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Correction to This Article
This article misspelled the last name of Loudoun County developer Leonard S. "Hobie" Mitchel.
Economic Woes Render Growth Debate Moot
D.C. Suburbs Shift Focus

By Jonathan Mummolo
Washington Post Staff Writer
Monday, April 7, 2008

Throughout the Washington suburbs, the economic downturn has accomplished what the slow-growth movement could not: It has slowed growth significantly.

Once the dominant topic in regional politics, taming residential development has largely been eclipsed by the fiscal woes created by the slowdown. Rising construction costs, plummeting property assessments, soaring foreclosures and high gas prices have local officials debating how to craft budgets with limited resources instead of arguing over new subdivisions.

Growth "was the most salient issue and politically sensitive issue between the late 1990s and up through as late as 2006," said Corey A. Stewart (R-At Large), chairman of the Prince William Board of County Supervisors. Now, "people just aren't concerned about it because there's no residential development to be concerned about. We don't hear about it much at all."

Some elected officials said the downturn means they can turn their attention to issues that had taken a back seat to growth. In Prince William, that has meant a spotlight on such issues as illegal immigration, Stewart said. Several Loudoun County officials, expecting an even tougher budget cycle next year, said they will focus on reforming fiscal policies.

"Prior boards have focused on land use, and in my opinion, it's time to focus on finance and budgets," said Loudoun Supervisor Susan Klimek Buckley (D-Sugarland Run), one of four Democrats who unseated Republicans in November with campaigns that decried excessive growth.

Slow-growth advocates say the downturn will allow localities to "take a breather" and focus on improving existing communities rather than trying to keep up with the impact of booming growth. But others say a stagnant economy prevents governments from playing catch-up because the same economic slump that halted development plans is also ravaging revenue sources.

It's a fiscal scenario affecting fast-growing areas across the country. In Collier County, Fla. (Naples), Sacramento County, Calif. (Sacramento), and Maricopa County, Ariz. (Phoenix), for example, strained income sources -- including impact fees for new construction and sales and property taxes -- means officials are debating a mix of deferring capital improvements, freezing hiring and scaling back services.

"Counties are getting hit right, left and sideways," said Jacqueline Byers, director of research for the National Association of Counties. She said fast-growing counties have been especially affected because rapid, speculative construction has left a huge surplus of housing, which has brought down property values.

In the Washington region, the slump has affected close-in counties such as Fairfax and Montgomery less than the outer counties, building industry analysts said, in part because high gas prices make long commutes less attractive to potential home buyers.

Residential growth has slowed dramatically in Loudoun, the nation's third-fastest-growing county between 2003 and 2004; it fell to 35th place between 2006 and 2007, according to census data.

Two years ago, crowds at Loudoun County Planning Commission meetings overflowed into the hallways, and the boardroom was packed with developers, lawyers and planners sparring over building projects late into the night. But at a work session last month, there were no housing projects to be debated, and 10 or so onlookers listened to educational briefings, along with the hum of the ventilation system.

The Loudoun Board of Supervisors has voted on just one subdivision this year, and the number of residential building permits issued last year -- the final authorization needed to build housing and an indicator of growth -- dropped more than 40 percent from 2005, according to county estimates. From September through November, the county averaged 124 foreclosures a month, according to a county report.

In once-booming Charles County, combined commercial and residential building permits declined 26.5 percent last year from the year before, and the county had 984 foreclosures filed with the Circuit Court, nearly double the number in 2006.

In Prince William, where the county board is considering a 27 percent increase in the tax rate, 1,298 building permits were issued for single-family homes in 2007, about 40 percent of the number issued in 2005.

Although difficult, the economy has been an impetus for reform, officials said.

In Loudoun, Buckley said she wants to spend the entire year, not just a few hurried months, looking at ways to cut costs and increase revenue. Ideas on the table include scaling back property tax breaks on such items as airplanes, expanding the county's rainy day fund and cutting the size of government, she said.

However, capitalizing on the slow rate of growth to make gains on infrastructure will be difficult, some researchers said.

"It's a 'damned if you do, damned if you don't' " situation, said Christopher Leinberger, a developer and visiting fellow at the Brookings Institution. "In good times, you're flush with capital, but you're running so fat you're trying to keep up with sprawling demand, and then in bad times, you don't have the wherewithal financially to put in infrastructure."

The housing slowdown is probably cyclical, and the suburbs will eventually bounce back -- but possibly in an altered form, analysts said.

The market is trending toward smaller, attached homes, said Arthur C. Nelson, co-director of the Metropolitan Institute at Virginia Tech. He said surpluses of large-lot detached homes in such places as Loudoun and Prince William are just the "tip of the iceberg"; his research indicates that by 2025, there will be a surplus of 22 million such homes nationwide -- about 40 percent of the stock that exists today.

If the suburbs want to revitalize their housing markets, "they'll have to be reformed," he said. "The smart suburbs will figure out where the market trends are and retool their zoning codes."

But in an indication that the growth debate is likely to bounce back as well, some are unconvinced of that projection.

"Suburbia doesn't necessarily want to turn to urban, and not everybody wants to live in a condo," said Hobie Mitchell, a Loudoun developer who said the market has many developers in a holding pattern. "People still want to have a single-family house on a decent-sized lot where the kids can play in the back."

Staff researcher Meg Smith contributed to this report.

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