Local Address

A look behind the lack of affordable family housing

Elizabeth Razzi
Saturday, October 31, 2009

Families are being priced out of the Washington area housing market. Or at least they're being driven to the far edges of the metro area and forced into long commutes to and from employment hubs. That's the message in a new report from the Urban Land Institute's Terwilliger Center for Workforce Housing.

It's not exactly news to anyone of average income looking to buy a home in the area -- or to drivers stuck on clogged roads. But the Terwilliger Center report quantifies our misery and says things are likely to get worse if someone (ahem, government) doesn't do something to make it profitable for developers to build more affordable homes -- big enough to accommodate families earning 60 to 100 percent of the area median income -- close to jobs in the region's six employment cores: Alexandria (broadened to include Arlington's Crystal City and Pentagon City), Bethesda, Downtown D.C., Reston/Herndon, Rockville and Tysons Corner.

In the Washington metro area, 60 to 100 percent of the median represents a pretty healthy paycheck. For a single person it's $43,140 to $71,900; for a couple, $49,320 to $82,200; for a three-person household it's $55,440 to $92,400; for four people it's $61,620 to $102,700; and for five it's $66,540 to $110,900. Almost a quarter of Washington-area households -- what the report defines as the "workforce" -- falls into these income ranges.

We have a shortage of about 40,000 for-sale homes within a 30- to 45-minute commute of those employment hubs that are affordable to people earning these incomes, according to the report. It forecasts that the shortage of affordable for-sale homes will grow by 5,000 units per year from 2010 to 2030. And recent declines in area home prices haven't helped much, it says, because housing close to those employment hubs took less of a hit than homes farther out in the suburbs.

What about all that housing development that has sprung up around Metro stations? Convenience makes them expensive -- and much of that housing is geared toward singles, not households with children. The report says we have a balance or oversupply of for-sale homes for singles in these income ranges in downtown D.C., Bethesda, Tysons Corner and Alexandria. However, the report says there is not enough affordable housing for singles to buy near jobs in Reston/Herndon and Rockville.

There's some irony that this declaration, that the close-in homes built recently are unaffordable, comes from the development industry itself; ULI is funded by urban planners and developers. But J. Ronald Terwilliger, founder of the Terwilliger Center and chairman of Trammell Crow Residential, the giant apartment developer, says the private sector can't build homes for this market without government intervention because the land is simply too expensive to make the finances work. "The problem, of course, is an economic one," Terwilliger said in an interview. To get more affordable homes built, he said, "you can either mandate it or you can incent it."

He suggests using the mortgage-interest deduction as a source of revenue that could offset the cost of government incentives. "Eliminate the deduction for second homes, which includes boats, and restrict the ability to deduct interest," he said. "That would be a way to pay for a tax credit for the workforce."

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