Not-So-Bad News Cheers Arlington
Wednesday, December 31, 2008
Arlington County's assessor has what passes for bright economic news this holiday season: Home values are down just 2 percent, and commercial assessments have actually ticked up by 1 percent.
The picture offered yesterday by Arlington officials demonstrated a central tenet of this, and any, recession: Some get hit harder than others. In the Washington region, areas farther from the District and the region's core are taking the brunt.
"Around the country, residential has been hit so bad. We took a big beating last year. We're going to take a real hard beating next year," said Prince William Board of County Supervisors Chairman Corey A. Stewart (R-At Large). Home values fell about 30 percent this year and are expected to fall an additional 15 percent next year before leveling off, he said.
Arlington's comparatively modest drop in the assessed value of existing homes surprised even some of the closest observers of the region's real estate trends.
"That's amazing. I'm not surprised that commercial is up one. I'm surprised residential is not down like 5 [percent]," said John McClain of George Mason University's Center for Regional Analysis. "Closer-in locations have a much higher premium than the ones farther out and are more stable."
County officials said more is at play than simply the accident of Arlington's location next to the seat of U.S. power.
Arlington County Board member Barbara A. Favola (D), who will be elevated by her colleagues to the position of board chairman tomorrow, said years of policy choices helped usher in large amounts of convenient commercial development near Metro stops in the county.
"Businesses are not always greeted with open arms. People are very anxious about new development and new office projects coming in because of the traffic," Favola said. But "the value of being a job center can't be overstated."
In past recessions, "we were able to weather the cycle better than our neighbors, and it was because we have this really vibrant commercial base," she said.
Stewart warned that today's strength could become a significant liability in the future as the recession evolves.
"We're going to see a tremendous drop in commercial values all over the country. That's really going to hurt Arlington. That's when they are going to get their trouble," Stewart said. Commercial values "tend to be more stable, then all of a sudden, they also start declining."
But McClain said geography will help Arlington on that front, too.
"We know that commercial is going to hurt," McClain said. But data from around the Washington region show how vacancy rates tend to be lower in the District and closer-in locales such as Arlington and Bethesda, and higher in Tysons Corner and Reston, for example.
Complicating the picture, thousands of Defense Department jobs are to leave Arlington in coming years as part of the base realignment and closure plan. But, McClain said, "by 2011, when they are having to leave, the economy is probably doing fine. . . . Office space that's closer in is going to fare better than office space farther out."
Tommy Rice, Arlington's director of real estate assessments, said early conservative estimates had the county losing zero to 5 percent of its total tax base. But modest decreases in the value of existing homes and small increases in existing commercial buildings, combined with new construction, resulted in a 0.4 percent increase in the overall tax base.
The good tidings probably won't mean lower tax bills, however. Favola said she thinks the board will raise rates even higher than members signaled previously to make up for the fraying safety net.