Henrico considering 'transformational' fix to housing affordability crisis

There’s a national home affordability crisis that’s showing its effects locally with average homebuyers being priced out of the market. Staple jobs — police officers, teachers, dental assistants and paralegals — often make less than half the yearly salary needed to afford the median home price in the county. Even dual-earning households at that level have limited options.

Henrico’s envisions impacting the price of 10% to 15% of the new homes built in the county every year, in the region of 100 to 150 homes. County Manager John Vithoulkas told supervisors the 10% to 15% threshold is what it would take to make an impact on rising home prices.

Vithoulkas said housing affordability is maybe the most significant issue, not just in the county, but the state and the nation.

“From families passing on generational wealth to economic development and new employees coming on and living in the locality, affordable housing is becoming more and more of an issue,” he said.

Housing affordability crisis

Home prices started rising during the pandemic when generationally low interest rates spurred a housing boom in many areas of the country. It was marked by fierce competition where homebuyers paid above asking price and often waived customary procedures such as home inspections.

Those trends have eased in some regions but not the Richmond area.

In Henrico, between 2023 and 2024 the median sales price for a single-family home jumped from $355,000 to $390,000, according to data from the Central Virginia Multiple Listing Service (MLS). The price for condos and townhouses rose from $345,390 to $395,617.

Housing prices are being driven higher in part by fierce competition for homes. Single-family homes are on the market for 24 days before a sale while condos and townhomes sell in about 28 days.

“If we had a balanced market (homes would be on the market for) three to four months,” said Laura Lafayette, CEO for the Richmond Association of Realtors. “We haven’t been there in about five years, and we’re not getting there anytime soon.”

The income needed to purchase a home at a certain list price has also increased as mortgage rates have gone up, according to Virginia REALTORS data presented by Lafayette.

That data indicated the income needed to afford the median-priced home in Virginia increased by 76% in just four years.

In 2020, someone earning $67,400 annually could afford a $287,000 home with a 3.47% mortgage rate.

In 2024, that person would need to earn $118,300 per year to afford the same home, because the home now costs $384,576 and mortgage rates have increased to 6.78%.

“The demand so out swamps the supply,” Lafayette said. “Another thing that we’ve seen, we have a lot of virtual workers who are coming from D.C., coming from Northern Virginia … with cash or they have D.C. wages and are coming down here and competing with our wage earners.”

The annual income needed in Henrico to own a home was calculated to be around $114,000 with 10% down. The county noted the income of different professions – police officers ($57,646), elementary school teachers with a master’s degree ($57,223), office assistant ($39,616) and dental assistant ($43,320).

Rents have followed similar upward trends.

“A one-bedroom, five or six years ago, it was $900, $800. It’s now $1,500, $1800,” Vithoulkas said. “It’s not even questioned. A two-bedroom, you’re beyond $2,000. So, the rents are also a problem that we have.”

Henrico has spent around $19 million over the past 5 years on different projects to help with housing affordability, but the county manager said more could still be done.

“Despite many of the efforts that have been taken locally, unless there is an inflection point to incentivize affordable housing in a different way, then the trends are going to be what they are,” Vithoulkas said.

A land trust model

Henrico staff and the Board of Supervisors acknowledged that the county has a problem with housing affordability, saying it wanted to do something “transformational” to address it.

Vithoulkas said any solution wouldn’t be funded by issuing bonds. It would require a cash sum. Henrico has yet to put out a specific dollar amount for the initiative.

County leaders discussed using a land trust model as one of its possible solutions for making at least 10% to 15% of new-build homes affordable. Lafayette is the immediate past-chair for the Maggie Walker Community Land Trust and explained the nonprofit’s model.

Under Maggie Walker’s land trust model, the trust owns plots of land on which housing is then built. When homebuyers go to purchase the home, the price of the land is excluded from the overall price. Buyers earn equity in the home, but not the land beneath it, which is owned by the trust.

The land trust’s model says that homeowners agree to resell homes at an affordable price based on the Richmond region’s area median income.

In a theoretical example, Lafayette said the cost of a $350,000 home could be lowered to a $250,000 home by factoring out the land cost.

Supervisors talked about partnering with Maggie Walker Community Land Trust in the acquisition and development of land. No final structure for the ownership of land or its funding was decided at the meeting.

Board Chair Tyrone Nelson said the ultimate solution should be spread across Henrico, in multiple ways.

“In Tuckahoe it may be for seniors or maybe in Varina you take a development that’s going up, take a percentage of it and make it affordable,” Nelson said. “But, not to tie ourselves down to any particular way to do it.”

He expressed a desire to start working on the project within the next six months to a year.

“The triple underscore on all of this is ownership, ownership, ownership,” Vithoulkas said. “Whether it’s a new home buyer, whether its a senior buying a home, whether its a single-family home, a townhome or a condo. All of that is ownership. What this can’t be, because it won’t make any difference, is a subsidy for apartment (developers).”