Virginia Capitol Connections, Summer 2022 17 In 2020, the Joint Legislative Audit and Review Commission (JLARC) asked its staff to conduct a review of housing affordability in Virginia. Housing costs have been rising in the Commonwealth and there is a shortage of available housing in all regions. JLARC’s report quantified the amount and type of affordable housing units needed in Virginia’s localities and also recommended state policy changes to address housing shortages. Housing is considered affordable when a household is spending 30 percent or less of its income on housing costs. Households are considered “cost burdened” when they spend more than 30 percent of income on housing and are considered “severely cost burdened” when they spend more than 50 percent of income on housing. Approximately 29 percent ofVirginia households (905,000) were housing cost burdened in 2019, and nearly half of these households spent more than 50 percent of their income on housing. Virginia ranks near the middle of states in terms of the percentage of households that are cost burdened. The trend is worsening, with the prevalence of housing cost burden among lowincomeVirginians having increased over the past decade. Cost-burdened households face difficult choices when high housing costs squeeze their incomes, forcing them to cut back on necessary expenditures. This problem is particularly severe for lower-income households, who may be left with only a few hundred dollars to pay for non-housing necessities after rent. According to academic research, costburdened and severely cost-burdened households spend less on food, transportation, and healthcare than households that are not cost burdened. Additionally, children experiencing housing instability typically perform worse on standardized assessments for basic skills like reading and math compared with housing stable children. Cost-burdened households are also at risk for eviction and homelessness—Virginia received national attention in 2019 when studies determined that five cities inVirginia had the highest eviction rates in the country. This affects Virginians who work in common occupations and who are paid relatively low salaries, such as home health aides ($22,000 salary), teaching assistants ($29,000 salary), bus drivers ($45,000 salary), and social workers ($51,000 salary). These workers are needed in all parts of the state, and a lack of affordable housing in some regions constrains their supply of those workers. The majority (67 percent) of cost-burdened households live in the state’s most populated regions: Hampton Roads, Northern Virginia, and Central Virginia. Households in Hampton Roads are more likely to be cost burdened than in any other region in the state. Black and Hispanic households are more likely to be cost burdened than white households. Rising home prices have made it more difficult forVirginians to own their homes—the percentage of all Virginia homes sold for $200,000 or less has decreased by 40 percent since 2019. While renting a home can helpVirginians avoid the upfront costs of purchasing a home,Virginia has a statewide shortage of at least 200,000 affordable rental units, and that is just what is needed to meet the housing needs of the state’s extremely and very low-income households. Every region in the state has a shortage of affordable rental units, but NorthernVirginia and its bordering regions need the largest number of affordable rental units—almost 80,000. Housing shortages exist statewide SOURCE: JLARC analysis of American Community Survey, 5 year data, 2015–2019. NOTE: Vacant rental units included in number of available units, but vacant units that do not have complete kitchen or plumbing facilities are excluded.All figures rounded to the nearest 100. Figures may not add because of rounding. Ten localities with the largest need for affordable rental units account for over 50 percent of the state’s need for affordable rental units and have experienced relatively high population growth. Four of these localities are in NorthernVirginia, three localities are in Hampton Roads, and three localities are in Central Virginia. Most unmet need for affordable rental units is in 10 localities SOURCE: JLARC analysis of American Community Survey, 5 year data, 2015–2019. NOTE: Vacant rental units included in number of available units, but vacant units that do not have complete kitchen or plumbing facilities are excluded. All figures are rounded to the nearest 100. Most government programs to improve housing affordability subsidize either the construction or rehabilitation of housing units to increase the inventory of affordable housing or provide financing or direct cash assistance to households to help them afford housing costs. It could cost nearly $47 billion to support development of needed affordable rental units and another $5 billion annually to provide direct cash assistance to extremely and very low-income households. Providing housing assistance payments to extremely and very low-income costburdened renters and households experiencing homelessness could cost as much as $3.7 billion annually. Providing housing assistance payments to extremely and very low-income cost-burdened homeowners could cost up to $1.3 billion annually. The state will also need to invest in new housing development. The cost to develop 200,000 affordable rental units could be up to $47 billion (the majority of which would be financed through debt that would be repaid). The state currently has two flexible sources of funding dedicated to affordable housing initiatives that could be used to help address the needs identified through the JLARC study. Virginia Housing dedicates the majority of its net income to its affordable housing program— called REACH—which is used to lower interest rates on loans for multifamily rental developments and to provide grant assistance for specific affordable housing projects. Since 2014, Virginia Housing has committed a total of $557 million to REACH, all of which has been generated by Virginia Housing itself. In 2012 the General Assembly created the Virginia Housing Trust Fund for increasing construction of affordable housing and reducing homelessness. Since 2014, the General Assembly has appropriated JLARC Report on Affordable Housing By TRACEY SMITH Housing shortages exist statewide See JLARC Report on Affordable Housing, continued on page 21
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