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Home Construction Hits 10-Year Low
National Slowdown, Higher Gas Prices Take Toll in Loudoun, Economist Says

By Sandhya Somashekhar
Washington Post Staff Writer
Sunday, February 4, 2007

The pace of home construction in Loudoun County slowed dramatically last year, dropping to levels not seen in a decade, according to recently released county figures.

By the end of 2006, the county had issued 3,284 residential building permits, 35 percent fewer than the year before and fewer than half the number issued at the peak of the Loudoun housing boom in 2003, according to a January report by the county's Department of Economic Development.

Because each building permit is the final authorization needed to put up a housing unit, the annual totals are considered a reliable indicator of residential development.

Many observers said the 2006 figure, the lowest annual total in Loudoun since 1996, confirms what economists have been saying for months: that the nation's housing marked cooled rapidly last year after several years of explosive growth. Some analysts said the drop could signal a longer-term slowdown in Loudoun's growth rate.

The decline from the 5,065 permits issued in 2005 represents a "very, very large drop," said Peter Morici, an economist at the University of Maryland.

He said it might be not only a function of the cooling housing market but also the effect of higher gas prices that make long-distance commuting increasingly unpalatable.

"Loudoun County has been a hot area," he said. "So what this tells us is the bloom is off the rose in Loudoun County, and it could indicate a shift regionwide."

Commercial development, on the other hand, was up last year in the county.

The amount of permitted retail, industrial and office space increased 8 percent to just over 4 million square feet. Among the larger projects that began last year were the Lansdowne Town Center off Route 7 and about 400,000 square feet of industrial buildings around Dulles International Airport, said Robyn Bailey, manager of business infrastructure for the county.

That's seen as a healthy, sustainable level of commercial construction because it followed a period of intense residential construction, she said.

She contrasted that to the large increase in commercial development generated by the dot-com boom in the early part of the decade, when developers built dozens of large office buildings in the hopes that tenants would flow in. That sort of speculative building can promote instability in an economy, Bailey said.

Last year, permits were issued for more than 1 million square feet of retail space in Loudoun, almost double the retail total for 2005. That is a natural consequence of adding more homes, or "rooftops," a term often used in economic development circles, Bailey said.

"We're in a cycle," she explained. "First you get the rooftops. Then the retail will follow the rooftops, then the office will follow that. That's the traditional trend."

Since 2000, the county has issued more than 35,000 building permits for apartments, townhouses and single-family homes. During that period, the county has added 100,000 residents, increasing its population by 59 percent, according to a University of Virginia study released last month.

Last year's residential building permit total shows a decline to levels seen before that boom, and it represents a more appropriate level of growth for the county, said Edward Gorski, the Loudoun County land-use officer for the slow-growth Piedmont Environmental Council.

But Gorski noted that the potential for another growth spurt hasn't gone away. According to the county Department of Building and Development, there is a backlog of more than 36,000 approved but unbuilt housing units. That leaves the door open for another boom, he said.

The respite from rapid expansion should lead to some reflection by county leaders, who have an opportunity to take more control over what goes up in their communities, Gorski said.

"It allows everyone to step back and take a breath and assess: Does Loudoun want to continue at the pace that we were going in the last few years?" he said. "The slowdown hasn't been caused by Loudoun, it's been caused by market pressures outside of Loudoun. I think this might be an opportunity for Loudoun to sit down and reassess."

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