments. She wants Amazon to be more proactive in the community. While the company has given $3 million to a community foundation in Arlington County, that won’t build a lot of housing units in such an expensive region.

“That’s nothing coming from a company such as Amazon,” Moran says. “They can do so much more, but unfortunately, we’re not seeing that. We want them to be much more proactive, and think about the impact they can make on the community.”

How does Arlington housing level up?

Regardless of how proactive Amazon chooses to be, the region will need to attempt to catch up during HQ2’s growth spurt.

Cristeal says that the county can add capacity in its multifamily regions and transit areas and incentivize more density in these areas. The ADU ordinance can do the same in single-family residential neighborhoods. But even Cristeal agrees that it may be tough for the county to meet its affordable housing creation goals this year; they’re been averaging about 300 of the 600 units they need in recent years. With a new housing plan set to be drawn in 2020, which will factor in increased competition for housing and rising rents caused by the increasing influx of Amazon workers, the county may find itself even more behind.

Like many in the region, including advocates, he says the region needs to look at zoning (right now, Arlington is 75 percent single-family homes). Both Wesley’s Murphy and Winters from the Housing Alliance were impressed and inspired by Minneapolis’s plan to upzone the entire city. Mayor Wilson says it’s something he’s been talking about for years.

Zoning reform might eventually be a huge part of the solution in northern Virginia—just as advocates across the country, in cities where a surfeit of single family-only neighborhoods constrict housing supply, hope will happen in their cities and towns—but it’s not available to renters today.

“Intentions are great, but it’s like the gun debate,” she says. “Thoughts and prayers aren’t enough to solve the housing crisis.”